Bangladesh’s foreign debt liability climbed to $74.34 billion by the close of the 2024-25 fiscal year, marking an 8% increase over the previous year and a staggering 46% rise in five years. This surge is attributed to a record $3.41 billion in budget support loans from development partners like the World Bank and ADB, used to stabilize the economy and bolster foreign reserves.At the end of FY24, foreign debt stood at $68.82 billion, and five years prior (FY 21) it was just $50.88 billion. Despite modest borrowing for mega projects, economic officials say budget support has taken center stage in external funding decisions.$8.11B Disbursed, $2.6 B Repaid in FY25:  According to the Economic Relations Division (ERD), $8.11 billion in foreign aid was disbursed in FY25, while $2.6 billion was paid in repayments-a substantial outflow, leaving net borrowing at about $5.5 billion. 
Loan servicing surged, with total repayments reaching $4.087 billion, the highest on record, including $2.595 billion principal and $1.491?billion interest-up over 20% from FY24. Notably, principal payments rose almost 29%, and interest by 10.5%.Infra Projects Drive Disbursement, Budget Support Leads Debt Growth: Large infrastructure ventures-including Rooppur Nuclear Power Plant, Dhaka Metro MRT Line-6, Padma Bridge rail link, Karnaphuli Tunnel, and Hazrat Shahjalal International Airport Terminal 3-entered completion phases, triggering substantial disbursements but not significantly increasing debt from new project loans. Instead, the spike in foreign debt liability is attributed primarily to budget support loans, taken by the government to shore up macroeconomic stability rather than guinea projects-a deliberate shift in fiscal strategy.Debt Pipeline: $42.6 Billion Waiting to Be Disbursed: ERD’s preliminary FY?25 projections show $42.605 billion in pending foreign loans and grants -nearly all of it debt financing. This figure slightly declined from $42.85?billion in FY?24, indicating a modest slowdown in new external commitments. Lessons from the Fiscal Strategy: Policy analysts noted that while borrowing was cautious on mega-scale projects, budget support loans from World Bank, ADB, and IMF filled a crucial gap: managing reserves and supporting balance-of-payments. Yet external liabilities grew as a result.Dr. Masrur Reaz, chairman of Policy Exchange Bangladesh, stressed the need to be selective with future borrowing. He warned that external debt servicing is expected to rise by 65%, urging the government to avoid rigid or long-term financing unless returns are clear and soon.Key Risks and Policy Challenges Ahead: Budget Support vs. Growth-Oriented Borrowing. While budget loans provide short-term stability, they do not generate revenue streams. Analysts warn that using budget funding as a substitute for project financing may compound vulnerabilities when repayment obligations come due.Debt Maturation and Harder Terms Loom: As grace periods on major loans expire—including loans tied to the Rooppur plant and other infra—repayment burdens will intensify. Terms are often less flexible and interest rates higher, creating pressure for refinancing or external adjustment programs. Need for Prudent Borrowing StrategyExperts advocate for a more cautious approach moving forward, emphasising: Prioritize loans with quick, measurable returns, Avoid mega-project financing without strong, feasibility and revenue plans, Seek concessional and flexible financing with favourable terms.Strategic Outlook: Toward Sustainable Debt Management: Bangladesh is at a crossroad. With foreign debt nearing $105 billion overall—of which $74.3 billion is government debt—and household liabilities rising simultaneously, macro-financial pressures are mounting.Key recommendations for stability include: Enhancing debt transparency and monitoring, including government-supported guarantees, Prioritizing revenue-generating, infrastructure, Strengthening domestic resource mobilization to reduce external dependency, Leveraging reforms tied to IMF and ADB support to improve fiscal efficiency and resilience.Balancing Support with Sustainability: The record foreign debt level of $74.34?billion in FY?25 reflects both Bangladesh’s macroeconomic fragility and the strategy of using budget support to maintain economic balance. 
Yet this approach carries long-term risks, as rising servicing costs and pipeline liabilities cast a shadow over fiscal stability. With debt repayments surging and household debt rising—especially among rural families—the imperative is clear: debt taken must yield growth, and policy discipline must underscore future borrowing.Bangladesh stands at a critical juncture: managing rising obligations while pursuing sustainable growth will test the government’s fiscal strategy in the years ahead.