Bangladesh's foreign debt repayment surges 25%
Bangladesh's repayment of foreign loans surged in the first 10 months while the inflow of loans from bilateral and multilateral lenders continued to fall, according to provisional data from the Economic Relations Division (ERD) released today.
The country repaid $3.5 billion of debt during the July–April period of the 2024–25 fiscal year, up 25 percent year-on-year.
For all latest news, follow The Daily Star's Google News channel. In Bangladeshi taka terms, debt servicing costs rose nearly 37 percent year-on-year to Tk 42,281 crore during this period.
Ashikur Rahman, principal economist at the Policy Research Institute (PRI) of Bangladesh, said Bangladesh's foreign debt servicing had increased due to an expanded external loan portfolio, rising global interest rates, and moderate depreciation of the taka.
"Despite this increase, the risk of default remains minimal," he said.
Robust foreign exchange inflows—projected to exceed $75 billion this fiscal year from exports and remittances—provide a substantial cushion for meeting external debt obligations, even if annual servicing requirements rise to $5–6 billion, he added.
"However, the implications for domestic fiscal management are more nuanced. Continued exchange rate depreciation may elevate the local currency cost of debt servicing, placing additional pressure on the national budget."
"This underscores the importance of sustained efforts by the Ministry of Finance to enhance domestic resource mobilisation and broaden the fiscal base," he said. Strengthening these mechanisms will be critical to ensuring that Bangladesh retains adequate fiscal space to manage its external commitments without undermining domestic development priorities, Rahman said.
ERD data showed that the disbursement of foreign loans dropped 18 percent year-on-year to $5.16 billion in the first 10 months of the year.
After repayment of principal and interest, net foreign loans fell by more than half to $1.65 billion during the July–April period of this fiscal year, from $3.47 billion a year ago, the ERD data showed.
The commitment of fresh loans by lenders dropped 44 percent year-on-year to $4.25 billion in the first 10 months of the 2024–25 fiscal year.
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