Bangladesh now can afford more borrowing to address the economic fallout from Covid-19 pandemic as the country managed public debt to GDP ratio in a conservative way, as per a policy note, prepared by Bangladesh Bank (BB).
According to the note, Bangladesh has experienced low debt to GDP ratio of around 34 percent of GDP since last few years. Debt statistics report also shows that Bangladesh is at low risk in terms of vulnerable debt sustainability. Therefore, the country can increase its expenditure, if needed, at significant level through domestic borrowing and foreign loans to support affected sectors of the economy.
The report also recommends that the government may improve tax compliance with proper implementation of tax reform policies for improving tax-GDP ratio in the near and medium-term.
Chief Economist's Unit of the central bank release the policy note, titled 'Covid-19 Crisis and Fiscal Space for Bangladesh Economy: A Comparative Analysis with South Asian Countries'.
It also pointed out that Bangladesh maintained around 10 per cent of tax to GDP ratio, which is lower than all other South Asian countries, except India.
This report also finds that Bangladesh was the lowest spending country among South Asian countries and the fiscal deficit as percent of GDP for Bangladesh is below 5 percent in the last decade.
As per the policy note, Covid-19 pandemic continued to spread and impacted Bangladesh economy since March 2020, reflecting in a sharp decline in growth rate of real gross domestic product (GDP) to 5.24 percent in FY20 as compared to a record high of 8.15 percent growth in FY19.
Likewise, other South Asian countries are not exception as being affected by Covid-19, slowing down their economic growth as well. In response to combat against the possible economic disruptions because of the pandemic, South Asian countries including Bangladesh have been taking extensive fiscal measures depending on their own capacities.