Foreign Debt Repayment Hits $4 Billion in Record High

Bangladesh’s foreign debt repayment exceeded $4 billion for the first time in a single fiscal year, driven by the expiry of grace periods on major infrastructure and budgetary support loans.

According to the Economic Relations Division (ERD), the country repaid $4.087 billion in principal and interest in FY25, marking a 21.2% rise from $3.37 billion the year before. This is the highest amount Bangladesh has ever paid in a year to development partners.

The ERD report shows principal repayments surged by 28.8% year-on-year to $2.595 billion, while interest payments rose 10.5% to $1.491 billion.

Officials attributed the spike to repayments on mega-project loans like the Rooppur nuclear power plant, whose grace periods are ending. They warned that repayment pressure will intensify in the coming years as more loans mature.

Economist M Masrur Reaz noted that from FY2016-17, the government began undertaking numerous large projects—many of which lacked feasibility studies and offered limited returns. He said Bangladesh's external debt has doubled in seven years due to over-reliance on foreign loans amid weak revenue mobilisation.

He further expressed concern over the rising share of hard-term loans—those with higher interest rates and shorter repayment periods—taken especially during the pandemic and the global fallout from the Russia-Ukraine war.

Reaz cautioned that the growing debt servicing burden is straining fiscal space and called for a realignment of borrowing with repayment capacity.

While repayments rose, new foreign loan commitments and disbursements declined. Bangladesh signed loan agreements worth $8.32 billion in FY25, down from $10.74 billion a year earlier. Disbursements also fell to $8.57 billion from $10.28 billion.

ERD officials said political uncertainty during the interim government period, along with disruptions in project execution, contributed to the slowdown.

Despite the drop in project loans, Bangladesh secured a record $3.4 billion in budget support during the year to manage economic challenges.

The World Bank was the top lender, committing $2.84 billion, including $1 billion in budget support. It was followed by the Asian Development Bank ($2 billion), Japan ($1.89 billion), and the AIIB ($561 million). In terms of disbursement, the ADB led with $2.52 billion, followed by the World Bank ($2.012 billion) and Japan ($1.58 billion).