Bangladesh’s foreign debt repayments surpassed $4 billion for the first time during the last fiscal year as its appetite for overseas funds jumped in recent years to implement large infrastructure projects.
The country had to repay approximately $4.087 billion in principal amount and interest to development partners in FY25, according to annual foreign funds disbursement report released by the Economic Relations Division (ERD).
It marks the highest annual repayment on record and a 21.2% increase from the $3.372 billion paid in FY24.
ERD officials attributed the sharp rise in debt servicing to the expiry of grace periods on several large infrastructure and budget-support loans taken over the past decade.
The debt servicing burden is expected to intensify further as grace periods for several more loans – including that for the Rooppur nuclear power plant – are ending within one or two years.
A breakdown of the ERD data shows principal repayments surged by 28.8% year-on-year, reaching $2.595 billion in FY25, up from $2.02 billion the previous year. Interest payments also rose, increasing by 10.5% to $1.491 billion from $1.349 billion in FY24.
Economic analysts also echoed similar concern, saying the country’s overseas borrowing has grown rapidly in recent years, squeezing fiscal space and putting fiscal discipline at risk.
They pointed to a sharp rise in hard-term loans with higher interest rates, shorter grace periods, and compressed repayment schedules.
The Covid-19 crisis and the Russia-Ukraine war compelled the country to take multiple budget support loans from the development partners to stabilise balance of payments and fend off free fall of local currency against the greenback.
Despite the spike in repayments, both foreign loan commitments and disbursements declined in FY25. Bangladesh signed new loan agreements worth $8.323 billion—down from $10.739 billion in FY24. Actual disbursements also dropped to $8.568 billion from $10.283 billion.
The World Bank led foreign loan commitments, pledging $2.84 billion in FY25, including $1 billion in budgetary support. The Asian Development Bank (ADB) followed with $2 billion, of which $1.5 billion was allocated for budget support. Japan committed $1.89 billion, while the Asian Infrastructure Investment Bank (AIIB) pledged $561 million.
In terms of disbursements, ADB topped the list, releasing $2.52 billion, followed by the World Bank with $2.012 billion. Other major lenders included Japan ($1.58 billion), Russia ($675 million), AIIB ($527 million), China ($415 million), and India ($185 million).