Staff Correspondent:

Foreign debt repayments saw a steep rise at the beginning of the new fiscal year (FY2025-26), with Bangladesh paying more than double the amount disbursed by development partners in July.

According to the latest Economic Relations Division (ERD) report published on Thursday (August 28), the government repaid $446.68 million in the first month of FY26 – with $327.72 million as principal repayment and $118.96 million as interest.

But the country received only $202.44 million from the development partners at the same time.

ERD officials said Bangladesh’s debt obligations are mounting as grace periods on several major loans have expired. Many of these loans were contracted under tough conditions, with short repayment schedules and relatively high interest rates, leading to a steady increase in repayment pressure.

Debt servicing is projected to approach $5 billion by the end of FY26, according to stakeholders.

In FY2024-25, Bangladesh repaid $4.086 billion, including principal repayment and interest.

Bangladesh’s foreign debt burden rose to $74.34 billion at the end of the 2024-25 fiscal year, an 8% increase compared to the previous year.

Despite the government’s restrained approach to new borrowing for mega projects, the budget support from development partners, such as the World Bank and the Asian Development Bank, was taken in a bid to stabilise the macroeconomic situation of the country and support foreign reserves, according to Economic Relations Division (ERD) officials.

Officials earlier warned that repayment pressure is expected to intensify further as grace periods for several more loans – including the Rooppur nuclear power plant – are set to expire within the next one to two years.

Economists echoed the concern, saying the country’s foreign borrowing has grown rapidly in recent years.

M Masrur Reaz, chairman of Policy Exchange Bangladesh, said, “From FY2016-17, debt management came under significant strain as the government took on numerous large projects, some unnecessary and poorly planned.”

He said many of the loans lacked proper feasibility studies, had inflated budgets, or yielded limited economic return. “Because of weak revenue mobilisation, Bangladesh relied on foreign loans. As a result, our external debt has doubled in just seven years. Both the pace and nature of this growth are worrying.”