Bangladesh’s Economy Buckles Under Rising Debt Burden as External Liabilities Cross $74 Billion

Behind a temporary sense of relief in foreign exchange reserves, Bangladesh’s economy is steadily slipping into a deeper debt cycle. At the end of the 2024–25 fiscal year, the central government’s external debt climbed to $74.34 billion, marking an annual increase of nearly 8 percent, according to preliminary estimates from the Economic Relations Division (ERD).
While the figure may fluctuate due to exchange rate movements, economists say one reality is now undeniable: foreign debt is no longer confined to balance sheets—it has become a direct threat to macroeconomic stability.
Hidden Liabilities Beyond Official Figures
A major limitation of the current estimate is that it excludes government-guaranteed loans and IMF credit, meaning the actual external liability is likely higher than $74 billion.
Official data show a sharp upward trend:
2023–24: $68.82 billion
2020–21: $50.88 billion
In just five years, Bangladesh’s external debt has surged by nearly 46 percent, raising questions about the sustainability of debt-driven development.
Borrowing to Run the Budget, Not Build Growth
ERD data indicate that in 2024–25, budget support—not development projects—was the primary driver of net external borrowing. While loan disbursements stood at $8.11 billion in the previous fiscal year, the government repaid $2.59 billion in principal in the just-concluded year.
Most notably, the government received a record $3.41 billion in budget support, all of which was fully disbursed. This surpassed the previous high of $2.60 billion recorded in 2021–22.
Analysts argue that to manage revenue shortfalls and foreign exchange pressure, the government is increasingly borrowing to cover current expenditures, a strategy that carries significant long-term risks.
Mega Projects End, Debt Does Not
According to official statements, most large infrastructure projects—such as the Rooppur Nuclear Power Plant, Metro Rail (MRT-6), Padma Rail Link, Karnaphuli Tunnel, and the third terminal of Hazrat Shahjalal International Airport—are either completed or nearing completion.
Despite a cautious approach to launching new mega projects, Bangladesh’s external liabilities have continued to grow, driven by disbursements of previously committed loans and fresh budget support.
The Yen Trap and Exchange Rate Risk
Currency volatility has emerged as a silent but serious contributor to debt stress, particularly due to the Japanese yen.
The yen’s value rose from $0.0063380 in 2023–24 to $0.0069125 in 2024–25, increasing Bangladesh’s external debt burden by nearly $1 billion purely due to exchange rate changes. Economists caution that continued yen–dollar instability could make future debt servicing significantly more expensive.
‘Debt Is Rising, Repayment Pressure Even Faster’
Masrur Riaz, Chairman and CEO of Policy Exchange Bangladesh, noted that despite restraint on new mega projects, the interim government has been unable to contain the growth of external liabilities.
“To manage balance of payments pressure and stabilise reserves, the government had to rely heavily on budget support from the World Bank, ADB, and IMF—directly resulting in higher external debt,” he said.
He warned that external debt servicing pressure could rise by nearly 65 percent in the coming years, posing serious fiscal and balance-of-payments challenges.
More Pressure Ahead
ERD’s preliminary data show that by the end of 2024–25, Bangladesh’s loan and grant pipeline stood at $42.61 billion, almost entirely composed of loans. The figure was $42.85 billion in the previous fiscal year.
Economists offer a clear warning: even with fewer new projects, the combined weight of legacy debt, growing dependence on budget support, and exchange rate risks means external borrowing is no longer just a development tool—it has become a central threat to Bangladesh’s economic stability.