Foreign debt repayment may hit $5 billion in FY27

Bangladesh is expected to face growing pressure from external debt repayments in the 2026–27 fiscal year, with obligations projected to rise further amid economic challenges.

According to Finance Division sources, foreign loan servicing could reach nearly $5 billion in FY2026–27, up from an estimated $4.80 billion in the current fiscal year. In FY2024–25, the country repaid about $4 billion in external debt.

Officials attribute the rising repayment burden to revenue shortfalls and ongoing energy-related pressures. While the government plans to reduce domestic borrowing to support private investment, this is expected to increase dependence on foreign loans, further adding to repayment obligations.

Data from the National Board of Revenue shows Bangladesh’s tax-to-GDP ratio remains around 8 percent, significantly lower than several regional peers. India’s ratio ranges between 12–19 percent, while Sri Lanka stands at about 12 percent. The low revenue base continues to widen the budget deficit and strain fiscal space.

Sources indicate that repayment pressure will increase further as grace periods on major loans expire, requiring both principal and interest payments. By FY2029–30, annual external debt servicing could peak at around $6 billion. Between FY2025–26 and FY2029–30, total repayments are projected at roughly $26 billion, including $18.38 billion in principal and $7.6 billion in interest. Over a longer horizon up to FY2034–35, the total may rise to about $52 billion.

Economists warn that the combined effect of rising repayments and increased borrowing could heighten financial stress. They also note that excessive reliance on domestic borrowing may crowd out private sector credit, making stronger revenue mobilisation essential.

Global lenders, including the International Monetary Fund and the World Bank, have cautioned that economic conditions may become more challenging in the coming years, urging Bangladesh to strengthen domestic production and improve food security.

Since independence, Bangladesh has repaid around $40 billion in foreign loans. However, rising borrowing and expiring grace periods mean repayment obligations are set to accelerate sharply over the next decade.

Experts also point to large infrastructure projects, including Rooppur Nuclear Power Plant, Padma Rail Link, Karnaphuli Tunnel, Dhaka Metro Rail, Single Point Mooring project, airport expansion, and Jamuna Railway Bridge, as key contributors to external debt growth.

Analysts say weak revenue collection, high project costs, limited export diversification, and capital outflows are increasing pressure on the country’s external financial position.