How the Yunus Government is Using Debt Misinformation to Hide Its Failures

Opinion

Since Muhammad Yunus became the head of the government of Bangladesh, a disturbing trend of populist propaganda has taken hold. One of the most despicable aspects of this narrative is the deliberate attempt to downplay Bangladesh’s remarkable economic progress over the last 15 years. To achieve this, foreign debt has been weaponized as a tool of misinformation.

A false narrative is being aggressively pushed to manipulate public perception, claiming that Bangladesh’s external loans are excessive and unsustainable. This propaganda suggests that the country should entirely avoid foreign loans and can achieve economic progress without external borrowing – an idea that is not only misleading but outright laughable. If this were true, why do OECD countries, including economic powerhouses like the United States, Japan, and Germany, continue to rely on foreign loans to sustain growth and fund development?

Foreign loans play a crucial role in the development of an emerging economy, fueling infrastructure projects, industrial growth, and overall economic stability. For a country like Bangladesh, these loans have been instrumental in transforming its economic landscape over the past 15 years. Despite concerns about debt levels, Bangladesh’s foreign and domestic loans remain within manageable limits, ensuring sustainable economic progress.

Weaponizing Generational Fear: How Yunus’ Government Exploiting Debt Anxiety

The vast majority of people in the Indian subcontinent carry a deeply ingrained generational memory of debt and borrowing. Historically, low- and middle-income households, particularly farmers in Bangladesh and India, were oppressed by “Mahajans”—traditional moneylenders who exploited their financial desperation. Muhammad Yunus merely added another layer to this cycle of exploitation. The devastating consequences of Grameen Bank and its microcredit debt trap are well documented, with reports of borrowers driven to suicide under crushing debt burdens.

No one understands the deep-seated resentment toward Mahajans better than Md. Yunus himself. His microcredit model, presented as a solution for poverty alleviation, only mirrored the exploitative practices of traditional moneylenders, trapping the poor in endless repayment cycles under exorbitant interest rates.

In countries like Bangladesh, where the formal financial system remains limited, low- and middle-income families have historically struggled to access institutional loans. This vacuum allowed informal moneylenders to thrive, using predatory lending practices to financially subjugate poor farmers. The result? A long-standing, generational fear of debt that has shaped public perception for decades.

This is where Yunus and his interim government’s propaganda machine come into play. Knowing well how deeply rooted this aversion to debt is, they now weaponize it to discredit Bangladesh’s economic progress under the Awami League government. By misrepresenting foreign debt as a crisis, they attempt to undermine the achievements of Sheikh Hasina’s administration, despite the fact that strategic borrowing has fueled record-breaking GDP growth, infrastructure development, and economic expansion.

Understanding Development Financing: Lessons from Startups to Nations

Let’s consider what it takes to build a startup from scratch. You have a brilliant idea, but turning it into reality requires capital—to develop the product, expand services, and reach customers. What are your options?

You primarily have three.

First, you can bootstrap—fund the business using your own savings. Maybe you have a steady job that provides a monthly paycheck, and you save up to invest in your startup.

Now, let’s apply this analogy to a small, underdeveloped nation. Suppose you’re the government of such a country, aiming to build critical infrastructure to uplift your people. You check your revenue sources—tax collections, non-tax income, and remittances from expatriates. Do you have enough funds to construct a metro rail system or a new port? Just like an entrepreneur assessing their savings, the government must evaluate whether its financial reserves can support large-scale projects.

But what if the answer is no—neither the entrepreneur nor the country has sufficient income to fund growth?

The second option is raising investments. An entrepreneur can approach angel investors or venture capitalists. For a country, this translates to attracting foreign direct investment (FDI). While FDI boosts employment, business activities, and GDP expansion, infrastructure development often requires large-scale financing beyond what private investors can offer. Sometimes, Public-Private Partnerships (PPP) can help, but even developed nations rely on a powerful financial tool—debt or leverage—to fund national development.

This leads to the third option: borrowing. Entrepreneurs secure business loans to scale operations. Similarly, governments turn to domestic and foreign lenders to finance large-scale infrastructure projects. However, in many developing nations, domestic capital markets lack the capacity to offer substantial government loans. As a result, seeking foreign loans becomes the most viable option.

But is foreign debt a burden? Could it push the country toward bankruptcy, like Sri Lanka? Or is it a strategic tool for sustainable economic growth?

