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Maintain risk-free foreign debt limit: Bangladesh PM Hasina directs officials after Sri Lanka announces debt defaults

The crisis in Sri Lanka has sparked a debate in several countries in the region about the sustainability of their foreign debts, much of it coming from China

Apr 13, 2022
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Bangladesh PM Hasina directs officials after Sri Lanka announces debt defaults (Photo: Dailystar)

Against the backdrop of Sri Lanka's economic disaster, Sheikh Hasina, Bangladesh’s prime minister, took a review of the country’s economy and microeconomic indicators at a high-level meeting and directed officials to maintain a risk-free foreign debt limit, amid the rising prices of essential commodities. 

At the meeting Tuesday, Hasina was given a detailed briefing on "offshore tax amnesty" and a "review of Bangladesh's macroeconomy against the backdrop of Sri Lankan economic crisis," according to an official statement issued by her office.

Faced with an unprecedented economic crisis for months, Sri Lanka on Tuesday announced its plan to temporarily default on all its external debt obligations, totaling around  $51 billion. The crisis in Sri Lanka has sparked a debate in several countries in the region about the sustainability of their foreign debts, much of it coming from China. 

Bangladesh, with its resilient economy, is still positioned very well to cope with the present challenges. 

After the meeting on Tuesday, the government ruled out any medium and long risks in the repayment of foreign loans. “Almost all the indices indicate that the economy of Bangladesh is relatively stable,” the statement said. 

However, the authorities said special emphasis would be given to the implementation of an integrated revenue policy and monetary policy to control inflation in the domestic market in the context of the abnormal price spiral of fuel, food products, and other items in the international market. 

"The situation in Bangladesh is not comparable with that of Sri Lanka but we must remain wary and take lessons from them," Mustafizur Rahman, a fellow at the Centre for Policy Dialogue (CPD), an independent Bangladeshi think tank, said. On Sri Lanka, he said, Colombo failed to complete its mega projects.

The CPD, in a set of recommendations released on Tuesday, asked the government should prioritize reining in the rising prices of essentials. Continuing subsidies in fertilizer, agriculture, and remittances are also among other measures. Other experts also suggested avoiding unnecessary big-ticket projects, thus reducing the government’s annual expenditure. 

(SAM)

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