Rising National Debt Poses Challenge For Bangladesh Government

Geopolitical financial obligations and domestic borrowing metrics have experienced notable shifts during the current fiscal period. According to the latest available economic data from the International Monetary Fund (IMF), specifically detailed within its “Article IV Consultation Report”, the total public debt of Bangladesh has reached 188.79 billion US dollars for the 2024–25 financial year. This total volume of national debt is equivalent to 41 per cent of the country’s Gross Domestic Product (GDP). This figure represents a measurable increase from the previous financial year, during which the public debt-to-GDP ratio stood at 39 per cent.

Concurrently, the international financial institution, which operates as one of the principal lenders to the South Asian nation, has updated its formal Debt Sustainability Analysis. In this latest analytical assessment, the IMF downgraded the debt sustainability classification of Bangladesh, moving the country from a “low-risk” designation to a “medium-risk” category. This reassessment was systematically based on a combination of compounding economic factors, including the outright expansion of total debt volumes, escalating debt service obligations relative to national economic output, subdued export earnings, and persistently weak domestic revenue collection performance.

Escalating Fiscal Pressures on the Administration

The growing requirements of national debt servicing have generated significant challenges for the Bangladesh nationalist government, a coalition administration led by the Bangladesh Nationalist Party (BNP) that assumed executive power following political changes in February. This fiscal strain has materialised at a critical juncture, as the newly established administration actively prepares to draft and implement its very first national fiscal budget.

The operational parameters of state financial management have been further complicated by a rapid and continuous surge in total debt-servicing expenditure. Statistical forecasts compiled by the IMF indicate that during the current 2025–26 fiscal year, Bangladesh is under an obligation to repay an aggregate total of 30.59 billion US dollars. This substantial figure encompasses both the principal amounts and the accompanying interest payments for both domestic and external sovereign loans.

This requirement reflects a steep upward trajectory when contrasted with preceding and subsequent financial periods:

Imbalances in Domestic Borrowing and Private Sector Impact

A precise structural breakdown of the state liabilities reveals an asymmetrical reliance on internal credit markets. IMF data highlights that during the 2024–25 fiscal cycle, approximately 89.4 per cent of the government’s total debt-servicing expenditures was directed exclusively towards fulfilling domestic debt obligations. Financial analysts note that this specific concentration of repayment resources towards internal lenders is significantly higher than the averages observed in comparable peer economies globally.

The IMF has issued explicit warnings regarding the wider macroeconomic consequences of this domestic borrowing strategy. The international body noted that the state’s intensive reliance on commercial banking networks to finance public expenditures is highly likely to crowd out private enterprise. By consuming available capital, government borrowing reduces the credit flow accessible to the private sector, thereby inflicting additional structural strain on a banking sector that is already operating under pre-existing systemic vulnerabilities.

Low Revenue Mobilisation and Refinancing Vulnerabilities

The structural weaknesses of the national fiscal system are deeply exacerbated by an exceptionally low rate of domestic resource mobilisation. The tax-to-GDP ratio of Bangladesh remains stubbornly below the 7 per cent threshold. This metric is documented as one of the lowest revenue collection rates within the entire South Asian geographic region.

As a direct consequence of this restricted revenue baseline, the state apparatus is finding it increasingly difficult to absorb the accelerating pressures of compounding debt. The IMF report explicitly cautions that the high ratio of debt servicing and interest obligations relative to actual government revenue collection will systematically elevate rollover and refinancing risks for the country in the coming fiscal years, leaving fewer liquid assets available for critical public infrastructure and development projects.