Bangladesh Faces $30 Billion Debt Burden

Bangladesh is confronting a formidable fiscal challenge, as it must allocate nearly $30 billion this financial year to service both domestic and external debt, according to the latest projections from the International Monetary Fund (IMF). The scale of these repayments is exerting significant pressure on the country’s economy and public finances.

The IMF has issued a cautionary note: unless domestic revenue collection rises substantially, Bangladesh could face heightened risks in refinancing its debt obligations. Of particular concern is the “rollover risk”, which arises when opportunities to replace maturing debt with new borrowings diminish. This situation could make new borrowing more difficult and, in the context of rising global interest rates, place additional strain on economic stability.

According to the IMF’s Article IV Consultation Report, the government’s debt service obligations for the current fiscal year amount to $30.59 billion, up from $26.63 billion in the previous year. Looking ahead, repayments are projected to increase further to $33.84 billion in the following fiscal year.

Bangladesh Debt Statistics (FY 2024–25)

The government has allocated 89.4% of domestic revenue to service domestic debt, a ratio significantly higher than comparable economies. While net domestic borrowing has fallen to 0.3%, it is expected to average 2% in the coming years.

The IMF warns that such high debt-service ratios pose a considerable medium-term refinancing risk. Heavy reliance on government borrowing may also crowd out the private sector, increasing the overall cost of debt. Current revenue-to-GDP ratios remain below 7%, limiting fiscal manoeuvrability. The Finance Minister has indicated a target of 8% in the upcoming budget. The IMF has also recommended increasing investments in government securities and strengthening the primary dealer system to improve debt sustainability.

Former Economic Adviser Salehuddin Ahmed has highlighted that while debt risk has fallen from “high” to “moderate,” the pace of debt servicing relative to export earnings and revenue is accelerating. He advises boosting revenue collection and avoiding high-interest commercial borrowing.

The IMF analysis is unequivocal: neglecting debt management could jeopardise Bangladesh’s future economic stability. The government’s principal challenge is to increase revenue, maintain debt balance, and accelerate economic growth to mitigate looming fiscal pressures.