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

Debapriya Bhattacharya and Zeeshan Ashraf

South Asian Journal of Macroeconomics and Public Finance, 2018, vol. 7, issue 2, 137-173

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

Keywords: Public debt; financial flow; developing countries; Bangladesh; debt sustainability (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:sae:smppub:v:7:y:2018:i:2:p:137-173

DOI: 10.1177/2277978718795755

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