Bangladesh’s foreign debt has been rising steadily over the past decade, driven by infrastructure megaprojects, energy imports, and post-pandemic recovery spending. As of 2025, the country’s external debt stands at $102 billion, raising concerns about debt sustainability, repayment capacity, and economic stability.
This report examines:
✔ Bangladesh’s foreign debt breakdown in 2025
✔ Key factors driving debt accumulation
✔ Risks and challenges ahead
✔ IMF bailout and policy reforms
✔ Future outlook and solutions
Bangladesh’s Foreign Debt in 2025: Key Statistics
| Indicator | 2025 Data | Change (Since 2020) |
|---|---|---|
| Total External Debt | $102 billion | +58% |
| Debt-to-GDP Ratio | 38% | Up from 22% (2020) |
| Foreign Currency Reserves | $26 billion | Down from $48B (2021) |
| Debt Service Payments | $4.2 billion/year | 2x higher than 2020 |
(Source: Bangladesh Bank, IMF, World Bank)
Breakdown of Foreign Debt (2025)
- Multilateral loans (World Bank, ADB, IMF): 45%
- Bilateral loans (China, Japan, India): 30%
- Commercial loans (Eurobonds, private creditors): 15%
- Short-term trade credits: 10%
Why Is Bangladesh’s Foreign Debt Increasing?
1. Mega Infrastructure Projects
Bangladesh has taken large loans for infrastructure development, including:
- Padma Bridge ($3.6 billion)
- Rooppur Nuclear Power Plant ($12.6 billion, Russian-funded)
- Metro Rail & Expressway Projects ($8 billion+)
While these projects boost growth, high-interest commercial loans (7%+) strain repayment capacity.
2. Rising Energy Import Costs
- Fossil fuel imports (oil, LNG) surged due to Ukraine war price shocks.
- Power plant loans (coal, LNG-based) now require dollar repayments.
3. Post-COVID & Inflation Pressures
- Pandemic stimulus packages increased borrowing.
- Taka depreciation (BDT lost 30% vs USD since 2020) raised debt burdens.
4. Declining Forex Reserves
- Reserves dropped from $48B (2021) to $26B (2025) due to:
- High import bills (energy, machinery)
- Lower remittance growth
- Export slowdown (global demand drop)
Debt Sustainability: Risks & Challenges
1. Rising Debt Servicing Costs
- 2025 debt repayments = $4.2B (up from $2B in 2020).
- May require new loans just to pay old ones (debt trap risk).
2. Currency Depreciation Pressure
- Every 1 BDT drop vs USD increases debt burden by $600M.
3. Dependence on China & Commercial Creditors
- China holds 25% of Bangladesh’s bilateral debt (vs 12% in 2020).
- Eurobond yields spiked to 9%+, making refinancing costly.
4. IMF Bailout & Austerity Measures
- Bangladesh secured $4.7B IMF loan in 2023 but must:
- Cut fuel/energy subsidies
- Raise taxes
- Float exchange rate further
Case Study: Sri Lanka vs Bangladesh Debt Crisis Comparison
| Factor | Sri Lanka (2022 Crisis) | Bangladesh (2025) |
|---|---|---|
| Debt-to-GDP | 119% (Default) | 38% (Moderate risk) |
| Forex Reserves | < $1B (Collapse) | $26B (Low but stable) |
| IMF Program | Too late | Early intervention |
| Key Weakness | Tax cuts + organic farming | Energy import reliance |
Bangladesh is in a better position but must avoid Sri Lanka’s mistakes.
Solutions & Policy Recommendations
1. Debt Restructuring & Cheaper Financing
- Negotiate longer repayment terms with China/World Bank.
- Shift from commercial to concessional loans.
2. Boost Exports & Remittances
- Diversify exports beyond garments (pharma, IT, leather).
- Encourage formal remittance channels (currently 30% informal).
3. Energy & Import Substitution
- Accelerate renewable energy (solar, wind) to cut fuel imports.
- Promote local manufacturing (steel, electronics).
4. Strengthen Forex Reserves
- Strict controls on luxury imports (cars, smartphones).
- Attract FDI in export sectors.
Future Outlook: Will Bangladesh Default?
✅ Low default risk in 2025-26 (IMF program provides cushion).
⚠️ High risk if exports/remittances drop further.
🔄 Critical next 3 years – must stabilize reserves & growth.
Conclusion
Bangladesh’s foreign debt is manageable but requires urgent reforms. While not in crisis yet, rising repayments and falling reserves demand:
✔ Smarter borrowing (avoid commercial debt traps)
✔ Export/remittance growth to earn dollars
✔ Energy independence to cut import bills