Bangladesh’s Debt Servicing to Hit $5.3B in FY27

Bangladesh's foreign debt servicing is set to reach a record $5.3 billion in FY27, with $1.9 billion for interest and $3.4 billion for principal repayments. While this peak is expected, repayments will decline in subsequent years. In FY26, total servicing is projected at $5 billion.

At the beginning of the current fiscal year, the ousted Awami League government borrowed extensively from bank and non-bank sources, exceeding BDT 232 billion in July alone, according to the Bangladesh Bank. Net borrowing from banks reached BDT 189.08 billion, a significant increase from BDT 6.9 billion in July of the previous year, coinciding with widespread student protests for quota reform that disrupted normal life and business activities. Borrowing from non-bank sources also rose sharply to BDT 42.94 billion, up from BDT 9.33 billion last year.

Private-sector credit flows in Bangladesh have decreased due to the August political upheaval that led to the fall of Sheikh Hasina's regime, causing economic activities to stall. Credit growth fell to 9.86% year-on-year in August 2024, down from 10.13% in July, despite slightly exceeding the Bangladesh Bank's target of 9.80%.

The Asian Development Bank (ADB) has pledged nearly $1.15 billion in financial support to the Bangladesh government for the fiscal year 2024-25, as announced during a project-review meeting with the Economic Relations Division (ERD) and relevant ministries.

Corporate borrowing from external lenders in Bangladesh has declined significantly, with short-term overseas debts dropping to $11.19 billion as of August 2024. This marks a decrease from $13.95 billion in May 2023, attributed to entrepreneurs pausing business expansion amid an energy crisis and economic instability following political unrest in early August.

The Awami League government, in power for 15 years, has significantly increased foreign debt, primarily through bilateral loans, with one-third of this debt sourced from only three countries: India, China, and Russia. From 2009 to June 2024, Bangladesh has borrowed approximately $44.38 billion, with $14.01 billion coming from these three nations. This has led to a 166% rise in per capita foreign debt, from about $150 in 2009 to nearly $400 by the end of FY 2023-24.