Economic Intelligence Unit (EIU) in a recently published report has placed Bangladesh behind Pakistan and Sri Lanka in its assessment of financial risk in South Asia.
In its latest assessment of tight financial conditions set to affect, the London-based unit has said that financial risk has eased in Asia while several countries, particularly Sri Lanka and Pakistan, will remain vulnerable.
Regarding the assessment of external financing requirements, EIU forecasts that Bangladesh's foreign exchange reserves may fall short by as much as 60% in meeting these requirements.
According to the EIU report, fiscal deficit in Bangladesh has been predicted to be more than 5% of GDP in 2023-24, while the Ministry of Finance data shows the country's budget deficit was revised at 5.1% of GDP in 2022-23.
Meanwhile, the country's public debt to GDP ratio is forecasted to be moderately good, at less than 40% in FY24.
The foreign currency-denominated public debt as a percentage of GDP in Bangladesh currently ranges between 10-30%.
The total external debt service due as a percentage of exports of goods, primary income and remittances is projected to be less than 10%, according to the report.
As per the report titled "No Return To Cheap Money", the recent surge in global interest rates has placed a mounting burden on countries worldwide.
African nations have found themselves in a precarious financial situation, largely due to their high levels of debt and substantial external debt-service obligations. As global interest rates have risen, the cost of servicing these debts has soared, putting considerable pressure on their already stretched public finances.
In contrast, developed economies face a different set of challenges. While their repayment burdens are relatively lighter, some countries carry substantial public debt loads that remain a concern. Many of these economies continue to grapple with fiscal deficits that have yet to return to pre-pandemic levels, despite a modest improvement in public finances following the pandemic-related spending surge.
The financial watchdog has listed Sri Lanka among the six countries that defaulted in 2022.
"Against this backdrop, public finances remain strained in many countries. Three of the six countries that defaulted in 2022 (Russia, Ukraine and Belarus) were the result of Russia's invasion of Ukraine, while the other three (Ghana, Sri Lanka and Mali) related either to a combination of domestic economic imbalances—exacerbated by a less favourable external context—or policy mismanagement," the report reads.