Revenue must increase to reduce reliance on foreign debt: Wahiduddin

Infrastructure-based development through foreign loans on hard terms has increased the debt burden, and sustainable development will not be possible with such financing, believes Planning Adviser Wahiduddin Mahmud.

"We are feeling the pressure this year, though it has been discussed in previous years," he said after the Executive Committee of the National Economic Council meeting in the capital today (2 February).

He noted that mega projects undertaken by the previous government would further escalate principal repayment pressure in the coming years, leaving no alternative to increasing revenue.

"Our revenue-to-GDP ratio is very low. Without an increase, managing the budget and overall economy will become difficult," he warned.

According to an Economic Relations Division report, Bangladesh will have to repay over $3.5 billion in principal annually from 2029 to 2032 for foreign loans taken up to FY24. The repayment will be $3-3.5 billion per year in 2027 and 2028.

Wahiduddin said while foreign financing once covered up to 70% of the development budget, with half of it in grants, domestic sources now fund 70% of allocations.

However, soft-term loans have declined, increasing reliance on hard-term borrowing, he said. With Bangladesh's transition from LDC status, access to concessional loans from multilateral partners will further diminish.

"In this scenario, boosting revenue is crucial. The preparation of the revised budget for the current fiscal year will begin next week, focusing on reducing debt dependence and increasing revenue," he added.

The planning adviser said while allocating 3-5% of GDP to health and education is often suggested, Bangladesh's revenue collection remains at just 7-8% of GDP, making such allocations difficult.

He stressed that budget management must change, shifting focus from infrastructure-driven development to human resource investment. The revised budget for the current fiscal year will prioritise human resource development.

Ongoing projects cannot be halted, but cost reductions will be made where possible, he said. The government will also prioritise human resource development.

Wahiduddin said hospitals have been built up to the upazila level, and patients are present, but a shortage of doctors, nurses, and technicians persists. Medical equipment has been procured, but there is a lack of personnel to operate it. To address this, doctors, nurses, and technical staff will be appointed through the revenue budget, not the development budget.

Similarly, large university buildings have been constructed in many districts, but they lack teachers and students, he said. Of the 55 government universities, half were established in the last seven years – a record worldwide.

However, technical education has been neglected, he lamented. Moving forward, the government will place renewed emphasis on the education budget.

The planning adviser emphasised the need for a balanced approach to human resource development and infrastructure. Infrastructure will be built as needed, prioritising export-oriented projects that attract both domestic and foreign investment.

In response to a question, he clarified that there is no option to delay Bangladesh's graduation from LDC status, even if businesses demand it, he said.

"If the UN committee recommends a country's exit from LDC status, it must be accepted. Previously, the Maldives sought an extension but was denied, ultimately making the transition," he added.