Bangladesh's external debt increases almost threefold in decade

Bangladesh's foreign debt has almost tripled over the past decade, growing faster than in any other South Asian nation except the Maldives, according to the World Bank. Despite this, the country's debt burden relative to its export earnings is lower than that of Pakistan, Sri Lanka, and Bhutan, though higher than India and Nepal.

At the end of 2025, Bangladesh's total foreign debt reached $113 billion, up from roughly $38 billion in 2015, ranking third among South Asian countries. For every $100 in annual earnings, Bangladesh carries $210 in total debt, with an annual repayment of $16. Economists believe the current levels are manageable, but there could be repayment issues if borrowing continues at this rate and the funds are not utilized effectively.

In the region, India has the largest external debt stock at $764 billion, up 59% in a decade, followed by Pakistan at $135 billion. Sri Lanka's foreign loans increased by 31% to $57 billion, while Nepal's rose by 186.5% to $3.3 billion, and Bhutan's by 57% to $3.3 billion. The Maldives saw a more than fourfold increase to $4.7 billion.

Repayments account for 16% of Bangladesh's export earnings, slightly higher than the previous year but below India's 10% and the South Asian average of 10%. Measured against gross national income (GNI), servicing costs are low at 2%, matching India and the regional benchmark. However, the debt-to-GNI ratio is 24%, slightly above the South Asian average of 21%.

Measured against export earnings, the debt appears heavier at 210% of Bangladesh's annual exports, more than double what the country earns from foreign trade and other income. This is far higher than India at 83% and the South Asian average of 95%, but lower than Pakistan at 324%, Bhutan at 301%, and Sri Lanka at 272%. Former World Bank economist Zahid Hussain warns that if debt keeps growing at the current pace, Bangladesh might face a situation similar to Sri Lanka's.

He emphasizes the importance of prudent borrowing and using borrowed funds effectively. Prof Mustafizur Rahman from the Centre for Policy Dialogue highlights that the debt-to-GDP and debt-to-export ratios are rising, but the most critical indicator is the net exports-to-debt servicing ratio. He notes that about 85% of export earnings come from readymade garments, where domestic value addition is 60-65%.

If net exports are used, the ratios would be significantly higher. Recent loans carry higher interest rates and shorter repayment periods, which will increase in the coming years due to rising interest rates and shrinking grace and repayment periods. To address this, Rahman suggests raising exports, improving domestic resource mobilization, and reducing reliance on foreign borrowing.