In light of Dhaka’s increasing reliance on China’s Belt and Road Initiative (BRI), concerns have been raised about Bangladesh falling into a debt trap similar to Sri Lanka. The report warns that Bangladesh is now grappling with the consequences of accepting Chinese loans without heeding the lessons from other countries. Following unsustainable borrowing from China, Sri Lanka experienced a sovereign debt default in 2022, leading to an economic crisis.
Debt servicing has become the second largest budgetary expense for Bangladesh, with its debt-to-GDP ratio rising to over 39 percent from around 34 percent in 2017-18. The country’s external debt has surged by 42 percent over the past five years, reaching nearly $105 billion by the end of 2024. This increase has raised concerns as external debt now stands at 192 percent of the country’s export earnings, with debt service payments amounting to 16 percent of exports.
The Chairman of the National Board of Revenue of Bangladesh, M. Abdur Raman Khan, confirmed that Bangladesh has fallen into a debt trap. Notably, the country’s national budget for the current year is smaller than the previous year for the first time in its history. This has led to comparisons, with one official likening the situation to a thin person being asked to lose even more weight.
Under the leadership of Mohammed Yunus as Chief Advisor of the Interim Government, Bangladesh has strengthened its ties with China. However, the report highlights that China has diversified its engagements in Bangladesh, recognizing the temporary nature of the interim government. China has been fostering relationships with various power centers in Bangladesh, including Jamaat-e-Islami, a fundamentalist organization with pro-Pakistan leanings.
