Bangladesh’s per capita foreign debt has more than doubled over the last eight years, according to official data. Economists point to poorly planned foreign-funded projects and corruption as the key reasons behind this surge, which is increasing the financial burden on the country’s low-income population, including the extremely poor.
Data from Bangladesh Bank reveals that the per capita external debt jumped by 135% to $605 in the 2023-24 fiscal year, compared to just $257 in 2015-16. The total external debt now stands at $103.79 billion, with $83 billion belonging to the public sector alone.
The Finance Division warns that Bangladesh’s external public debt servicing is on the rise and will continue to increase in the coming years. In fact, the government’s foreign debt payments, including both principal and interest, rose by 26%—from $2.67 billion in the 2022-23 fiscal year to $3.35 billion in 2023-24.
Zahid Hussain, a former lead economist at the World Bank’s Dhaka office, explained that a significant portion of these loans wasn’t used properly, with some funds even lost to capital flight. “Expensive contracts were signed for foreign-financed projects, and much of the money ended up abroad due to corruption,” he said.
Hussain cited examples such as power plants built in Khulna’s Rupsha area using foreign loans, which now sit idle due to a lack of gas supply. Despite the loans being taken, these projects are contributing little to the economy.
Although the per capita debt has risen sharply, Hussain noted that the country’s per capita income is also increasing. However, he emphasized that the growing debt-to-GDP ratio is a concern. In 2023-24, the ratio reached 22.6%, up from 15.5% in 2015-16.
While this ratio is still moderate compared to other countries, the stress of repaying these loans is beginning to impact Bangladesh’s foreign exchange reserves, especially over the past two years.
Hussain also highlighted a hidden burden: the arrears of state-owned enterprises (SOEs), which are not counted in the foreign debt. These arrears, estimated at around $5 billion, stem from the country’s purchase of electricity and fertilisers, further adding to the financial strain.
As Bangladesh faces dollar shortages and rising arrears, Hussain said the government has little choice but to take on more foreign loans.
“To keep importing essentials like furnace oil and fertilisers, the country needs cash dollars,” he explained. Loans from institutions like the International Monetary Fund (IMF) and World Bank, which offer lower interest rates, are the most viable option.
The government is now seeking support through various channels, including budget financing and guarantees, to ease the foreign exchange burden and keep the economy running, he added.
