The burden of foreign debt is getting heavier and heavier, which is adding more and more liabilities day by day. In the last period alone, foreign debt repayments have increased almost four times. This upward trend is now becoming permanent. The reality is that this pressure is now not limited to the books of accounts, but has a direct impact on the balance of the budget and the overall economy.
According to the Economic Relations Department (ERD), the interim government has repaid a total of $6.77 billion in foreign debt and interest during its 18-month tenure. In local currency, this figure is more than 82 thousand crore rupees. Out of this, 3.78 billion dollars have been paid in the last 11 months of the fiscal year 2024-25 and 267.68 million dollars have been paid in the 7 months from July to January of the current fiscal year 2025-26. There is no precedent in recent history for paying off such a large debt and interest in such a short period of time.
Sources said a major part of this repayment came from old debt obligations. The grace period of major projects taken during the Awami League government has ended one by one. As a result, now the principal and interest have to be paid simultaneously. This increases the pressure every year. The government cannot stop this payment at will. Because the installments have to be paid as per the scheduled time. As a result, a large part of the budget is now going towards debt repayment.
As is evident over time, how this pressure has built up step by step. A decade ago, the annual debt repayment was 100 to 200 million dollars, now it has increased several times. Payments in 2012-13 were $110 million, which increased to $201 million in 2021-22. The upward trend then becomes more rapid. In the fiscal year 2022-23 it increased to about 3 billion dollars, reaching 337 billion dollars in the fiscal year 2023-24. And in the financial year 2024-25, foreign debt and interest payments stand at 409 million dollars, which is the highest in a year. This series of jumps in a short span of time shows how the debt burden is quickly becoming heavy.
Major infrastructure projects have played a role in this growth. Power plants, airports, metrorails, tunnels—large foreign loans were taken for these projects. Then there was no pressure to repay the installments of these loans, because the grace period was going on. Now that time is over. As a result, many projects have started to be repaid simultaneously, which has accelerated the pressure.
Economists say, this pressure will increase further. Because full installment payment of major projects has started now. The former chief economist of the World Bank’s Dhaka office. Zahid Hossain feels that many projects undertaken in the past had questions about cost and necessity. Now that loan has to be repaid with interest, the pressure is increasing.
Special fellow of the Center for Policy Dialogue (CPD) is giving a similar warning. Mostafizur Rahman. According to him, the debt repayment pressure will increase in the future. Therefore, emphasis should be placed on increasing income from now. This pressure will be difficult to deal with unless export and expatriate income flows are strong. He also said to take a strict stand against hundi and money laundering.
The issue is gaining importance from within the government. Former interim government planning advisor. Wahiduddin Mahmud said, an attempt has been made to get out of the trend of paying off debt with debt. However, if this trend is not maintained, the situation may become more complicated.
Now the biggest test before the government is to keep the balance. Reducing development spending will slow down the economy, while reducing spending on the social sector is not possible. At the same time the debt repayment pressure is increasing. As a result budget management is becoming more difficult.
Overall the picture is clear. Not only is the amount of debt increasing, but the repayment pressure is also increasing rapidly. The recent payment of 82 thousand crore rupees is a visible form of that pressure. Coping with this pressure will be the biggest challenge for the economy.
