External debt almost doubles in just over three years

Bangladesh’s external debt has nearly doubled in just over three years, driven by a surge in emergency budget financing in the post-Covid period and a sharp devaluation of the local currency that inflated the value of dollar-denominated obligations.

The country’s total external debt jumped 92 percent to Tk 9.51 lakh crore by the end of September 2025, compared with June 2022 levels, according to a debt bulletin published Tuesday by the Ministry of Finance.

The sharp increase reflects Bangladesh’s growing reliance on quick-disbursing budget support loans rather than traditional project financing, amid weak revenue collection and widening fiscal deficits.

Between fiscal years 2021-2022 (FY22) and 2024-2025 (FY25), Bangladesh received $9.82 billion in budget support, with $3.44 billion coming last fiscal year alone.

Budget support loans, which are disbursed immediately upon approval and come with policy conditions, rose 69 percent year-on-year in FY25, even as project loans fell more than 29 percent.

The shift reflects the government’s need for funds that can be deployed immediately to cover budget operations amid weak revenue collection. Unlike project loans, which are disbursed gradually and tied to specific infrastructure works, budget support can be used directly for deficit financing.

The interim government has continued prioritising budget support over project loans, maintaining the pattern established by the previous administration.

Currency devaluation has compounded the debt burden. The local currency has weakened to around Tk 122 per dollar from Tk 85 several years ago, thanks to heightened imports in the post-Covid period and commodity price surge in global markets, among other factors.

The government’s total debt rose 1 percent to Tk 21.49 lakh crore in the first quarter of the current fiscal year, pushing the debt-to-GDP ratio up roughly two percentage points to 38.61 percent.

Of the total debt stock, Tk 11.97 lakh crore is domestic borrowing, while the remainder consists of external obligations.

The growing debt load is straining government finances. Interest payments surged 27 percent year-on-year to Tk 31,629 crore during the July-September period in FY26.

Of this, domestic interest payments rose 19 percent, while interest on external borrowings rose 80 percent. Among domestic elements, payment for treasury securities rose by 21 percent and national savings certificates by 16 percent.