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Is Bangladesh Rolling towards Debt Stress? An Exploration of Debt Sustainability in the Context of Recent External Financial Flows

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  • Debapriya Bhattacharya
  • Zeeshan Ashraf

Abstract

This article examines the sustainability of public debt in Bangladesh under alternative future scenarios based on simulation exercises for the period of FY2017 to FY2026. It adopts the debt-stabilizing primary balance approach (DPSBA) and International Monetary Fund/World Bank Debt Sustainability Framework (DSF). The findings of the former indicate that Bangladesh will be able to service its increasing public debt as long as its economic growth rate remains higher than the real interest rate payable on debt. Public debt also appears to be sustainable according to variables tested under the DSF. However, findings indicate that Bangladesh has been and would continue allocating an increasing share of its revenue to external debt repayment, creating a trade-off with investment in growth-oriented sectors. JEL Classification: H63, H68, H69, H81, G28

Suggested Citation

  • Debapriya Bhattacharya & Zeeshan Ashraf, 2018. "Is Bangladesh Rolling towards Debt Stress? An Exploration of Debt Sustainability in the Context of Recent External Financial Flows," South Asian Journal of Macroeconomics and Public Finance, , vol. 7(2), pages 137-173, December.
    • Handle: RePEc:sae:smppub:v:7:y:2018:i:2:p:137-173
    DOI: 10.1177/2277978718795755
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    References listed on IDEAS

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    More about this item

    Keywords

    Public debt; financial flow; developing countries; Bangladesh; debt sustainability;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • H69 - Public Economics - - National Budget, Deficit, and Debt - - - Other
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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