Bangladesh's debt rises 13.5pc in FY25

Bangladesh's total debt rose by more than 13.5 per cent to Tk 21.44 trillion in the fiscal year ending in June 2025, driven largely by external borrowing, according to data released by the Finance Division on Wednesday.

This represents 38.61 per cent of the country's Gross Domestic Product (GDP), up by 2.31 percentage points from a year earlier.

But the Finance Division says it is still safe for remaining less than 55 per cent of the International Monetary Fund (IMF) debt burden threshold for low-income countries.

External debt climbed 17 per cent to Tk 9.49 trillion in June 2025, while domestic debt increased by 11 per cent to Tk 11.95 trillion.

The sharp rise in foreign liabilities was primarily attributed to loans received from the IMF during the 2024-25 fiscal year.

Under the IMF-supported programme that began in FY24, Bangladesh has so far received $3.50 billion of the approved $4.55 billion.

Despite the recent increase in external borrowing, domestic debt remains the dominant component of the government's overall debt portfolio.

Till June 30 this year, domestic and external liabilities accounted for 56 per cent and 44 per cent of total government debt stock, respectively, underscoring the continued reliance on local financial markets for budget financing.

Banking sector financing constituted about 65 per cent of total domestic debt, followed by the National Savings Certificates (NSCs) at 28 per cent, with the remainder funded through the General Provident Fund (GPF).

The ongoing reforms in the NSC schemes are gradually easing fiscal pressures and helping create a more balanced debt portfolio, the Finance Division in its report mentioned.

During the period under review, borrowing from non-banking sources, mainly the NSCs, declined by more than Tk 60 billion.

In the meantime, interest expenses surged by 17 per cent compared with FY24.

The cost of treasury securities rose sharply - by 43 per cent year-on-year - while external interest payments increased by 21 per cent.

The Finance Division in its analysis warns that effective management of interest expenses on government borrowing is now essential not only for fiscal prudence but also for maintaining macroeconomic stability, protecting foreign exchange reserves, sustaining economic growth, and safeguarding the country's international creditworthiness.

Ensuring long-term debt sustainability, it says, will require decisive policy action, including more prudent debt management, rigorous project evaluation, improved implementation efficiency, stronger domestic resource mobilisation, and greater efforts to diversify export earnings.

Yield curves indicate a slight decline in the cost of borrowing through government securities in the fourth quarter of FY25 compared with the same period a year earlier.

The World Bank's International Development Association (IDA) remains Bangladesh's largest external creditor, followed by the Asian Development Bank (ADB), Japan, and Russia.

The currency composition of external debt reflects a cautious approach to managing foreign exchange risks.

The US dollar accounts for about 52 per cent of the outstanding external debt, with the remainder diversified among the Japanese yen, the euro, and the Chinese Renminbi - a strategy aimed at balancing exchange rate exposures.

jasimharoon@yahoo.com