Bangladesh won’t fall into debt trap, says foreign minister

[Homo Sapiens]

Bangladesh won’t fall into debt trap, says foreign minister
FE Online Report | Published: December 01, 2020 19:36:00 | Updated: December 02, 2020 10:05:28

Bangladesh will not fall into the so-called debt trap due to its borrowing from China or India, Foreign Minister Dr AK Momen said on Tuesday.

Many critics argue that since Bangladesh has undertaken a large number of mega projects through borrowing from other countries, it may fall into debt trap but it is not true,” the minister said in his written speech in the Bangabandhu lecture series.
Bangladesh’s debt ratio is only 15 per cent, which much below the IMF threshold of debt-trap.

When debt ratio of a country reaches 40 per cent, that country debt trap as per IMF doctrine.

Taking loan from China and India will not lead Bangladesh to the debt trap or make the country dependent on them, he said.
“Our debt ratio with China is around 6.5 per cent of India is 1.3 per cent GDP. So, the apprehension of felling into the debt trap is not based on fact,” he explained.

And the argument that despite our thriving economy, the country‘s cost of borrowing is rising which is also not fact based, he added.

Now our cost of borrowing is around 1.3 per cent only, said the minister.

He informed that the ministry has established 58 Bangabandhu centres in Bangladesh missions abroad to mark the Mujib centenary.

He said Nobel Laureate Professor AK Sen is likely to the keynote speaker in the next Lecture Series on Bangabandhu next month.

Terming Bangabandhu, an institution, Dr Momen said he was a visionary leader who spent his entire life specially to establish the rights of people, and to end discrimination, disparity and deprivation.

The Ministry of Foreign Affairs has recently established Bangabandhu Center for Diplomatic Strategy and Research at the Shugonda, the 1st office of Bangabandhu Sheikh Mujibur Rahman as the head of the government of independent and sovereign Bangladesh, he added.

“Bangladesh which was known as the bottomless basket is now a vibrant economy, a land of opportunity. Even post-Covid economy, its GDP growth rate is food 5.4 per cent, which is the highest in Asia”.

“Bangabandhu always said peace is essential for development. Therefore, we proposed to organise the ‘World Peace Conference’ in Bangladesh next year during the 50th year anniversary of independence of Bangladesh,” he said adding that it would be a gathering of peace lovers of all across the globe.
mirmostafiz@yahoo.com



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[DalalErMaNodi]

Yes.

 

[SpaceMan18]

Yes.

Yes

 

[mb444]

Even though BD is extremely conservative in its fiscal policy overburdened with debt is never a good thing so this should be a top concern. BD thankfully is borrowing for infastructure that will generate growth.

I still think BD should find alternative ways of borrowing. Release sovereign bonds and make it easier to deposit savings in foreign currency for the diaspora. But more importantly enforce laws and stop hoarding of black money.

 

[Michael Corleone]

Even though BD is extremely conservative in its fiscal policy overburdened with debt is never a good thing so this should be a top concern. BD thankfully is borrowing for infastructure that will generate growth.

I still think BD should find alternative ways of borrowing. Release sovereign bonds and make it easier to deposit savings in foreign currency for the diaspora. But more importantly enforce laws and stop hoarding of black money.

Foreign currency deposits is easy now and revenue earned is tax free.
but I’m wondering why did they place tax on bond returns and simultaneously lowered return rate. Counterintuitive

 

[313ghazi]

As long as the economy keeps growing and BD focuses on spreading the wealth amongst the population rather than in the hands of a few billionaires then it won't be a problem.

Having a few hundred Bangladeshi billionaires driving the economy is great, but having 200 million Bangladeshis with the spending power to buy cars, white goods, electronics, houses, holidays, designer clothes etc - is a much better driver for the economy.

Pure trickle down doesn't work - it needs to be facilitated and coaxed.

