Bangladesh’s infrastructural development has been a major focus in recent years, with numerous megaprojects underway and others in the planning stages. However, the Padma Bridge stands out as the only project that the country has fully financed on its own. For the rest, Bangladesh has relied on securing loans from prominent international organisations like the IMF, Asian Development Bank, and World Bank. As the nation continues to prioritize its growth and development, the approach to financing such critical projects remains a topic of interest and scrutiny.
You can also read: Does Xi jinping’s third term indicate an endless power grab?
Countries like Japan, China, India, and Russia are also giving loans to Bangladesh to meet these development needs. However, neighbouring India warned Bangladesh last year that the amount of money the country is borrowing from China is going to be a debt trap for the country. Beside India, many economists and other prominent personalities also noted the same point that Bangladesh is going to fall into the debt trap of China. So, what is the truth here? Is Bangladesh really going to fall into the debt trap set by China?
What’s Bangladesh’s take on this?
Recently, in a discussion programme, the Foreign Minister AK Abdul Momen said, “There are no possibilities for Bangladesh to fall into the debt trap of China.” Emphasising on the fact, the minister said, “No way… No Way. We are not heading into the debt trap. Rather, there are some misconceptions about Bangladesh’s possibility of slipping into China’s debt trap.” The discussion was held at the Bangladesh Business Summit, and Momen was asked the question by CNN’s business editor-at-large, Richard Quest.
Here to mention, the Bangladesh Business Summit is a three-day long summit, organised by the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI). The summit was held at the Bangabandhu International Conference Centre in Dhaka with the aim of showcasing the country’s development and potential to native and international investors.
Why has the question of a debt trap arisen?
To meet the country’s infrastructural development needs, Bangladesh has borrowed a notable amount of loan from multiple sources. Among its biggest loan providers, China is holding the chart in the first row. Having China in the first row of the chart is a matter of tension to the experts, as there are examples of Sri Lanka, which had a huge amount of debt with China, and eventually the country went bankrupt in 2022. In this regard, Moment said, “Our biggest loan provider is Japan, and beside this, we are taking loans from a number of sources, but for sure, in a prudent way.” Among Bangladesh’s total foreign loans of $72.3 billion, the World Bank has provided $18.2 billion. The other providers are the Asian Development Bank ($13.3 billion), Japan ($9.2 billion), Russia ($5.1 billion), China ($4.8 billion), and India ($1.02 billion).
Additionally, China is widely known for its debt trap diplomacy, according to which, China plays the infrastructure card against the western world. Some experts even projected China’s strategy as a “Machiavellian strategy,” and experts also think that China is now reaching toward Bangladesh to play this cunning strategy. Though China follows the socialist political system, its market is regulated according to the free-trade system, as the country always looks for opportunities to enhance its market, mostly in the South Asian countries. A notable factor is that these South Asian countries are together known as Big Bazaar for the areas’ geographical standings. And Bangladesh. For its core geographical importance, is on the top list of countries to which China should pay special attention in assessing the whole market, for which providing loans is a good tool.
Are the speculations true?
Rumours have been circulating regarding Bangladesh’s indebtedness to China. However, when asked, the minister said, “It’s true that Bangladesh has a notable amount of debt with China. But at the same time, the returns from this loan are greater than the loan itself. So, Bangladesh is well capable of paying back the loans as well as consuming the benefits gained from investing these loans.” Similarly, in February, the International Monetary Fund also said that Bangladesh is at low risk of falling under the pressure of external and overall debt, even though the country has already taken large amounts of loans from a number of sources.
Furthermore, the Commerce Minister also rejected the speculation saying, “It’s true that the Russia and Ukraine war has injected huge sufferings into Bangladesh, but despite all of these challenges, we are on the right track to find a solution to this problem and we are moving forward continuously.” He added, “If you give a look, you will see that our export income has been increasing gradually, and the scene didn’t change in this global turmoil either.” So continuing the development journey will not be a big deal for us, and we are proving it day by day.” Giving priority to the education investment, the commerce minister added, “The government is doing pretty well in investing in the vocational training as well. We are now looking forward to producing a skilled workforce, for which an emphasis on the vocational educational system is on the way. This will surely help our economy, despite all of the challenges, from the war to the debt.” When asked about it, Salman F. Rahman, the advisor of Prime Minister Sheikh Hasina, also said, “There are not a single portion of possibilities for Bangladesh to become just like Sri Lanka.”
But the reality is harsh!
Even though these experts are saying that there are no possibilities for Bangladesh to become bankrupt, just like Sri Lanka, the country’s reserve is also diminishing gradually. Bangladesh’s reserve has recorded a six-year low of $31.15 billion foreign reserve. Which is really a serious threat to the existing economy. The amount was $44.14 billion in March 2022. That means, in just a year, the reserve has slipped up to 30% in total. However, Salman said in this regard, “Bangladesh is not going to hand over ownership of its ports. So there is no worry regarding the country’s becoming just like Sri Lanka.” Therefore, despite the assurances, it is crucial for Bangladesh to remain vigilant, take appropriate measures to be prepared for any situation, and plan wisely to avoid falling into any trap.