Bangladesh's foreign debt servicing obligations are projected to nearly double — rising from $4.11 billion in FY2024-25 to $7.6 billion in FY2028-29 — driven by surging interest payments, shorter loan maturities, and repayments falling due on several large infrastructure projects, according to the Finance Division's 'Medium-Term Macroeconomic Policy Statement' for FY27–FY29. The trajectory poses a serious challenge to the country's fiscal stability, as reported by The Daily Star, a Dhaka-based newspaper.

Scale of the Debt Surge

For FY2028-29, foreign debt servicing costs are expected to comprise $4.3 billion in principal repayments and interest payments of approximately $3.3 billion — equivalent to Tk 40,300 crore at prevailing exchange rates. The revised estimate for the current fiscal year stands at $4.94 billion, projected to climb further to $5.62 billion in the next fiscal year. Bangladesh's total foreign debt stock is expected to reach $123 billion by FY2028-29, up sharply from $77.27 billion at the end of the last fiscal year and $51 billion in FY2020-21, according to finance ministry data.

Why the Burden Is Rising

Zahid Hussain, former lead economist at the World Bank's Dhaka office, identified three primary drivers: rapid debt accumulation in the post-Covid-19 period, shorter repayment periods compared to earlier borrowings, and rising global interest rates. He also pointed to the structure of World Bank loan repayments, under which borrowers pay 1 per cent interest annually in the first decade, 2 per cent in the next, and progressively higher amounts thereafter — meaning older loans are now entering their costlier repayment phases. A strengthening US dollar is compounding the pressure further, he noted.

Mega Projects Adding Pressure

Repayment schedules for large bilateral loans are also converging. Annual repayments for the Rooppur Nuclear Power Plant loan are expected to require approximately $600 million per year, with repayment of Russia's $12 billion loan for the project commencing in September 2028. Chinese loans carry shorter grace periods and maturities, requiring faster repayments. According to an Economic Relations Division (ERD) report, Bangladesh borrowed approximately $9 billion from China under a package arrangement, of which around $500 million has already been repaid, excluding interest. The interest rate on these loans stands at 2 per cent, with a grace period of only five years and a repayment period of 15 years.

What This Means for Bangladesh

The convergence of multiple large repayments within a narrow window — between FY2027 and FY2029 — leaves Bangladesh with limited fiscal headroom. The country's foreign exchange reserves have already faced stress in recent years, and a near-doubling of annual debt service obligations could constrain public spending on health, education, and social protection. Notably, this comes at a time when Bangladesh is also navigating a post-pandemic economic recovery and political transition. How the government manages refinancing risks and foreign reserve buffers over the next three years will be closely watched by multilateral lenders and credit rating agencies alike.