Md. Sahidul Islam (Sumon) : One of the most uncomfortable questions confronting Bangladesh’s economy today is not simply how much debt the country has accumulated, but how much it is now repaying—and whether that debt has generated enough sustainable economic capacity to justify the burden.

Recent figures on external debt repayment have made the question even more urgent. In just five months since taking office, the government repaid $2.047 billion in principal and interest on external loans. At the prevailing exchange rate, this amounted to roughly Tk 25,163 crore. For any five-month period, this represents a record level of external debt servicing.

Between March and July, principal repayments amounted to $1.3524 billion, while interest payments stood at $695.2 million. That means the government had to service, on average, nearly $410 million every month. During the same period a year earlier, debt servicing stood at $1.8971 billion. The increase of roughly $150 million in just one year is not merely a statistical development; it reflects the growing pressure on Bangladesh’s foreign-exchange resources.

This pressure did not emerge overnight. The upward trend in external debt servicing has been evident for several years. Bangladesh repaid around $2.67 billion in external debt in FY2022-23, $3.37 billion in FY2023-24, and $4.09 billion in FY2024-25. In FY2025-26, the figure climbed further to $4.49 billion, an increase of around 10 percent in a single year.

According to the Economic Relations Division (ERD), one of the principal reasons behind this rising repayment burden is the expiry of grace periods on large project loans contracted in earlier years.

There is, however, an important distinction to make. Borrowing itself is not a crime. For a developing economy, foreign borrowing can help finance infrastructure, electricity, transport, ports, railways, energy and other productive sectors. The problem begins when loans are contracted without adequately assessing a project’s economic returns, foreign-exchange earning capacity, employment potential and future debt-servicing ability.When that happens, a loan taken in the name of development can eventually become a financial burden for future governments—and ultimately for taxpayers.Bangladesh’s current reality brings that concern sharply into focus.

According to government data, Bangladesh’s total external debt stood at $78.22 billion in March 2026. Around 61.97 percent of this was concessional or relatively soft-term borrowing, while 38.03 percent was non-concessional. Thus, the size of the debt matters, but so does its composition and the terms under which it was contracted.

The picture becomes even larger when total government debt is considered. In July 2026, the finance minister informed Parliament that the government’s outstanding debt stood at Tk 22.06 lakh crore, of which external debt accounted for Tk 9.59 lakh crore. A substantial portion of the government’s liabilities, therefore, is denominated in foreign currency, exposing the economy to exchange-rate and external financing risks.

This inevitably raises another question: when and under which governments was this debt accumulated?

At the end of FY2001-02, Bangladesh’s government external debt was around $16.28 billion. Historical IMF data show that it stood at about $15.73 billion in FY2000-01. In other words, when the BNP-led government came to power in 2001, Bangladesh had already inherited an external public debt burden of roughly $16 billion.

The debt continued to grow thereafter, but its expansion accelerated significantly after 2009. World Bank data show that Bangladesh’s total external debt stock was around $15 billion in 2001, rising to approximately $25.4 billion in 2009 and $57.1 billion in 2019. By 2024, total external debt had reached roughly $104.5 billion, although this figure includes both public and private-sector borrowing.

The expansion of public external debt has also been substantial. According to ERD data, the government’s medium- and long-term external debt stock stood at $68.82 billion in June 2024.

More recent parliamentary data are equally significant. The finance minister said Bangladesh had contracted approximately $85.99 billion in foreign loans between FY2008-09 and FY2025-26. During the same period, the country repaid $22.32 billion in principal and $8.70 billion in interest. The figures demonstrate not only the scale of borrowing but also the growing cost of servicing that debt.Yet the current BNP government cannot afford complacency simply because it is repaying old liabilities. Debt repayment alone does not constitute successful debt management. The real test lies in how much new debt is being contracted, on what terms, and where the borrowed money is being invested.

The interim government also faced substantial external debt-servicing pressure. During the first 11 months of FY2024-25, Bangladesh repaid around $3.78 billion in external loan principal and interest. Between July and November 2024 alone, repayments amounted to approximately $1.71 billion.According to the then interim government’s economic adviser, nearly $6 billion in external debt was repaid during its tenure. Much of that burden originated from loans contracted by previous governments.

This is the fundamental reality of public borrowing: one government contracts the debt, another government services it, but the liability ultimately belongs to the people.

If borrowed money increases production, creates employment, expands exports or generates foreign-exchange earnings, debt can become an investment in future economic capacity. But if projects are unnecessary, excessively costly, plagued by allegations of corruption, or fail to generate their expected economic returns, the same borrowing becomes a long-term burden on the public.This is precisely where the present government must demonstrate a meaningful departure from past practices.

The government has indicated that future borrowing should be guided by project necessity, economic returns, employment generation and the country’s future debt-servicing capacity. Such principles must not remain policy statements; they must be institutionalized and rigorously enforced.

The greatest danger facing Bangladesh today is therefore not merely the size of its $78 billion-plus external debt. The deeper concern is a debt structure in which an increasing share of public resources must be allocated each year to servicing previous obligations.

In FY2025-26, external debt servicing reached $4.49 billion, while new external loan commitments declined to $5.24 billion. This suggests that the government is increasingly being compelled to focus on managing existing liabilities rather than simply expanding borrowing. That should be treated as a warning signal.

Three priorities should therefore guide the government’s debt strategy.

First, it should conduct a comprehensive audit of all external borrowing and publish a national debt register showing which loan financed which project, at what cost, under what terms and with what economic outcomes.

Second, new borrowing for low-return and high-cost projects should be discouraged or stopped altogether. Every new loan should pass a rigorous cost-benefit and debt-sustainability assessment.

Third, debt management must be insulated from short-term political considerations and brought under a credible Medium-Term Debt Management Strategy, with greater transparency and parliamentary accountability.

Ultimately, the most effective way to reduce debt dependence is not simply to stop borrowing. It is to strengthen the productive foundations of the economy—through higher investment, exports, productivity and domestic revenue mobilization.

Unless Bangladesh can increase its tax-to-GDP ratio and broaden its productive economic base, today’s Tk 22 lakh crore government debt could become an even larger burden tomorrow.

Bangladesh now stands at a critical juncture. It must distinguish between borrowings in the name of development and borrowing that actually produces sustainable development. There is little value in blaming only previous governments, just as the current government cannot absolve itself simply by servicing inherited liabilities.

Every loan contracted in the name of the people must carry a corresponding obligation of transparency, accountability and measurable economic return.

After all, debt does not remain confined to government balance sheets. Its principal and interest are ultimately paid by the people.

If today’s borrowing fails to create tomorrow’s production, employment and prosperity, it is not development financing. It is simply spending the income of future generations in advance.

The real test for Bangladesh is therefore straightforward: can the country use the burden of inherited debt as a catalyst to build a more productive economy—or will it remain trapped in the cycle of borrowing to repay borrowing?

The answer will determine not only the sustainability of Bangladesh’s public finances, but also the real meaning of its economic independence.

Md. Sahidul Islam (Sumon) is an economic analyst, columnist, and CHT Affairs Researcher. Email: [msislam.sumon@gmail.com]