TDS Desk:

Bangladesh’s foreign debt stock rose by $9.13 billion in last fiscal year (2024–25), lifting the country’s per capita foreign debt burden. By end of June, total outstanding external debt had reached $113.20 billion after new borrowing, according to a Bangladesh Bank report on foreign loans. The figure includes public sector borrowing from overseas sources and private sector external debt.

An analysis of central bank data shows per capita foreign debt growth last fiscal year was the steepest since the pandemic period. The figure stood at $609.70 at end of FY 2021–22, edged down to $607.22 in 2022–23, and fell further to $606.50 by close of 2023–24. It then jumped by $48.40 in FY 2024–25 to $654.90 per person. At an exchange rate of BDT 122 to the dollar, this equals a per capita debt of BDT 79,898.

Economists and sector analysts link the sustained rise to indiscriminate borrowing for development projects during fifteen years of rule by now–ousted Prime Minister Sheikh Hasina. Foreign debt stock was kept within about $20 billion in 2010 but had surged to $104 billion by mid–2024. A large share of loans from development partners and donor agencies was siphoned abroad through irregularities and corruption during Awami League’s tenure, they say.

Borrowing patterns have since shifted: government is now taking foreign loans not for new development projects but to service existing interest obligations and cover administrative costs. Analysts warn the rising debt stock will continue to climb, creating a major challenge for any future government responsible for managing principal and interest repayments.

Economist Dr Mustafa K Mujeri warns the government may be forced to borrow from foreign sources simply to service existing foreign debt in coming years. “A large portion of foreign loans taken in name of mega projects under the previous government has been siphoned out of the country,” he told journalists. “Loans were taken by inflating project costs two or threefold. Grace periods on those loans are now ending, and pressure of foreign debt repayment on the government will rise relentlessly. This may force the government to take new loans just to repay old ones.”

Dr Mujeri, former chief economist of Bangladesh Bank and now executive director of private research body Institute for Inclusive Finance and Development (InM), also addressed sharp rise in per capita debt under the interim government. He said: “Following the mass uprising, government has taken loans from various development partners and agencies, including World Bank and IMF. It’s normal for per capita debt to rise when the total stock increases. Crucial question is this: the government is not undertaking major development projects now, so where is this foreign loan money being spent? This needs clarification.”

He flagged worrying fiscal trends, citing weak revenue collection and a rising debt burden on domestic banks alongside foreign borrowing. “The government’s revenue collection situation is not satisfactory. Alongside foreign sources, the burden of borrowing from the domestic banking sector is also increasing. Even amid this situation, the interim government has formed a pay commission to raise salaries and allowances of officials and employees. If the new pay structure is implemented, the government’s operating expenditure will rise by BDT 700–800 billion. If, in the future, the government also has to finance its operating expenditure by borrowing from foreign sources, the country’s economy will be grim.”

Data from finance ministry and Bangladesh Bank show government foreign loan stock stood at $20.33 billion at end of June 2010. The now–ousted Awami League government had pushed stock beyond $80 billion by FY 2023–24. After the fall of the Sheikh Hasina–led AL government in 2024 mass uprising, foreign loan inflows slowed briefly before picking up again. By December 2024, combined foreign debt stock of the government and its entities had climbed to $85.34 billion, rising above $93.74 billion by end of June 2025. Of this, $80.51 billion was direct government borrowing, with state–owned enterprises accounting for the remaining $13.22 billion.

Repayment pressure has intensified alongside rising stock. Annual foreign debt servicing, which stood at just $876 million in FY 2009–10, surged beyond $4.5 billion in the last fiscal year. Economic Relations Division sources say more than $5 billion will fall due for repayment in the current 2025–26 fiscal year.

Private sector foreign borrowing has also expanded sharply over past decade and a half, with outstanding stock at $19.58 billion as of June 2025. Combined with public sector borrowing, this took total foreign debt stock to $113.20 billion at end of FY 2024–25. At an exchange rate of BDT 122 to the dollar, the stock exceeds BDT 13.81 trillion.

Asked about rising debt stock and per capita burden, Bangladesh Bank Executive Director and spokesperson Arif Hossain Khan told journalists: “We received loans from various development agencies and partner countries in last fiscal year including World Bank, IMF, IDB, and ADB. Their inclusion has raised the stock. Earlier accounting errors in debt data had also been corrected, contributing to the increase. Following the mass uprising, alongside new foreign borrowing, Bangladesh Bank settled matured LC obligations and arrears of nearly $5 billion. As grace periods on mega projects have ended, repayments have begun. Apart from some arrears in the power sector, Bangladesh now has no overdue foreign loans or service bills.”

Economic conditions began to deteriorate after 2020 due to capital flight and systemic corruption. A dollar shortage emerged by mid–2022 and intensified rapidly, with the Bangladeshi Taka losing more than 40 percent of its value against the dollar within two years. To address the crisis, the then–Awami League government turned to International Monetary Fund, agreeing to a $4.7 billion loan programme under strict conditions. The interim government later secured expansion of the programme to $5.5 billion.

Last year marked the first time IMF imposed a binding ceiling on Bangladesh’s foreign borrowing. The condition was added during fourth and fifth reviews of the $5.5 billion programme in June. It caps borrowing at $8.44 billion in FY 2025–26, with a first–quarter limit of $1.91 billion and a first–half limit of $3.34 billion. IMF will monitor borrowing on a quarterly basis. No such ceiling applied when the Fund approved the original $4.7 billion programme in 2023. In June 2025, IMF approved fourth and fifth tranches, adding about $800 million and extending the programme by six months. Bangladesh has received $3.6 billion from IMF so far.

A country’s borrowing capacity and economic risk exposure are assessed through debt sustainability analysis (DSA). A joint World Bank and IMF DSA report published last August shows Bangladesh’s debt risk has risen from low to moderate. The shift stems mainly from revisions to export data for the 2022–23 and 2023–24 fiscal years. The report also identifies weak revenue mobilisation relative to GDP and a shallow domestic debt market as key risks to repayment capacity.

Asked about risks in servicing foreign debt, Dr Anisuzzaman Chowdhury, the chief adviser’s special assistant at the finance ministry, told journalists: “Previous governments failed to follow established borrowing criteria, taking foreign loans for economically unviable projects. Our future policy must focus on alternative financing to curb debt risks. Loans should be taken only for projects that are economically viable. While borrowing may still be necessary for projects with critical social value, their costs must be offset by returns from other profitable ventures.”

A surge in remittances has stabilised the dollar market, prompting a modest decline in government foreign borrowing in the ongoing 2025–26 fiscal year. Bangladesh Bank data show foreign debt stock fell by about $1.5 billion in first quarter from July to September, easing to $112.12 billion by end of September. Data for following months have yet to be released.

Remittance inflows have surged since the student–led mass uprising in 2024. Expatriates began sending money home through formal channels at unprecedented levels after the fall of the Hasina–led AL government, reaching a record $30.33 billion in FY 2024–25 — up 26.83 percent. Inflows have risen further in the ongoing fiscal year with $18.13 billion received between July and January 17. This marks a more than 21 percent increase from the $14.97 billion in same period a year earlier. The surge has replenished foreign exchange reserves, which stood at $28.03 billion under BPM6 standard on January 15, 2025. Reserves had fallen to about $17 billion in mid–2024.