Bangladesh's Composite Index is estimated at 2.88 and is based on October 2022 WEO update and 2021 WB CPIA. The debt carrying capacity remains medium.
Fiscal year in Bangladesh starts in July and ends in June.
These statistics reflect the rebased national accounts (base year 2015/16). In November 2021, the Bangladesh Bureau of Statistics (BBS) released a rebased series of national accounts (base year 2015/16). The rebasing has led to an increase in GDP levels and a slight decline in GDP growth rates, partly reflecting wider coverage of economic activities and methodological changes. See Annex IV of the staff report for a request for the extended credit facility (ECF), extended fund facility (EFF), and resilience and sustainability facility (RSF) arrangements.
NSCs were introduced in the subcontinent in 1944 by the National Savings Institute of the Ministry of Finance of India. The intent was to promote savings among the population and finance the government's budget deficit. Currently, the Department of National Savings under the Bangladesh Ministry of Finance issues NSCs.
Effective FY20, the authorities digitized the issuance of NSCs and linked it to the purchasers' tax identification number to enforce the existing cap on their issuance and increased the tax on interest income from 5 to 10 percent. This resulted in a decline in NSC issuance in FY20 by around 70 percent compared to FY19. NSC issuance in FY21 rebounded driven by the exceptional remittance inflows and the increase in the spread between the deposit rate and the NSC rate.
The large increase in this debt in FY23 is due to large Taka depreciations (around 21 percent by December 2022).
Trade credits include the difference between the customs record and the actual transaction record, which are settled in the short term.
Based on the authorities' data, non-guaranteed SOE debt (outside debt coverage) is assessed to be lower than 2 percent of GDP (informing the calibrations of the contingent liability shock) and does not represent a fiscal risk based on the information available.
Macro-fiscal assumptions under the baseline scenario for the DSA include the authorities' climate spending of around 0.6-0.7 percent of GDP in line with historical spending profile, as well as additional climate investment of 0.3-0.8 percent of GDP annually supported by RSF and other financing catalyzed through development partners. The RSF disbursements would help reduce the present value of debt and debt servicing burdens by substituting for more expensive domestic debt. The authorities do not intend to undertake additional climate-related spending, beyond what is already included in the baseline DSA, that would jeopardize risks to public and publicly guaranteed debt sustainability.
The authorities' preliminary estimates suggest these restrictions apply to about 10 percent of total imports.
As noted in the previous DSA, the recent SDR allocation of US$1.457 billion (0.4 percent of GDP) was used to bolster the reserves.
For external debt, the credit terms for IDA borrowing has changed to IDA Blend, from IDA Regular in the previous DSA, reflecting the change in Bangladesh's status to Gap.
Additional analysis suggests that long-term growth at the lower-end of 6.5 percent does not change external and overall debt risk ratings.
A World Bank (2016) study, Bangladesh: Building Resilience to Climate Change, estimated that that with a per capita GDP of about US$1,220, the economic losses in Bangladesh over the past 40 years were an about $12 billion, depressing GDP annually by 0.5 to 1 percent.
Specifically, the breach is driven by how the sharp rebound in exports in FY22 affect standard deviation of export growth. Sensitivity analyses, with different standard deviations of export growth (i.e. standard deviation excluding just FY22 or the post-pandemic period or both pandemic and post-pandemic periods), confirm that the PV of debt-to-exports remain below the threshold under an export shock.
See, Bangladesh Country Climate and Development Report, for details. World Bank Group. 2022. Bangladesh Country Climate and Development Report. CCDR Series;. World Bank Group, Washington, DC. © World Bank Group. https://openknowledge.worldbank.org/handle/10986/38181 License: CC BY-NC-ND.