Bangladesh faces deepening debt crisis
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New Delhi, April 24 : In the five fiscal years from 2026 to 2030, Bangladesh will need to spend a staggering $26 billion to repay external debt, which is expected to create a huge economic burden on the country, according to an article in the local media.
The debt burden is considered “enormous” as in the 54 years since independence, Bangladesh has spent a total of $40 billion on external debt repayment. In contrast, in just the next five years, it will have to spend nearly two-thirds of that amount, the Dhaka Tribune article said.
As of last June, Bangladesh’s total external debt stood at $77 billion, which is 19 per cent of national income, and this ratio has been rising over time.
Currently, Bangladesh’s debt servicing to government revenue ratio is 16.5 per cent. Although this is slightly below the International Monetary Fund’s risk threshold of 18 per cent, the overall picture is far from reassuring, the article observed.
It further stated that during the 10 fiscal years from 2026 to 2035, Bangladesh’s external debt repayments will total $51 billion -- double the amount of the next five years. By 2030, annual repayments will peak at around $5.5 billion.
From 2021 to 2025, Bangladesh earned about $2 billion from remittances per month. Thus, the peak annual repayment could be covered by roughly three months of remittance income. If current trends continue, it will take Bangladesh 37 years -- until 2063 -- to fully free itself from the current debt burden, the article pointed out.
Regarding the factors leading to the piling up of this massive debt, the article states that some causes are global, such as the Ukraine war, the Covid-19 pandemic and now the Middle East conflict. The global turmoil has negatively affected exports, foreign direct investment, and remittance inflows of Bangladesh, which has weakened the country’s capacity to repay its debt.
Domestic factors include Bangladesh’s large-scale infrastructure projects, largely financed through foreign loans, which have contributed heavily to the debt burden. These include the $11 billion Ruppur Nuclear Power Project, the Karnaphuli Tunnel, the Padma Rail Link, and the third terminal of the Shahjalal International Airport.
Delays in the implementation of these projects have increased project costs and, consequently, debt repayment obligations of Bangladesh.
Second, Bangladesh has failed to adequately expand its tax base. Tax revenue, especially direct taxes, has not reached desired levels.
Thirdly, many bilateral and multilateral lenders have changed their interest structures, shortened repayment periods, and reduced grace periods. Altogether, these changes have intensified the pressure on Bangladesh’s debt servicing situation, the article added.
The debt burden is considered “enormous” as in the 54 years since independence, Bangladesh has spent a total of $40 billion on external debt repayment. In contrast, in just the next five years, it will have to spend nearly two-thirds of that amount, the Dhaka Tribune article said.
As of last June, Bangladesh’s total external debt stood at $77 billion, which is 19 per cent of national income, and this ratio has been rising over time.
Currently, Bangladesh’s debt servicing to government revenue ratio is 16.5 per cent. Although this is slightly below the International Monetary Fund’s risk threshold of 18 per cent, the overall picture is far from reassuring, the article observed.
It further stated that during the 10 fiscal years from 2026 to 2035, Bangladesh’s external debt repayments will total $51 billion -- double the amount of the next five years. By 2030, annual repayments will peak at around $5.5 billion.
From 2021 to 2025, Bangladesh earned about $2 billion from remittances per month. Thus, the peak annual repayment could be covered by roughly three months of remittance income. If current trends continue, it will take Bangladesh 37 years -- until 2063 -- to fully free itself from the current debt burden, the article pointed out.
Regarding the factors leading to the piling up of this massive debt, the article states that some causes are global, such as the Ukraine war, the Covid-19 pandemic and now the Middle East conflict. The global turmoil has negatively affected exports, foreign direct investment, and remittance inflows of Bangladesh, which has weakened the country’s capacity to repay its debt.
Domestic factors include Bangladesh’s large-scale infrastructure projects, largely financed through foreign loans, which have contributed heavily to the debt burden. These include the $11 billion Ruppur Nuclear Power Project, the Karnaphuli Tunnel, the Padma Rail Link, and the third terminal of the Shahjalal International Airport.
Delays in the implementation of these projects have increased project costs and, consequently, debt repayment obligations of Bangladesh.
Second, Bangladesh has failed to adequately expand its tax base. Tax revenue, especially direct taxes, has not reached desired levels.
Thirdly, many bilateral and multilateral lenders have changed their interest structures, shortened repayment periods, and reduced grace periods. Altogether, these changes have intensified the pressure on Bangladesh’s debt servicing situation, the article added.
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