Finance Minister Amir Khosru Mahmud Chowdhury has told Parliament that Bangladesh’s external debt has reached $78.22 billion, with just under 62 percent of it concessional, and acknowledged “several challenges” in managing it. The figure that matters is that 62 percent. The cushion of cheap, long-dated official credit that has spared Bangladesh the discipline of markets is shrinking, with no channel ready for when it runs thin.
External repayments are projected to rise from about $4.8 billion this fiscal year to roughly $6 billion by the end of the decade, totalling nearly $26 billion over five years. This is not yet a solvency problem. It is a liquidity and timing problem, and those are the ones that catch governments unprepared.
The instinctive answer, raised since Bangladesh Bank floated the idea more than a decade ago, is to issue a sovereign bond and create a buffer. The instinct is sound; the usual justification is not. A debut bond would not make the debt cheaper. At B+ with a negative outlook, a dollar bond would likely price at around 8 to 10 percent. Kenya, a comparable credit, priced dollar bonds at 8.2 and 9.2 percent last October, several times the cost of the concessional loans they would replace.
A bond can roll over maturing principal and pre-fund a repayment. It cannot reduce the interest bill, and borrowing in hard currency to meet interest is the path that ends in restructuring. Frontier issuers refinancing maturing debt have paid coupons 200 to 300 basis points above those on the paper they retired. Refinancing buys time on principal; it does not lower the ongoing cost.
So the case is not for cheaper money. It is for optionality. The concessional door is closing regardless: the transition to middle-income status has already narrowed access, as the minister noted, and LDC graduation, due in November, will narrow it further. The worst time to approach the market is when you are forced to. The IMF itself says Bangladesh needs a liability-management framework and a broader investor base to manage rollover risk.
The larger prize is a market price for Bangladeshi risk. A liquid sovereign yield curve gives every bank and corporate borrower abroad a reference point and turns a once-a-year rating verdict into a continuous, tradable signal. I have seen what one benchmark transaction can do. When Romania brought Romgaz to market in 2013 through its first dual listing in London and Bucharest, a single deal reopened the country to global funds and gave them a market price for Romanian risk that they had not previously had.
None of this argues for issuing now. Fitch revised the outlook to negative in May, the next IMF tranche has been delayed, and reserves remain below the median for the rating category. Issuing under those conditions would mean punitive pricing and a thin order book. This is the moment to build the capability: rating-agency engagement, the medium-term debt strategy and sustainability analysis the minister says are underway, a liability-management framework, investor relations, and the documentation a first-time issuer needs. A debut in sukuk format could attract Gulf investors, who may price a Muslim-majority sovereign more favourably.
Discipline is achieved through the use of proceeds. A benchmark issuance should refinance a defined maturity, pre-fund an identified repayment, or seed a ring-fenced buffer, never finance recurrent spending or service interest payments. The Economic Relations Division and Bangladesh Bank could adopt a two-stage approach: complete the governance reforms already flagged and establish a market-access framework this year, then target a modest debut, sized at perhaps $500 million to $1 billion, once the IMF programme and the rating outlook have stabilised. The point is not to borrow expensively today, but to build the door before Bangladesh has to walk through it.
The writer is an investment banker and managing director at RetailBook. He can be reached at [email protected]
