Debt servicing burden set to rise sharply External debt tops $78b
Bangladesh’s outstanding external debt stood at just over $78.06 billion as of February, Finance Minister Amir Khasru Mahmud Chowdhury informed parliament on Tuesday.
He disclosed the figure during a question-and-answer session in response to a query from Brahmanbaria-2 MP Rumeen Farhana.
The minister said the Economic Relations Division (ERD) oversees foreign debt servicing on behalf of the government. “Each fiscal year, projections are made for principal and interest payments, and the necessary allocations are incorporated into the national budget,” he said.
He added that repayments are being made regularly in line with scheduled plans using budgetary provisions. Since the current government assumed office, about $90.66 million in external loans has been repaid.
Data from Bangladesh Bank indicates that external debt has been on an upward trend in recent quarters. It reached $113.51 billion in the October–December quarter of 2025, slightly higher than $112 billion in July–September and close to the $113.58 billion recorded in the June quarter.
Central bank officials attributed the increase to higher foreign borrowing by both the public and private sectors. Of the total, public sector debt accounted for $93.46 billion, while private sector borrowing stood at $20.05 billion.
A senior official noted that part of the increase in the December quarter was due to inflows linked to Asian Clearing Union (ACU) accounts and offshore banking units, as some payments were deferred to later periods. Around $400 million also entered offshore banking channels, contributing to the rise.
Economists have highlighted the importance of effective utilisation of external borrowing. Zahid Hussain, former lead economist at the World Bank’s Dhaka office, said foreign loans are vital for development, but their benefits depend on how productively they are used.
“If funds are invested in projects that improve livelihoods and generate returns, borrowing is justified. Otherwise, it becomes a burden,” he said.
Bangladesh Bank officials echoed this concern, warning that inefficient use of foreign loans could heighten repayment risks. They stressed the need for stronger monitoring to ensure funds are utilised effectively.
An ERD report suggests that Bangladesh is entering a period of increasing fiscal pressure, with external debt servicing expected to rise sharply over the next five years.
Between the current fiscal year and FY2030, the country is projected to pay nearly $26 billion in external debt servicing. In historical terms, this is significant—Bangladesh has paid around $40 billion in debt servicing since independence in 1971, meaning nearly two-thirds of that amount will fall due within a five-year period.
The pressure is further compounded by structural challenges, including a tax-to-GDP ratio that has dropped below 7 per cent—one of the lowest among comparable economies—limiting fiscal flexibility.
At the same time, both global and domestic factors, such as the Covid-19 pandemic, the war in Ukraine, political uncertainty and tensions in the Middle East, have weighed on revenue collection, exports and remittance inflows, adding to the strain of debt servicing.
