FM doctor states that poor revenue collection is hindering debt management efforts
Challenges and Recommendations for Effective Debt Management in Bangladesh
The finance ministry has raised concerns over low revenue collection hindering effective debt management and limiting the government’s ability to invest in crucial infrastructure and development projects. In a recent document titled ”Medium Term Macroeconomic Policy Statement (2023-24 to 2025-26)”, the ministry highlighted the adverse impact of a low revenue-to-GDP ratio on debt sustainability, especially with the looming LDC graduation deadline in 2026.
The high-interest rate environment, both domestically and internationally, has further compounded the issue by increasing borrowing costs and straining public finances. The rising need for government funding for essential projects has only added to the financial burden.
To address these challenges, the finance ministry has recommended a comprehensive and integrated approach to debt management, improved revenue collection, and exploring alternative financing mechanisms to reduce reliance on debt. Prompt action is necessary to ensure sustainable public debt and support the country’s development goals.
In a move towards financial efficiency, the Finance Division has introduced secondary market transactions of government securities through a memorandum of understanding signed with various financial institutions. This initiative aims to enhance the efficiency and transparency of the financial system, allowing both institutional and household investors to participate in government securities transactions.
Additional reforms, such as automating the National Savings Certificate issuance process and publishing the Debt Bulletin for transparency in debt data, are also being implemented to streamline processes and reduce paperwork.
Despite maintaining a moderate level of public debt and a low risk of external debt distress, significant challenges remain for Bangladesh in managing its debt effectively. Addressing these challenges is crucial to supporting the country’s development objectives and ensuring sustainable public debt in the long run.
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