Originally posted in The Daily Star on 8 November 2026
Foreign debt nearly triples in a decade
Economists say debt is manageable for now, but exports are small, borrowing costs are rising and grace periods are shortening
Bangladesh’s foreign debt has almost tripled in 10 years, a steeper rise than in any other South Asian country except the Maldives, according to the World Bank.
Even so, the country has a lower debt burden relative to export earnings than Pakistan, Sri Lanka and Bhutan. However, its burden is higher than that of India and Nepal.
According to the World Bank’s International Debt Report 2026, Bangladesh’s total foreign debt stood at $113 billion at the end of 2025, up from about $38 billion in 2015. That is the third-largest stock in South Asia.
Economists say the indicators are manageable for now, but Bangladesh could face repayment trouble if borrowing keeps growing at this pace and the money is not put to proper use.
In the South Asia region, India holds the largest external debt stock at $764 billion, up 59 percent in a decade. Pakistan follows at $135 billion, almost double the level of 10 years ago.
In Sri Lanka, foreign loans rose 31 percent to $57 billion. External debt rose 186.5 percent to $11 billion in Nepal and 57 percent to $3.3 billion in Bhutan. The Maldives recorded a more than fourfold increase to $4.7 billion.
REPAYMENTS TAKE 16% OF EXPORTS
Debt servicing took 16 percent of Bangladesh’s export earnings in 2025, 3.1 percentage points less than the year before. That is the share of export income spent on repaying principal and interest on foreign loans, and a falling ratio is a positive sign of repayment capacity.
Even so, it remains above India and the South Asian average of 10 percent, though below Sri Lanka at 26 percent and Bhutan at 19 percent.
Measured against gross national income (GNI), servicing costs are low. At 2 percent, Bangladesh matches India and the regional benchmark, against 5 percent in Sri Lanka and 6 percent in Bhutan.
The country’s debt-to-GNI ratio, which is external debt as a percentage of the national income, stands at 24 percent. It is a manageable level but slightly above the South Asian aggregate of 21 percent. The ratio is 20 percent in India, 41 percent in Pakistan and 54 percent in Sri Lanka.
Set against what the country earns from exports, the debt looks heavier.
External debt stands at 210 percent of Bangladesh’s annual exports, more than twice what the country earns each year from foreign trade and other income.
That is far above India at 83 percent and the South Asian aggregate of 95 percent, but below Pakistan at 324 percent, Bhutan at 301 percent and Sri Lanka at 272 percent.
WARNING ON BORROWING
Zahid Hussain, a former lead economist at the World Bank’s Dhaka office, said Bangladesh still does better than Pakistan and Sri Lanka on these indicators but trails India.
“If foreign debt keeps growing at the current pace, it would not be surprising if Bangladesh eventually faced a situation similar to Sri Lanka’s,” said the economist.
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“If you are not prudent about the types of debt you take and how you use the borrowed funds, becoming another Sri Lanka is only a matter of time.”
He said comparing Bangladesh with Pakistan is difficult, given Pakistan’s particular geopolitical and strategic situation.
Zahid said exports matter because the debt-to-GDP ratio shows very little about a country’s ability to repay. A large economy is not enough; it also needs adequate liquidity, which is why the export ratio is important.
On this measure, Bangladesh is also vulnerable because its export base is small and heavily dependent on a single product category. Its exports as a share of GDP are among the lowest, he said.
“Remittances add to foreign currency earnings, but even counting them India stays far ahead because its remittance income is much higher. Sri Lanka, similarly, receives large numbers of tourists and earns substantial foreign currency from tourism,” he added.
COSTLIER LOANS AHEAD
Prof Mustafizur Rahman, a distinguished fellow at local think tank Centre for Policy Dialogue (CPD), said the debt-to-GDP and debt-to-export ratios are rising gradually, but the most important indicator is the ratio of net exports to debt servicing.
He said that about 85 percent of export earnings come from readymade garments, where domestic value addition is 60-65 percent. The ratios would therefore be significantly higher if net exports were used.
Recent loans carry relatively high interest rates and shorter repayment and grace periods, so the ratios will rise rapidly in the coming years, said Mustafizur, as Bangladesh already faces growing debt pressure.
Government debt servicing was $4.9 billion in the last fiscal year and is projected to reach $7.6 billion by 2029, as interest rates climb while grace and repayment periods shrink. The interest rate in Japan, for example, has risen from below 1 percent in 2021 to above 3 percent, he said.
He said Bangladesh needs to raise exports and domestic value addition, improve domestic resource mobilisation and reduce its reliance on foreign borrowing to finance the Annual Development Programme.
“Global financing conditions are tightening. Bangladesh will still need foreign loans, but should negotiate better terms and secure more concessional financing,” he said, adding, “It could also consider raising funds through bond issuance.”
According to the World Bank report, foreign debt of developing countries rose 5.5 percent to a record $9.4 trillion in 2025, the fastest growth since 2021 and about four times the average pace of 2022-24.
Debt-service pressure remained severe amid elevated global interest rates. Low and middle-income countries paid $1.4 trillion in principal and interest in 2025, up 1.9 percent and the fifth consecutive annual rise.
Between 2022 and 2025, developing countries paid $436 billion more in debt service than they received in new financing.