The Importance of Foreign Loans for Economic Growth

Foreign loans, when managed effectively, serve as a crucial tool for national development. A healthy foreign loan is one that is sustainable, strategically utilized, and contributes to economic growth without leading to financial instability. To ensure long-term benefits, such loans should meet several key criteria:

Low Interest Rates: Concessional loans from institutions such as the World Bank, IMF, ADB, and JICA typically offer low interest rates and extended repayment periods. These loans are far more manageable than high-interest commercial borrowings, making them a preferred financing option for development projects.

Sustainable Debt-to-GDP Ratio: The IMF considers an external debt-to-GDP ratio of up to 40% as sustainable for developing economies. Bangladesh maintains a ratio of approximately 14%, well within safe limits, ensuring financial stability.

Productive Utilization of Funds: Foreign loans should be allocated toward revenue-generating projects such as infrastructure, energy, and education, rather than being used for recurrent expenses like government salaries or subsidies. Investments in critical sectors drive economic expansion and strengthen a country’s financial health.

These projects are not financial drains; they transform into revenue-generating assets over time. For instance:

Infrastructure Revenue: Users pay fares for the Dhaka Metro Rail and tolls on bridges and highways, generating direct government income.

Debt Servicing: Once infrastructure projects begin generating revenue, the government can repay loans without imposing additional taxes on citizens. Debt repayment is covered by the project’s own earnings.

Long-Term Economic Gains: After repaying the principal and interest, the revenue from these projects can be redirected toward building schools, hospitals, and funding further development initiatives.

This model ensures that foreign-funded projects are not liabilities but assets that fuel economic growth. The same principle applies to businesses—entrepreneurs take bank loans to set up factories, and once production begins, the business repays the debt from its revenue. This widely accepted financial strategy is fundamental to both business expansion and national development.

Sufficient Foreign Reserves for Debt Repayment: To ensure stability, the IMF recommends that countries maintain foreign exchange reserves covering at least three months of imports. Bangladesh consistently meets this benchmark, demonstrating financial resilience.

Manageable Debt Servicing Ratio: A healthy economy should maintain a debt servicing-to-export earnings ratio below 15% to prevent repayment difficulties. Bangladesh’s ratio remains 12.59% as of 2023, reflecting its strong capacity to manage foreign debt.

Major economies such as Japan, the U.S., India, and Australia also rely on foreign loans but invest strategically in sectors that drive long-term growth. Bangladesh follows a similar approach—securing long-term, low-interest loans for essential development, ensuring that its foreign debt remains an asset rather than a burden. With prudent financial management, foreign loans empower a nation to accelerate progress, enhance infrastructure, and uplift its citizens without the fear of economic distress.

Awami League’s Efficient Economic Policy and Bangladesh’s Economic Progress Over the Past 15 Years

Under the Awami League government, Bangladesh has pursued a prudent economic strategy, balancing rapid growth with responsible borrowing. The government has prioritized long-term concessional loans over high-interest commercial debts, ensuring that borrowed funds are directed toward productive development. Strategic investments in infrastructure, energy, and the digital economy have laid a strong foundation for sustainable growth.

Since 2009, Bangladesh’s economic progress has been nothing short of remarkable. The country’s GDP has grown from $102 billion in 2009 to over $460 billion in 2023, according to the IMF. More impressively, Bangladesh’s global economic ranking has surged. In 2009, it was the world’s 53rd-largest economy; today, it ranks 35th. In terms of Purchasing Power Parity (PPP), Bangladesh’s economy now exceeds $1 trillion, placing it 24th in the world.

Key indicators of this transformation include:

GDP Growth Rate: Averaging 6%–7% annually before the pandemic, with a strong post-COVID-19 rebound to 5.6% in 2023 (World Bank).

Per Capita Income: Rising from $759 in 2009 to over $2,800 in 2023 (Bangladesh Bureau of Statistics, BBS).

Export Growth: Exports, led by the booming garment industry, soared from $15 billion in 2009 to nearly $55 billion in 2023.

Poverty Reduction: The poverty rate fell from 40% in 2005 to around 18% in 2023 (World Bank).

Major infrastructure projects, such as the Padma Bridge, metro rail, and power plants, have been instrumental in this economic transformation. These developments have improved connectivity, enhanced industrial productivity, and reduced logistical costs, making Bangladesh an increasingly attractive destination for investment.

