Dhaka, Sept 2025 — Bangladesh is facing mounting pressure in foreign loan repayments, with expenditures surpassing new disbursements at the very start of the 2025–26 fiscal year.
According to the Economic Relations Division (ERD), in July alone, the government spent $446.6 million on debt servicing—more than double the amount of fresh loans received. Of this, $327.7 million was paid in principal and $119 million in interest, while disbursements amounted to only $202.7 million. Compared to last year, repayment expenses rose nearly 16 percent.
Officials warn that repayments will climb further as grace periods on past mega project loans expire. In FY 2024–25, Bangladesh paid $4.09 billion—the highest ever—and the figure is expected to rise again this year. Debt servicing has tripled in just two years.
At the same time, foreign exchange reserves stand at $30.30 billion (or $25.39 billion under IMF’s BPM6 standards), reflecting pressure from import payments despite steady remittance inflows.
Economists caution that repayment pressures will intensify after Bangladesh graduates from LDC status in 2026, when concessional loans and foreign aid are expected to decline. Meanwhile, misuse and underutilization of borrowed funds remain a major weakness. A recent report revealed that 35 percent of foreign loans remained idle in FY 2024–25, with several ministries—particularly health, land, and the Election Commission—failing to spend allocated funds.
Analysts warn that unspent loans still require repayment once grace periods expire, undermining development and eroding lenders’ confidence. Coupled with rising interest rates and a depreciating taka, debt servicing costs are escalating.
Experts stress that Bangladesh must reform debt management, improve project implementation, and prioritize transparency and accountability. Without effective use of borrowed funds, the economy risks falling into a debt trap.
Writer
Dr. Mihir Kumar Roy
Researcher, Economic Analyst, Professor, and Former Dean, Faculty of Business Administration, City University, Dhaka
Mobile: 01700662932