As remittance and export earnings continue to grow, the government is not facing any crisis in repaying foreign loans. However, in the first two months of the current fiscal year (2025–26), 89 percent of the foreign loans received were spent on repaying previous loans and interest.

The Economic Relations Division (ERD) released its monthly update on Sunday (September 28). It showed that in July and August, the government received $750 million in foreign loans. During the same period, $667.1 million was spent on loan repayments. As a result, only $83 million in fresh funds were added to the government’s loan resources.

According to ERD, $667.1 million in earlier foreign loans taken for various projects was repaid in the first two months of the fiscal year. In the same period in 2024, $589.2 million had been repaid. This means loan repayments increased by 13.21 percent year-on-year. Of the amount repaid this year, $488.8 million was principal, while $178.3 million was paid as interest.

Regarding the growing pressure of foreign debt repayments, Dr. Mahfuz Kabir, Research Director at the Bangladesh Institute of International and Strategic Studies (BIISS) and an economist, told Bonik Barta, “The real burden of debt repayment for the country began in 2025. Before that, only interest was paid, but now the principal amount is also being repaid. This will continue to rise steadily over the next several years.”

Highlighting the practice of using loans to repay loans, Dr. Mahfuz Kabir said, “It will take a long time to break out of the culture of using foreign loans to pay off debt because the repayment pressure will keep increasing.” He emphasized the need to move away from the trend of taking loans for development projects at every opportunity.

ERD data shows that Russia disbursed the highest amount of funds in FY 2025-26. The country provided $315.4 million in the first two months (July-August), mainly for the Rooppur Nuclear Power Plant in Pabna, which is being built almost entirely with Russian loans. The World Bank’s International Development Association (IDA) ranked second, disbursing $253.5 million, while the Asian Development Bank (ADB) was third with $99.1 million.

Over the past 15 years, citing development activities, the ousted Awami League government borrowed heavily from foreign sources at an unusual pace. According to data from the Ministry of Finance and Bangladesh Bank, the government’s outstanding foreign debt stood at only $20.33 billion at the end of June 2010. By FY 2023–24, this had surged to $68.8 billion.

The fall of Sheikh Hasina’s government on August 5, 2024, following the student-led mass uprising, slowed the inflow of foreign loans somewhat. However, by June 2025, the government’s outstanding foreign debt had climbed further to $80.19 billion. Alongside the rising debt stock, repayment pressure has grown sharply. In FY 2009–10, the government had to repay just $876 million in foreign loans; by FY 2024-25, this figure had crossed $4 billion.

In addition to the government, the country’s private sector has also taken on a large amount of foreign loans over the past 15 years. By the end of June 2025, the outstanding foreign debt of the private sector stood at $19.78 billion. Together, the government and private sector now owe over $112 billion in foreign loans. At an exchange rate of BDT 122 per dollar, this amounts to more than BDT 13.66 trillion.

The economy began to weaken after 2020 due to multiple crises, capital flight, and widespread irregularities and corruption. By mid-2022, a severe dollar shortage had set in. The crisis became so acute that in just two years, the local currency depreciated by more than 40 percent against the dollar. To tackle the crisis, the Awami League government eventually turned to the International Monetary Fund (IMF), signing a $4.7 billion loan program despite strict conditions. After the Interim Government assumed office, the program size was expanded to $5.5 billion.

Meanwhile, for the first time, the IMF has imposed a ceiling on how much foreign debt Bangladesh can take on. During the review of the fourth and fifth tranches of the $5.5 billion loan program in June 2025, the IMF introduced the new condition. Under this, Bangladesh can borrow a maximum of $8.44 billion in FY 2025–26. Of this, the ceiling will be $1.91 billion for the first quarter and $3.34 billion for the first half. The IMF will closely monitor foreign borrowing each quarter.

When the IMF approved the original $4.7 billion program in 2023, there was no such ceiling. Last June, the fund extended the program period by six months, adding nearly $800 million while approving the fourth and fifth tranches. So far, Bangladesh has received $3.6 billion.