Bangladesh is facing a mounting burden of foreign debt, raising concerns among economists, policymakers, and financial analysts. Over the past decade, the country’s reliance on external borrowing has surged, largely driven by large-scale infrastructure and energy projects. In the 2009-10 fiscal year, Bangladesh’s foreign debt stood at around $20 billion. Today, it has escalated to nearly $112 billion, representing a more than fivefold increase.
This surge in borrowing has brought with it a proportional increase in repayment obligations. For the current fiscal year alone, Bangladesh is expected to spend approximately $3.5 billion in foreign currency to service debt-more than double the amount required five years ago. While borrowing itself is not inherently problematic, experts say the challenge arises when the expected returns from these projects fail to materialize or debt repayment capacity does not increase accordingly.
Mega Projects and Delayed Economic Benefits: Bangladesh has undertaken numerous high-profile mega projects over the past decade, including the Padma Bridge, Dhaka Metro Rail, Rooppur Nuclear Power Plant, and the Karnaphuli Tunnel. These initiatives have relied heavily on foreign loans from multilateral institutions such as the IMF, World Bank, Asian Development Bank (ADB), Japan International Cooperation Agency (JICA), and the Asian Infrastructure Investment Bank (AIIB).
“The problem is not borrowing itself, but that the returns from these projects are taking longer to materialize,” said economist Dr. Zahid Hossain. “The debt repayment obligations are immediate, but the economic benefits of these mega projects will only be realized in the coming years. This creates short-term pressure on the government and the national budget.”
Data shows that approximately $81 billion of Bangladesh’s current foreign debt has been accumulated in the last 15 years, primarily through loans taken by the government and private-sector enterprises. The public sector accounts for nearly 82% of the total debt, while the private sector contributes about 18%.
Rising Debt and Currency Pressure: Bangladesh Bank data indicates that foreign debt stood at $104.8 billion as of March 2025, an increase of $7.36 billion over just three months. Within six months, the debt increased by $8.43 billion compared to $103.73 billion in December 2024. Large-scale borrowing by the previous government for various projects began requiring substantial repayments starting in 2024, placing extra pressure on the current administration.
“The country’s foreign currency earnings are insufficient to meet debt obligations, which contributes to a persistent dollar shortage,” said Selim Raihan, Executive Director of SANEM. “Without increasing revenue and export earnings, Bangladesh risks facing a major foreign debt crisis in the near future.”
During the previous government’s tenure, heavy borrowing for mega projects compounded the problem. Even measures like import controls and increased foreign loans failed to prevent the depletion of foreign reserves, which have now fallen to $24 billion.
IMF Restrictions on Borrowing: The International Monetary Fund (IMF) has recently imposed limits on Bangladesh’s borrowing capacity. For the 2025-26 fiscal year, the country is allowed to take a maximum of $8.44 billion in foreign loans. According to IMF stipulations, Bangladesh can borrow up to $1.91 billion in the first quarter, $3.34 billion by the mid-year mark, and a total of $8.44 billion over the entire fiscal year.
Recent IMF analysis highlights that Bangladesh’s debt-to-export ratio has surpassed 162%, significantly above projected thresholds. Likewise, the debt-to-revenue ratio has also increased sharply, indicating a rising fiscal vulnerability.
Sectoral Debt Composition: A significant portion of Bangladesh’s foreign debt is concentrated in the infrastructure sector. For example, nearly $12 billion has been borrowed from Russia for the Rooppur Nuclear Power Plant, while Japan provided approximately $7 billion for the Metro Rail project. Other initiatives, including the Karnaphuli Tunnel, Padma Rail Link, and LNG terminals, have similarly relied on foreign financing. Delays in project implementation and cost overruns have further escalated the debt burden.
“Currently, Bangladesh’s foreign debt as a percentage of GDP is around 22%, which appears manageable,” said economist Dr. Anwarul Karim. “However, the rapid growth of the debt-to-export and debt-to-revenue ratios is concerning. If not addressed, the country could face challenges similar to those experienced by Sri Lanka, Pakistan, or Ghana.”
Experts Warnings and Policy Recommendations: Experts argue that without immediate policy adjustments, Bangladesh could enter a debt crisis despite relatively moderate GDP debt ratios. Dr. Zahid Hossain noted, “The key is to increase revenue and strengthen the country’s export base. Otherwise, the growing foreign debt will create serious economic instability in the near future.”
Selim Raihan emphasized the importance of prioritizing revenue mobilization and expanding the tax base. “We must reduce reliance on unnecessary loans for low-priority projects. Efficient use of existing debt, transparency, and accountability are crucial for avoiding fiscal mismanagement,” he said.
Economists also highlight that the country’s capacity to repay foreign loans depends heavily on its ability to generate foreign currency through exports. Without diversification of export markets and increased earnings from non-RMG sectors such as agriculture, leather, pharmaceuticals, IT services, and light engineering, Bangladesh remains vulnerable to external shocks.
“Bangladesh has borrowed heavily for energy and transport infrastructure, but without boosting export earnings and revenue collection, servicing this debt will become increasingly challenging,” said Dr. Nusrat Jahan, a trade and development economist. “Policy measures must focus not only on short-term fiscal management but also on long-term debt sustainability and economic resilience.”
Government Steps and Challenges: The current government has initiated efforts to manage foreign debt more efficiently. Measures include negotiating concessional loans, prioritizing high-return projects, and seeking multilateral support. However, experts stress that these steps alone are insufficient. Structural reforms, improved revenue collection, and prudent investment decisions are essential to prevent the debt situation from escalating further.
According to The Daily Industry sources, there is also concern over private sector borrowing from foreign sources. While these loans are relatively low-interest, they add to the cumulative foreign debt stock and create repayment obligations in foreign currency, which could strain national reserves during periods of limited export earnings.
Bangladesh’s growing foreign debt, coupled with delayed returns from mega projects and limited export revenue, poses a significant challenge for economic stability. While the absolute debt-to-GDP ratio appears manageable, rising debt-to-export and debt-to-revenue ratios indicate increasing vulnerability.
Experts emphasize that merely increasing income is insufficient unless the country simultaneously strengthens its capacity to service debt. Strategic measures-such as revenue mobilization, tax reforms, export diversification, and efficient utilization of borrowed funds-are critical to ensuring that Bangladesh avoids a foreign debt crisis.
As The Daily Industry reporting underscores, the current trajectory of borrowing without proportionate economic returns could amplify financial risks for Bangladesh in the coming years, making timely and effective policy interventions imperative.
