Bangladesh must borrow from both domestic and foreign sources every year as government expenditure continues to exceed revenue. The country’s debt burden is consequently increasing at a steady pace, along with the pressure of repayment. Even if the government takes on no new loans in the next fiscal year, it will still have to spend approximately BDT 4.35 trillion solely on repaying the principal and interest of previously incurred debt, according to official data and projections. Economists and analysts believe that this substantial repayment obligation will place significant pressure on the government’s fiscal management and the country’s foreign exchange reserves.
The largest component of the government’s debt repayment obligations in FY 2026–27 will be the redemption of maturing domestic Treasury bonds and Treasury bills, according to data from the finance ministry and the Bangladesh Bank. The amount involved is BDT 1.64 trillion, the highest ever recorded for a single fiscal year in the country's history. During the same period, nearly BDT 980 billion worth of savings certificates will mature.
The proposed budget for the next fiscal year has also allocated around BDT 1.27 trillion solely for interest payments on debt. The government will also have to repay around $ 3.77 billion in foreign loan principal instalments, equivalent to approximately BDT 460 billion in local currency. Altogether, the government’s total debt repayment obligations in the coming fiscal year are expected to reach BDT 4.35 trillion.
A significant portion of debt raised through Treasury bills and bonds is typically settled through rollover or reissuance mechanisms. Referring to this practice, former Finance Secretary and former Comptroller and Auditor General (CAG) Mohammad Muslim Chowdhury told Bonik Barta, “The net financing figures presented in the budget are determined after taking the projected debt repayment schedule into account. So rollover is a normal and widely used component of government debt management. But the primary risk lies elsewhere. Pressure may increase if additional liabilities emerge beyond the scheduled repayments. For example, savings certificate redemptions may exceed projections, refinancing Treasury bills and bonds may become more challenging, or the amount required for foreign debt servicing may be revised upward. Such uncertainties could create additional pressure on the government’s cash management.”
He also noted that if the government’s revenue collection target of BDT 6.95 trillion for the next fiscal year is not achieved, it will be forced to resort to additional borrowing. But he pointed out that this is not a new phenomenon.
“Revenue targets aren’t met every year, and they’re unlikely to be fully achieved in the future either. As a result, the government has to address the shortfall either by adjusting expenditure or through additional borrowing. While there’s some scope to reduce development spending, cutting operational expenditure is comparatively difficult. If development partners fail to disburse their committed funds on time, or if the amount received falls short of expectations, dependence on domestic borrowing could increase even further,” he told.
This heavy debt-servicing burden is largely a reflection of Bangladesh’s long-standing structural imbalance between revenue and expenditure. The persistent gap between government income and spending has increased reliance on borrowing, and in subsequent years, the obligation to repay both principal and interest on those loans returns on an even larger scale. Consequently, even without taking on new debt, the refinancing cycle of existing loans continues to create a permanent strain on the economy.
The growing dependence on domestic borrowing has particularly increased the government’s demand for funds from the banking sector, thereby crowding out credit to the private sector. This creates risks to investment growth while also increasing pressure on interest rates and liquidity management, affecting overall economic activity.
For fiscal year 2026–27, the government has announced a budget of BDT 9.38 trillion, the largest in the country’s history. The budget size is equivalent to 13.7 percent of GDP and is BDT 1.48 trillion higher than that of the current fiscal year, 2025–26.
Against this expenditure plan, the government has projected total revenue earnings of BDT 6.95 trillion. Of this amount, BDT 6.04 trillion is expected to be collected through the National Board of Revenue (NBR), while the remaining BDT 910 billion will come from other sources.
The budget deficit has been estimated at BDT 2.43 trillion, equivalent to 3.6 percent of GDP. To finance this deficit, the government plans to borrow BDT 1.27 trillion from domestic sources and BDT 1.09 trillion from foreign sources. Of the domestic borrowing target, BDT 1.12 trillion is expected to be raised from the banking sector.
Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), told Bonik Barta, “Despite a large portion of Treasury bonds, Treasury bills, and savings certificates that can be rolled over or reissued to avoid immediate cash payments, the structural pressure on the overall economy will remain severe. At a time when the government is already compelled to take on additional borrowing from the domestic banking system and foreign sources to finance the existing budget deficit, this accumulated debt burden will force reductions in budgetary allocations for social sectors and the Annual Development Programme (ADP). Obligations related to foreign debt servicing will also place substantial pressure on the country’s foreign exchange reserves. Amid ongoing global geopolitical tensions and extreme uncertainty in energy markets, such a significant outflow of foreign currency will further weaken the reserve position. Consequently, the increasing burden of debt repayment could undermine the government’s planned fiscal discipline and make it difficult to achieve the intended economic outcomes of the budget.”
“If the ambitious revenue collection target can’t be achieved, the government will have to borrow even more heavily from the domestic banking system outside its original budget framework to finance the deficit. The most important reality is that there’s currently no avenue for the government to transfer or absorb this accumulated economic pressure elsewhere; the entire burden ultimately falls on the government itself. As a result, significant downward revisions to key targets may become necessary in the revised budget for the next fiscal year,” she further added.
Bangladesh is required to repay a total of $30.58 billion in domestic and external debt during the current 2025–26 fiscal year, equivalent to approximately BDT 3.73 trillion at an exchange rate of BDT 122 per US dollar, according to a recent report by the International Monetary Fund (IMF). The IMF projects that debt repayments will rise further in 2026–27, reaching $33.84 billion, or approximately BDT 4.12 trillion.
The government’s total outstanding debt is projected to reach around BDT 26.33 trillion by the end of the 2026–27 fiscal year. Of this, domestic debt is expected to amount to BDT 15.02 trillion, while external debt will stand at BDT 11.30 trillion.
Due to the high returns on savings certificates and domestic securities, government interest payments are also rising steadily, consuming a significant share of budgetary revenue. This is gradually constraining effective allocations for development expenditure and reducing the structural flexibility of the budget. The burden of external debt repayment is also creating increased dependence on foreign exchange reserve management. Amid global economic uncertainty, import cost pressures, and exchange rate volatility, this situation may pose an additional risk to macroeconomic stability.
Overall, the current debt structure suggests that without not only new budget planning but also a structural solution through a medium-term debt management strategy, improved revenue mobilisation capacity, and expenditure restructuring, this pressure will continue to intensify over time.
Dr Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), told Bonik Barta, “The massive debt repayment pressure expected in the 2026–27 fiscal year is a serious concern for the country’s macroeconomy. To meet this huge financing requirement, the government will either have to take on additional borrowing or reduce allocations for development and welfare sectors. As a result, infrastructure development, education, health, and social protection programmes may face setbacks. Excessive borrowing from the banking system could also crowd out private investment and increase inflationary pressures. External debt servicing will also put pressure on foreign exchange reserves. So the government must address this challenge through improved debt management, expanded revenue mobilisation, and control over non-essential expenditures. Otherwise, maintaining macroeconomic stability could become increasingly difficult.”