Debt repayment a major challenge, says Khosru

Repaying a huge amount of accumulated debt has become one of the biggest challenges in rebuilding the country’s economy and creating a new financial framework, as the government’s fiscal space remains limited, Finance Minister Amir Khosru Mahmud Chowdhury said yesterday.

“Our debt repayment stands at around Tk 1.25 lakh crore. Where is the fiscal space? The fiscal space has shrunk significantly, yet we still have to repay this money,” he said while speaking as the chief guest at a seminar organised by the Bangladesh Economic Association (BEA). The seminar was held at the Institution of Diploma Engineers, Bangladesh, in the capital.

Despite the heavy debt burden, the minister said the government aims to create 1 crore jobs in the coming years, arguing that stronger economic growth would make repayment easier.

He also criticised the Awami League government’s development model, saying the current administration inherited around 1,300 development projects, many of which have now become a burden on the country.

“Now, we want to drop some of them, but we cannot drop them all because most are already 50 to 60 percent complete. We are stuck in a situation where we can neither swallow nor spit it out,” he said.

GOVT REVIEWS PROJECTS, EYES CAPITAL MARKET REFORMS

To address the crisis, the minister stressed the need to clean up the country’s balance sheet. The government is reviewing projects and plans to cancel some while redesigning others where possible.

Apart from outright looting, he said the banking sector’s troubles were also caused by excessive reliance on banks for long-term financing. He added that banks are not meant to provide large-scale, long-term funding and that a stronger capital market is the real solution.

To restore investor confidence, the government has formed a new capital market commission consisting of experienced professionals, with no political appointees. It is also carrying out major legal and tax reforms in the capital market.

The minister said the reforms have already attracted international attention, with global fund management firms such as JPMorgan showing interest in Bangladesh.

In conclusion, he said that despite many challenges, “things are moving in the right direction.”

Abu Ahmed, chairman of the Investment Corporation of Bangladesh, agreed that the government’s fiscal space has narrowed and said the private sector must expand to boost economic activity.

He argued that the policy rate should be lowered. While the central bank believes a high policy rate will help curb inflation, inflation remains elevated.

“If the central bank does not reduce the policy rate, who will invest at such high interest rates?” he asked.

The 6.5 percent GDP growth target is ambitious but achievable by Bangladesh’s historical standards, said Abdur Razzaque, chairman of Research and Policy Integration for Development (RAPID).

He described revenue mobilisation as the weakest part of the country’s macroeconomic framework, saying the FY27 target will require strong revenue growth, but a credible roadmap is yet to emerge.

Bangladesh’s fiscal challenge is now not only about raising more revenue, but also about how much remains after debt servicing, he added.

The government has increased allocations for health and education, which is necessary, but implementing spending effectively will be a challenge, said Atonu Rabbani, research director of Bangladesh Institute of Development Studies (BIDS).

He stressed the need to place greater emphasis on preventive healthcare.

Although some steps have been taken to improve education quality, no specific increase in budget allocation has been announced for domestic research and innovation, said Sayema Haque Bidisha, professor in the Department of Economics at the University of Dhaka.

She noted that there are no specific plans for additional incentives for teachers in rural and remote areas, and the budget does not address low resource utilisation in education.

Bidisha also recommended incentives for labour-intensive private industries, linked to worker-friendly conditions.

Abu Eusuf, executive director of RAPID, recommended linking access to public services with tax compliance, strengthening the National Board of Revenue, and introducing a universal tax identification number when citizens reach adulthood to expand fiscal space.

Mahbub Ullah, convener of the interim committee of the BEA, chaired the event, while Mohammed Helal Uddin, member secretary of the BEA, moderated the discussion.

Among others, the speakers included Sharmind Neelormi, professor of economics at Jahangirnagar University; Kazi Iqbal, research director of BIDS; Imran Matin, executive director of BRAC Institute of Governance and Development; and Anwar-Ul-Alam Chowdhury, president of Bangladesh Chamber of Industries.