In the upcoming fiscal year, the government faces dual pressure regarding foreign loans: increased payments for interest and principal, exacerbated by rising interest rates and currency depreciation. The budget allocates Tk36,500 crore for principal repayment and Tk20,500 crore for foreign debt interest. Interest pressure rises due to higher SORF rates, while principal repayment pressure mounts as grace periods for projects end. Spending on interest already exceeded the budget for the current fiscal year, reaching $1.15 billion. Debt stress is evident in the budget framework, with ADP financing solely reliant on borrowed resources, particularly domestic savings. Almost a quarter of operating expenses in FY25 are for interest payments. While domestic sources cover 85% of debt servicing, foreign debt servicing liability, nearing $2 billion, grows substantially. With external balances fragile and reserves depleting, debt management is a critical concern for the upcoming fiscal year.
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