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Bangladesh is facing mounting pressure in managing its external debt, as newly released data from the Economic Relations Division (ERD) reveals a significant rise in both principal and interest repayments during the first ten months (July–April) of the 2024–25 fiscal year (FY25).
According to the ERD’s report published on Thursday, the country repaid a total of around $3.51 billion to development partners, marking a 24.73% increase compared to the same period in FY24, when repayments totaled $2.81 billion.
Out of the total amount paid so far in FY25, $2.02 billion went toward principal repayments — a sharp 32.86% rise from $1.66 billion during the same period last fiscal year. Interest payments also climbed significantly, reaching about $1.30 billion, which is 12.95% higher than the around $1.15 billion paid in FY24. This means that for every dollar of principal, approximately 59 are being paid as interest — underlining the rising cost of borrowing, particularly under market-based loan terms.
ERD officials attributed this upward trend to the expiration of grace periods on large loans taken in recent years for mega infrastructure projects and budget support. Many of these loans, sourced from international financial institutions, carried short repayment timelines and high interest rates. Now, as repayment schedules kick in, the fiscal burden is beginning to bite.
Economists have warned that the situation may worsen over the next few years, especially as Bangladesh prepares to begin repayments on loans from Russia for the Rooppur Nuclear Power Plant project. These loans, estimated at over $11 billion, are set to begin maturing within the next one to two years. As grace periods end, the government will be required to start servicing these debts, adding another layer of strain to the already stressed public finances.
The increasing repayment obligations come at a time when Bangladesh is grappling with broader economic challenges, including pressure on foreign exchange reserves, a volatile currency, and tighter global financial markets. Experts say these factors, combined with a heavier debt load, limit the government’s fiscal flexibility.
Several economists have emphasised the urgent need for a long-term debt sustainability strategy. With a growing share of Bangladesh’s external borrowing now coming from market-based rather than concessional sources, managing interest costs will be critical in preserving financial stability and funding development priorities.