Bangladesh’s rise in global economic rankings underscores its progress from an emerging economy to a dynamic growth powerhouse, driven by strategic planning and visionary leadership.

Massive investments in infrastructure, including the Padma Bridge, metro rail, and power plants, have driven this economic transformation. These projects have enhanced connectivity, increased industrial productivity, and reduced logistical costs, making Bangladesh an attractive investment destination.

Why Bangladesh’s Foreign Debt Is in a Healthy State?

Concerns about Bangladesh’s debt are often overstated. The country’s external debt remains within a manageable threshold compared to its GDP.

Debt-to-GDP Ratio

Bangladesh’s total public debt-to-GDP ratio stands at approximately 38% (IMF 2023), much lower than countries like India (85%), the U.S. (120%), and Japan (over 250%).

External debt-to-GDP ratio is only about 14%, significantly below the 40% critical threshold set by the IMF for developing economies.

The Bangladesh Bank and international agencies such as IMF and World Bank have repeatedly stated that the country has no risk of defaulting on its foreign loans. Bangladesh’s foreign exchange reserves, which stood at $20 billion in 2023, are sufficient to cover more than four months of imports, further ensuring debt repayment stability.

How Bangladesh Has Managed Its Debt Effectively

Unlike countries that have fallen into debt crises due to reckless borrowing, Bangladesh has strategically used foreign loans to fund productive sectors. The government prioritizes low-interest, long-term concessional loans from multilateral organizations like the World Bank and ADB, rather than high-interest commercial loans.

Moreover, Bangladesh’s debt servicing ratio remains below 12.59% of total export earnings, ensuring that the country can comfortably repay its loans without economic distress. Comparatively, many developing nations face a ratio exceeding 30%, highlighting Bangladesh’s prudent debt management strategy.

Foreign Loans Have Fueled Economic Growth

Many of Bangladesh’s key projects were financed through foreign loans, yielding significant returns. A few examples:

Padma Bridge: Despite initial scepticism, this mega project is expected to contribute 1.2% to GDP annually by improving trade and connectivity.

Metro Rail (MRT): The Dhaka Metro Rail, funded by Japanese loans at very low interest rates, has reduced travel time and increased productivity.

Power Sector Expansion: Foreign-funded energy projects have played a crucial role in Bangladesh’s progress, enabling the country to achieve 100% electrification and drive industrial growth. In 2009, only 47% of the population had access to electricity, but strategic investments have transformed the energy sector, ensuring nationwide coverage.

Comparison With Other Developing and Developed Countries

• Bangladesh’s foreign loan usage is far more responsible than many other developing nations that have defaulted on their debts.
• Japan: Has a debt-to-GDP ratio of over 250%, yet remains a strong economy due to efficient financial management.
• India: With a debt-to-GDP ratio of 85%, the country continues to grow as a major global economic player.
• United States: Carries a 120% debt-to-GDP ratio, yet maintains a strong and stable economy.
• Australia: Has a general government debt of around 45% of GDP, which is considered sustainable.
• Bangladesh’s 38% debt-to-GDP ratio is significantly lower, indicating a well-managed financial structure.

Addressing Misinformation on Bangladesh’s Debt

There have been allegations of excessive debt burden in public projects, but independent assessments indicate that Bangladesh’s foreign debt is being utilized efficiently.

The IMF and World Bank have repeatedly affirmed that Bangladesh’s economy remains stable, with no immediate risk of a debt crisis.

Export earnings and remittances contribute significantly to foreign reserves, keeping the economy resilient.

Then why is this propaganda and state-sanctioned misinformation being spread? The answer is simple: to discredit Sheikh Hasina and the Awami League government and to hide Mohammad Yunus’s government’s incompetence in managing the economy. The economic success of Bangladesh under Sheikh Hasina’s leadership is undeniable, with record GDP growth, massive infrastructure projects, and improved living standards. However, those with vested political interests are deliberately distorting facts to create panic and shift the blame for economic challenges away from themselves.

By falsely portraying foreign debt as a crisis, these groups aim to delegitimize the Awami League government’s achievements and mislead the people into believing that Bangladesh’s current economic difficulties are solely the Awami League government’s doing. This tactic is not only deceptive but also dangerous, as it ignores global economic realities and the role of responsible borrowing in national development.

 

Writer :
Nur – E – Emroz Alam Tonoy
Shah Adaan Uzzaman