Bangladesh’s external debt-servicing burden is mounting rapidly. Government repayments of principal and interest have more than doubled in five years to breach $4 billion, according to a Bangladesh Bank report.
The report shows that repayments reached $4.11 billion in the 2024–25 fiscal year, up from $1.80 billion in 2020–21 — a rise of nearly 128 percent. The repayment trajectory has been consistently upward over the five years, pointing to mounting pressure from foreign liabilities and the repayment schedule.
Repayments rose to $2 billion in FY 2021–22, and then to $2.51 billion the following year. The figure crossed $3 billion for the first time to hit $3.48 billion in FY 2023–24 before reaching $4.11 billion in FY 2024–25.
The “Forex Market and Reserve Management Report for Fiscal Year 2024–25” report describes the country’s foreign exchange reserves as effectively a “nation’s wallet” for settling the government’s external obligations. Alongside import bills, fuel payments and private-sector external liabilities, debt servicing now absorbs a significant volume of dollars.
Bangladesh Bank data also show that interest payments on external debt have surged in recent years. While the bulk of Bangladesh’s borrowing was once low-interest concessional credit, the share carrying higher rates is now expanding.
Economists say the strain is becoming visible because large infrastructure loans contracted over the past decade are now entering their repayment phase. The Bangladeshi taka’s depreciation against the US dollar, higher global interest rates, and the fact that instalments on previous loans are growing much faster than fresh disbursements are compounding the pressure on the external account.
The shift began when Bangladesh graduated from low-income to lower-middle-income status in 2015, shutting the door progressively on concessional borrowing, said Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue.
“Concessional, easy-term loans started to shrink and non-concessional, hard-term borrowing began to climb. Previously, we used to secure 30-year loans at interest rates as low as 0.7 percent. That’s no longer available. Now interest rates are rising on almost every loan, and both grace periods and repayment periods are contracting,” Rahman told Bonik Barta.
As grace periods expire on large infrastructure projects, economists say principal repayments have now started alongside interest. The Rooppur nuclear plant and several other sizeable schemes are entering the repayment phase. Newer loans, meanwhile, carry shorter grace periods and compressed repayment schedules. Analysts argue that authorities must closely monitor which sectors are borrowing, whether those loans deliver the expected returns, and whether exchange rate stability holds. Rising debt-servicing pressure on reserves could eventually weaken the country’s import capacity, economists warn.
Public-sector debt accounts for the bulk of the pressure. Loans taken for power, energy, bridges, railways and communications infrastructure are now falling due in regular instalments as their grace periods end. Officials at the Economic Relations Division and Bangladesh Bank expect the strain to intensify over the next few years, because a large portion of the external debt stock accumulated after 2015 is now entering the repayment phase.
The International Monetary Fund has already urged caution. Unless project implementation efficiency and investment returns improve, the Fund warns, debt-servicing pressure will mount further. It has also recommended strengthening revenue mobilisation and export earnings.
According to a recent World Bank report, Bangladesh’s external debt has topped $100 billion. While the country is not yet classified as high-risk, economists stress that foreign currency earnings must rise to safeguard repayment capacity. Without stronger export and remittance inflows, they warn, the pressure on the external account will only deepen in the years ahead.
Officials at the finance ministry and Bangladesh Bank note that the bulk of the debt remains long-term and carries relatively low interest. But they concede that new borrowing now demands sharper scrutiny of cost-benefit analysis, speedy project execution and foreign exchange earning capacity.
External debt-servicing figures diverge slightly between Bangladesh Bank and the Economic Relations Division, a gap officials attribute to differing accounting conventions, timeframes and coverage. The central bank’s “sovereign debt servicing” data track reserve management and sovereign obligations settled through it. The ERD publishes a fuller picture of transactions with development partners — commitments, disbursements, and both principal and interest repayments. Timing of payments, dollar conversion rates and the inclusion of certain short-term liabilities or service charges all feed the discrepancy, officials say.
But both datasets point to the same conclusion: external debt-servicing pressure is rising fast and has become one of the stiffest challenges in managing the country’s foreign exchange reserves.