 

[Destranator]

Foreign currency deposits is easy now and revenue earned is tax free.
but I’m wondering why did they place tax on bond returns and simultaneously lowered return rate. Counterintuitive

To encourage consumer spending. We cannot afford to encourage people to save more amidst an economic slowdown in the real world (as opposed to BBS fantasy land).

 

[Michael Corleone]

To encourage consumer spending. We cannot afford to encourage people to save more amidst an economic slowdown in the real world (as opposed to BBS fantasy land).

But then that would be normal checking account and not deposits

 

[fallstuff]

As long as the economy keeps growing and BD focuses on spreading the wealth amongst the population rather than in the hands of a few billionaires then it won't be a problem.

Having a few hundred Bangladeshi billionaires driving the economy is great, but having 200 million Bangladeshis with the spending power to buy cars, white goods, electronics, houses, holidays, designer clothes etc - is a much better driver for the economy.

Pure trickle down doesn't work - it needs to be facilitated and coaxed.

I will rather have 100 million people at the bottom end with higher income then top 2%. Money circulates better when it is in the hands of many.

 

[313ghazi]

I will rather have 100 million people at the bottom end with higher income then top 2%. Money circulates better when it is in the hands of many.

I once watched a great documentary about trickle down. It stated that one of the big flaws in trickle down is the assumption that the wealth spent by the elite ends up eventually in the hands of the poor. Whereas in fact most of it circulates amongst the elite themselves and very exclusive high class businesses.

For example, if they buy a diamond, how much goes to the miner? How much goes to the girl who runs the till? The vast majority of the cost of that goes to the mining company and the retailer. If they buy a $10,000 bottle of wine, most of the wealth will go to owner of the Bar and the company who sells the exclusive wine. The person picking the grapes and the waiter pouring it will still only get a day wage.

Jeff Bozos set up an Amazon warehouse near me. On paper he's created hundreds of jobs, but the land is leased so tax deducted, the building was existing and he's renting it, so also deducted from his tax and the money spent goes to a multi-millionaire landlord. The workers are on minimum wage and on temporary contracts so he doesn't have to provide pensions contributions or many other benefits. Yes there are hundreds of people now receiving a minimum wage job and that is a positive, but it's in the most cost effective way for Amazon and doesn't add a great deal of benefit to wider society.

If minimum wage was higher, if a temporary contract could only be limited to 3 months, if you could only have a maximum of 5% of your workforce on temporary contracts - he'd still open that warehouse, he'd still earn millions a year from it, but those hundreds of workers would have stable jobs, pensions, and a better salary. You can't do amazon prime from Poland to the UK - it's too far to do next day delivery. It's key to his business model.

I have nothing against the wealthy, ultimately they are wealth generators, but only if govt policies are such that they encourage the spread of wealth, not just the growth of it. Increasingly in the world, i don't think they are. The wealth is generated but it's focused in the hands of a few.

 

[bd_4_ever]

To encourage consumer spending. We cannot afford to encourage people to save more amidst an economic slowdown in the real world (as opposed to BBS fantasy land).

But then that would be normal checking account and not deposits

You know, as Bangladeshis, we are well aware of the fact that we are a spendy nation. There is no element of doubt about that. We like to show, compete in materialistic things and quite recently, travel a lot. This is good, COVID or no COVID. Atleast within my circle, I haven't seen anyone who is worried about savings. Its just a cultural thing. We want to make money and we want to spend it.

On topic, I am confident that BD will never cross the 40% threshhold. The current rate of 15% is good and we should never let it jump beyond 20%. Our conservativeness has worked thus far. We should continue with the same policy.

Just invest and diversify the economic and export basket. Once we generate more income through external and internal demand/spending, we would be in a position to increasingly finance our mega projects ourselves and seek help on a case-by-case basis. This cycle has to be developed where income and spending at the national level sustains and not much interference is needed.

 

[fallstuff]

As of now all the mega projects are needed projects, like they should been done by now. Fancy projects like bullet train can wait a little longer, however 4 lane highway roads, bridges, and power stations are needed now.