Why Sri Lanka’s collapse looms large over Bangladesh
It’s the politics, stupid. A cocktail of dynastic rule, cronyism and debt-fuelled vanity projects, to be precise.
Why Sri Lanka’s collapse looms large over Bangladesh
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my2cents
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It is possible but very unlikely. Hasina govt. and Rajapaksa govt. has lot of similarities--both dynasties have ruled with iron fist and are equally corrupt. Both started big projects without looking at how sustainable they will be. Padma Bridge is going to be the achilles heel that may break BD bank.Why Sri Lanka’s collapse looms large over Bangladesh
It’s the politics, stupid. A cocktail of dynastic rule, cronyism and debt-fuelled vanity projects, to be precise.www.aljazeera.com
Having said all that, BD is well placed with 39 billion reserves. Even without outside loans, it can sustain for at least a year.
The reserve will come down in the coming years. Low expansion of exports and repayment of borrowed money @$4 to $5 billion from 2024 will cause havoc in the economy.
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BananaRepublicUK
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So, we will have to persist with Pinaki’s cheap impressions of Hanif Sanket till then?
It’s going to be pure torture
Wergeland
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BD debt to GDP ratio is reasonably low.
Quite the opposite of Sri Lanka:
Still BD government need to be careful now. Do not add more debt before world financial situation re-stabilize.
rainbowrascal
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I don't get it. Padma bridge was implemented with people's tax. And the money has already been spent. So how will it break down Bangladesh Bank, even if we don't consider that the bridge will be earning 900+ crore taka annually?
Bilal9
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Well the mainstay of Sri Lanka's economy was tourism - which took a massive hit during covid. That alone explains a lot. But long term, like @bluesky bhai said, there might be far deeper financial repercussions from all this churi in Bangladesh. Every top person in AL is responsible for thousands of crores in looted money.
Maybe most of the projects are not vanity projects like say in Sri Lanka (unneeded ports/expressways) or India (600 foot statues - anyone?), but the churi cannot be denied. Bangladeshi churi has no equal in the rest of the globe. So much so - that it attracted even US attention.
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Bilal9
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That "people's tax" story included loans from all manner of banks, ADB, IMF, WB and others.
Tax/revenue collection in Bangladesh is extremely weak.
"Nijer taka" is a smoke-and-mirrors story fed to the easily gullible.
If Bangladesh had no loans, then this would be believable. But it is not.
Bangladesh runs on loan money. Period. And it has to pay those loans back.
Those payments will suck the Bangladesh economy dry in the future.
Especially if world economic indicators point downward and Bangladesh cannot diversify its export basket.
Both of these are definite possibilities.
pikkuboss
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The status will achieve breakeven by 2030. Thousands of people get employment because of this tourist place. The place and people around the statue has developed so much.
rainbowrascal
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Are you saying govt redirected external loan money of other projects to the bridge construction?
The tax/gdp is indeed very low. It will be even lower if you see how and where the money is spent.
Having debt also doesn't mean you're not financially capable to build something? Otherwise china, usa has external loans too. How are they doing it?
If by Bangladesh you mean the infrastructure programs of Bangladesh are run by loan money, then Yes. Always has been.
Bangladesh current and near future dollar eating sources are raw materials and POL products imports. Only way to save dollar is limit these imports. Which can already be seen as local manufacturing has taken a hit. But good news is inflow and outflow of dollar is under control, for now.
As for the loan repayments, at current external loan, our payment is supposed to cap around $4bn after 2026. I wouldn't worry much, even if our tax base remains constant the next 4 yrs. But expenditure in various sectors must be looked after.
BananaRepublicUK
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If people could be bothered to do some simply research they would see that BD itself finances a greater percentage of these projects via its own funds and so it is slowly on the way to one day being able to totally self-finance all it's infrastructure projects. Will maybe take another 15-20 years but it will get there one day.
mb444
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Even if BD tax to GDP ratio remains constant given that BD economy is expanding the absolute value of tax revenue is expanding.
BD loans are at very low rates from international institutional lenders. There will be pressure but our loan to GDP is very low.
I understand the concern, GOB is masking the true level of the issue but there is no crisis.
Loan financing is not an issue nor a bad thing as long as it is controlled. However GoB needs to be proactive and increase revenue collection, discourage unnecessary luxury imports, get serious about overinvoicing in LC and allow dollar to freefloat. All economic 101.
BD loans are at very low rates from international institutional lenders. There will be pressure but our loan to GDP is very low.
I understand the concern, GOB is masking the true level of the issue but there is no crisis.
Loan financing is not an issue nor a bad thing as long as it is controlled. However GoB needs to be proactive and increase revenue collection, discourage unnecessary luxury imports, get serious about overinvoicing in LC and allow dollar to freefloat. All economic 101.
EasyNow
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Actually Padma bridge has shown itself to be anything but a white elephant / unsustainable project.
It had a widely publicised revenue target of 4.68b (468 cr) taka for year 1.
It has actually done tk 1b (100 cr) in just the first 42 days. That puts it on target to hit tk 8.69b for year 1!
Before anyone says the target was kept purposefully low - the comparable real world revenue from bangabandhu bridge is tk 6b.
That too after an entire section of traffic (bikers) were banned from the bridge after the first week. Otherwise revenue would've been even higher.
Padma bridge is not the Achilles heel of BD, it is in fact a beacon of its real success. Revenue on the bridge cannot be fudged, it indicates the true spending capacity of the populace - despite the propaganda from the opposition.
You also need to take into account the extra economic activities generated from the bridge which will feed into greater tax revenues for the BD government.
Padma Bridge will turn to be one of the greatest investments in BD government history.
