The International Monetary Fund has upgraded Bangladesh from a low-risk to a moderate-risk country in its debt sustainability assessment. This shift poses a significant challenge for the BNP-led government in preparing its initial budget. The IMF’s decision was influenced by worsening debt indicators, including debt volume, debt servicing in relation to GDP, exports, and revenue earnings.
Mounting repayment obligations are becoming a major concern for Bangladesh. The country’s debt service costs, covering both principal and interest payments, are projected to increase significantly in the coming years. By fiscal year 2026, these costs are estimated to reach $30.59 billion, up from $26.63 billion in fiscal year 2025, and further rise to $33.84 billion in fiscal year 2027.
Bangladesh’s public debt has surged to $188.79 billion, accounting for around 41% of the GDP in fiscal year 2024–25, compared to 39% in the previous year. The IMF has highlighted the elevated debt service-to-revenue ratio as a key concern, posing rollover risks over the medium term. The country has shifted from financing development expenditure through revenue surplus to relying heavily on borrowing, even for operational budgets.
The country’s financial challenges have escalated rapidly since fiscal year 2022-23, with revenue falling short of covering operating expenses. This gap has been filled through borrowing, leading to increased reliance on loans. In fiscal year 2024, the deficit rose further, requiring the entire Annual Development Programme to be funded through loans. The pressure is exacerbated by non-concessional foreign borrowing with high interest rates and short grace periods, as well as infrastructure projects failing to boost revenue collection.
The IMF has cautioned against Bangladesh’s heavy dependence on bank borrowing, which could crowd out private-sector credit and strain the financial system further.
