Bangladesh’s outstanding foreign debt is projected to rise to $123 billion by FY29, with repayments on Russian and Chinese funded projects adding to mounting fiscal pressure…reports Asian Lite News Desk
Bangladesh’s foreign debt servicing burden is projected to nearly double over the next four years, raising concerns over the country’s fiscal stability as repayments on major infrastructure loans gather pace, according to a report published by Dhaka based newspaper The Daily Star.
Citing the Finance Division’s Medium Term Macroeconomic Policy Statement for FY27 to FY29, the report said Bangladesh’s foreign debt servicing costs are expected to rise to 7.6 billion US dollars in FY2028-29 from 4.11 billion US dollars in FY2024-25.
The projected debt servicing bill for FY29 includes principal repayments of 4.3 billion US dollars, while interest payments are estimated at Tk 40,300 crore, equivalent to about 3.3 billion US dollars at the current exchange rate.
For the ongoing fiscal year, the revised estimate for foreign debt servicing stands at 4.94 billion US dollars and is expected to increase further to 5.62 billion US dollars in the next financial year.
According to data from Bangladesh’s Finance Ministry, the country’s outstanding foreign debt is projected to rise sharply to 123 billion US dollars by FY2028-29. The figure stood at 77.27 billion US dollars at the end of the previous fiscal year, compared with 51 billion US dollars in FY2020-21.
The report quoted Zahid Hussain, former lead economist at the World Bank’s Dhaka office, as saying that the increase in debt servicing obligations is an inevitable consequence of the country’s expanding debt stock.
Hussain identified three key factors behind the growing repayment burden, including rapid borrowing in the aftermath of the Covid-19 pandemic, shorter repayment periods on newer loans and rising global interest rates.
He also highlighted the repayment structure of World Bank loans, under which borrowers pay one per cent annual interest during the first decade, two per cent during the following 10 years and progressively higher repayments thereafter. As older loans move into later repayment stages, annual debt obligations naturally increase.
According to the report, the appreciation of the US dollar has further intensified repayment pressures by increasing the local currency cost of servicing external debt.
Bangladesh is also approaching the repayment phase for several large bilateral infrastructure loans.
The report noted that annual repayments linked to the Rooppur Nuclear Power Plant are expected to require around 600 million US dollars, while repayments on Russia’s 12 billion US dollar loan for the project are scheduled to begin in September 2028.
Chinese loans are also expected to add to the repayment burden because they generally carry shorter grace periods and repayment schedules.
According to an Economic Relations Division report cited by The Daily Star, Bangladesh borrowed around 9 billion US dollars from China under various financing arrangements up to June. Of that amount, approximately 500 million US dollars has already been repaid, excluding interest. The loans carry a two per cent interest rate, a grace period of five years and a repayment tenure of 15 years.
The report said the combination of rising debt, higher interest payments and the commencement of repayments for large infrastructure projects is expected to place increasing pressure on Bangladesh’s public finances in the coming years.
