With exports failing to keep up, rising repayments have crossed IMF risk thresholds and now squeeze the national budget
External debt repayments by both the public and private sectors in Bangladesh have increased far more sharply than in any other South Asian country over the past 15 years, even though the country's export earnings have not kept pace.
Across South Asia, countries together paid $95 billion in 2024 to repay foreign loans and the interest on them. This was 253 percent higher than it had been 15 years earlier, according to the World Bank's (WB) International Debt Report 2025, released on Sunday.
Bangladesh's repayments grew the fastest in the region. In 2024, the country paid $7.3 billion in total, a 617 percent jump from 2010. No other country in the region saw an increase on this scale.
Of the total repayment last year, $4.9 billion went towards paying back the original loan amounts, a mountainous jump from $821 million in 2010. Meanwhile, interest payments rose to $2.4 billion, compared to just $203 million in 2010.
According to WB data, Pakistan recorded the second-highest increase at 251 percent to $13.82 billion, followed by India at 246 percent to $82.06 billion and Sri Lanka at 211 percent to $4.17 billion last year.
IMF WARNING LEVEL CROSSED
Zahid Hussain, former lead economist at the WB's Dhaka office, said such rapid growth in repayment obligations squeezes the government's ability to plan the national budget.
As more money must be set aside for repayments, the economist said, the government has less room to respond to urgent spending needs.
Bangladesh's external debt compared to its export earnings has also crossed the warning level maintained by the International Monetary Fund (IMF).
The IMF considers a country at risk when its external debt reaches more than 180 percent of its annual export income. Bangladesh's ratio is now 192 percent.
The rise in external loans without a matching increase in exports also prompted the IMF in 2024 to downgrade Bangladesh's risk rating from "low" to "moderate".
According to the WB report, Bangladesh's total foreign debt stood at $104 billion in 2024, up from $26 billion in 2010. By the end of last year, the country spent 16 percent of its export earnings on debt repayment alone.
This surge also comes at a time when the National Board of Revenue (NBR), which is responsible for collecting 90 percent of the country's revenue, has consistently fallen short of reaching its target for the 13th year as of fiscal year 2024-25.
Speaking at an event in Dhaka on Monday, economist Prof Mustafizur Rahman said if the trend continues, Bangladesh is poised to fall into a "debt trap".
Falling into a debt trap would mean the government will have to repay loans by taking loans, he added.
At the same event, NBR Chairman Md Abdur Rahman Khan said, "We have already fallen into a debt trap; unless we acknowledge this truth, it will not be possible to move forward."
However, economist Hussain believes Bangladesh is not yet in a severe debt crisis but warned that the pace at which loans and repayments are rising could push the country into a riskier position sooner than expected.
He attributed part of the problem to what he called "irresponsible borrowing".
The economist noted that foreign loans should be backed by well-prepared projects and clear repayment plans, but that has not always been the case. "If you take a project at a cost of Tk 500 instead of its real cost of Tk 100 and launder the excess money, then how will you repay the loans?"
However, Bangladesh's debt position is still stronger than that of Pakistan and Sri Lanka, both of which have seen much larger mismatches between external debt and export income.
Pakistan's external debt is 315 percent of its exports; Sri Lanka's is 280 percent and Nepal's is 234 percent. India's is 82 percent, while Vietnam's is just 31 percent. The South Asian average stands at 93 percent, World Bank data show.
Hussain said Bangladesh should treat the rising ratio as an early warning that it could move towards the same difficulties faced by some neighbouring countries.
In this situation, he recommended that the government reschedule foreign-funded projects that are already underway but unlikely to generate enough revenue to repay the loans tied to them.
For projects that have been approved but have not yet begun, he said the disbursement should be reviewed and, if necessary, restructured or repurposed.
"Potential new borrowing should be analysed rigorously so that wastage cannot happen," he added.
The WB report also highlighted a wider global trend. Between 2022 and 2024, developing countries collectively paid $741 billion more in loan repayments and interest than they received in new financing. This was the biggest net outflow related to debt in more than half a century.
By 2024, the total foreign debt of low and middle-income countries reached a record $8.9 trillion. Of this, $1.2 trillion was owed by the 78 most vulnerable countries that qualify for low-cost loans and grants from the WBs International Development Association.
These record-high burdens, the report noted, came at a time when global interest rates are at their highest levels since just before the 2008-09 financial crisis.
