The Bangladeshi government is regularly and successfully repaying both principal and interest on its external debts, despite the mounting pressure to repay large amounts of foreign loans taken during the previous Awami League government. The government has adopted a cautious approach towards taking new loans, focusing on the necessity of projects, their economic feasibility, investment benefits, and the country’s future debt-servicing capacity.
According to the latest data from the Economic Relations Division (ERD), the government repaid US$453.23 million in principal and interest on foreign loans in July 2026, compared to US$446.68 million in the same month of 2025. Foreign loan disbursement stood at US$180.1 million in July, down from US$208.04 million in the same period of the previous year. The commitment for new foreign loans during the month was US$14.05 million.
The figures indicate that while the government is servicing its legacy debt, it is also being restrained in taking new loans. Priority is given to using borrowed funds for projects capable of generating investment and employment, particularly in the productive and manufacturing sectors. The pressure of foreign debt repayment has increased significantly in recent years as loans taken for large infrastructure and mega projects during the previous Awami League government have entered the repayment phase.
According to ERD data, the amount of principal and interest repaid against foreign loans in fiscal year 2025-26 increased by around 10 percent from the previous fiscal year to US$4.49 billion. The amount was US$4.09 billion in FY2024-25. The main reason for this increase is that many of the project loans taken over the past one and a half decades have now expired their grace periods, necessitating repayment of principal and interest.
Prime Minister’s Adviser on Finance and Planning Professor Dr Rashed Al Mahmud Titumir noted that the Awami League government borrowed extensively between 2009 and 2024 for infrastructure and mega projects without adequately considering the ‘value for money’ and interest rates. This has created a significant burden of loans and subsidies, particularly in the power sector. The current government is now dealing with the additional pressure of repaying these loans but is servicing these liabilities.
Dr Titumir emphasized that the present government has adopted an extremely cautious approach to borrowing from both domestic and foreign sources. The government is prioritizing the use of loans to increase momentum in investment, particularly in the manufacturing sector, and is considering the return and employment generation potential of projects before making borrowing decisions.
Economists recommend accelerating the implementation of ongoing projects, completing them within the stipulated timeframe, and ensuring the expected economic benefits from those projects. They also suggest negotiating with development partners for loans on better terms and prioritizing concessional or soft-term financing where possible. The significance of managing foreign debt effectively cannot be overstated, as it directly impacts the country’s economic stability and future development prospects.
