Bangladesh is facing a serious challenge with its debt, and it’s not just a financial issue. A recent report reveals that climate change plays a big role in this problem. The country needs to shift from relying on loans to seeking more climate grants, improve local revenue efforts, and manage its debt wisely. Otherwise, it risks falling into a harmful cycle of debt and climate vulnerability.
The report, titled “Navigating Debt, Development and Disasters,” was a collaborative effort by the Centre for Policy Dialogue (CPD) and the Task Force on Climate, Development, and the International Financial Architecture. It was presented during a discussion on achieving debt sustainability in the context of climate change in Dhaka.
Experts stressed the importance of linking climate issues to financial management. For example, Sadiq Ahmed from the Policy Research Institute (PRI) urged Bangladesh to focus on domestic funding rather than depending too much on foreign loans for climate action. He pointed out that much of the climate-related spending needs to be funded locally, as international support has been limited. Bangladesh has only received $461 million from the Green Climate Fund over 15 years, which is far below what it requires.
The data shows just how severe the situation is. Economic losses from climate-related disasters jumped from Tk 18,400 crore (about $2.2 billion) between 2009 and 2014 to Tk 179,200 crore (around $21.5 billion) from 2015 to 2020—a nearly tenfold increase. This rising cost means more borrowing for recovery, trapping the country in a continuous cycle of disaster and debt.
Prof. Rehman Sobhan from CPD emphasized the need for more transparency in how climate funds are spent. While 4–5% of the development budget is allocated to climate programs, little evaluation is done on their effectiveness. He called for a shift in focus from just budgeting to understanding the outcomes of spending in relation to climate action.
Moreover, experts noted the potential impact of global changes on local financing. With policy shifts in major economies like the U.S., there may be disruptions in international funding for climate initiatives. Prof. Sobhan advised exploring alternative funding sources, especially as Asia becomes a key player in international finance.
The path forward is intertwined with urgent reforms in both local and international financial systems. For instance, Prof. Kevin P. Gallagher from Boston University mentioned that Bangladesh needs affordable capital for climate projects. Enhancing cooperation with other countries could help secure more resources.
Experts agree that the financial situation in Bangladesh is tight. The government’s tax-to-GDP ratio is only 6.6%, while public spending tops 12.6%. This imbalance creates pressure, especially with upcoming bank mergers possibly needing an extra $1.8 billion.
Syed Yusuf Saadat, an economist at UNDP, highlighted how climate vulnerability impacts Bangladesh despite its minimal role in global emissions. Climate-induced damages not only increase borrowing but further entrench the cycle of debt.
As Sajjadur Rahman from The Business Standard pointed out, climate disasters are a growing concern. With one-fourth of the land flooding annually, food production and job stability are at stake. There’s an urgent need for stress tests on climate impacts and plans to switch to domestic funding mechanisms like climate-debt swaps for adaptation projects.
In summary, Bangladesh’s debt issues are deeply tied to climate change. Experts stress immediate action to create a sustainable financial framework that addresses both the economic and environmental challenges. Finding a balance between domestic resources and international support is crucial for the country’s future.
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