Bangladesh’s domestic and foreign debt has recently exceeded $204 billion, equivalent to more than 40 per cent of its GDP. The Bangladesh government is increasingly sinking into an ocean of debt. During her 15-and-a-half years of misrule, ousted Prime Minister Sheikh Hasina largely laid the groundwork for this descent into a sea of debt. Following Hasina’s ouster, the interim government that took power failed to rein in this excessive appetite for borrowing.
The current BNP government, too, has failed to demonstrate the necessary restraint in this regard. In particular, the BNP government appears to be showing little restraint when it comes to domestic borrowing.
In the budget for the current 2026–27 fiscal year, the allocation for repayment of government debt principal and interest has nearly caught up with the allocation for the education and technology sector, one of the largest expenditure sectors in the budget. Starting from the 2028–29 fiscal year, repayment of principal and interest on government debt will become the single largest expenditure item in the national budget. At that point, like Pakistan, the Bangladesh government will have to borrow increasingly large amounts every year to repay the principal and interest on both domestic and foreign debt. This is what is known as a ‘debt trap’—being submerged in an ocean of debt.
As of November 2026, Bangladesh’s outstanding external debt stood at $116 billion, equivalent to more than 23 per cent of the country’s total GDP. According to the World Bank and the IMF, external debt is considered dangerous for a country when it exceeds 40 per cent of GDP. Viewed from this perspective, it might appear that Bangladesh’s external debt has not yet reached a dangerous level. However, a closer examination of the following factors reveals the looming danger.
According to the Bangladesh Ministry of Finance publication Flow of External Resources into Bangladesh, the country’s external debt remained below 15 percent of GDP until the 2019–20 fiscal year.
As of the 2019–20 fiscal year, 38 per cent of Bangladesh’s total external debt came from the World Bank, 24.5 per cent from the Asian Development Bank (ADB), 17 per cent from the Japan International Cooperation Agency (JICA), 6.81 per cent from China, 6.14 percent from Russia, and just 1.3 percent from India.
Bangladesh primarily obtained ‘soft loans’ from these sources. Such loans generally carry lower interest rates and offer much longer repayment periods.
In the name of economic development, Hasina had established an unprecedented system of authoritarian rule and plunder in the country—one whose costs the people would have to bear for many years to come
Many of us may not be aware that Bangladesh has never defaulted on its external debt repayments in the past 55 years. Moreover, until the 2020–21 fiscal year, the annual instalments the country had to pay towards the principal and interest on its external debt accounted for only around 5 to 6 percent of the government’s budget. However, during the final decade of Hasina’s authoritarian rule, the government embarked on an unprecedented borrowing spree, taking out massive amounts of both domestic and foreign loans in the name of one mega project after another. This led to the establishment of a massive system of plunder, causing the government’s domestic and external debt to grow at an astonishing pace.
Even now, Awami League supporters continue to loudly claim that Bangladesh achieved unprecedented economic development during Hasina’s 2009–24 tenure. With high-profile mega projects such as the Padma Bridge, metro rail, Karnaphuli Tunnel, Rooppur Nuclear Power Plant, Dhaka–Mawa–Bhanga railway line, Dohazari–Cox’s Bazar railway line, the visually impressive Cox’s Bazar railway station, and the third terminal at Dhaka Airport standing before their eyes, ordinary citizens may find such claims convincing. However, despite the impressive appearance of these visible mega projects, each one conceals a story of extraordinary capital plunder.
Those of us who were able to understand the true stories of capital plunder behind each of these projects could see all along that, in the name of economic development, Hasina had established an unprecedented system of authoritarian rule and plunder in the country—one whose costs the people would have to bear for many years to come.
On the day Hasina’s government fell in 2024, the outstanding balance of the Bangladesh government’s combined domestic and external debt stood at more than Tk 18.35 trillion (18 lakh 35 thousand crore). Yet, when Hasina came to power in 2009, the outstanding balance of the government’s domestic and external debt was only Tk 2.7683 trillion (2 lakh 76 thousand 830 crore). This means that the combined debt stock increased by Tk 15.58206 trillion (15 lakh 58 thousand 206 crore) during this period.
Yet, even as her government plunged the people of the country into this vast ocean of debt—amounting to more than Tk 18.35 trillion—it continued to showcase high annual per capita GDP growth. This could well be described as a massive deception perpetrated against the people.
In the 2023–24 fiscal year, the budget allocation for repayment of principal and interest on external debt was approximately $2.5 billion. However, in the 2026–27 budget, this allocation has increased to more than $4.5 billion. In the coming fiscal years, the allocation for this purpose will have to be increased to nearly $6 billion.
Even more alarming is that, if the current government continues with its announced borrowing plans from domestic sources, the government’s budget deficit could exceed 5 per cent of GDP in the coming fiscal years.
The root of the problem lies in government revenue falling to around 7 percent of Bangladesh’s GDP, the lowest level in South Asia. Just a few years ago, the country’s tax-to-GDP ratio was close to 10 per cent. However, during the final five years of the Awami League government, it gradually declined to around 7 per cent.
On the one hand, there was an enormous spree of undertaking projects of limited necessity or no necessity at all; on the other, there was a failure to mobilise revenue. The inevitable consequence of these two factors has been an ever-increasing need for government borrowing. During the final five years of Sheikh Hasina’s authoritarian rule, private-sector investment stagnated at 23–24 per cent of GDP. Yet, in an effort to artificially inflate the annual GDP growth rate, Hasina continued to increase public-sector investment.
Domestically, the government borrowed recklessly from the banking sector. At the same time, it resorted to extreme imprudence in accepting foreign loans from virtually any available source to finance various projects. In the private sector, several hundred powerful business tycoons built an extraordinary vicious cycle of loan plundering within the banking sector.
Capital flight became the number one problem during the Hasina era. The White Paper Committee, headed by Dr Debapriya Bhattacharya and formed on the orders of the interim government, reported that an average of $16 billion was siphoned out of the country every year through the plunder perpetrated under Hasina’s authoritarian kleptocracy, amounting to a staggering total of $234 billion.
It is now being reported that although the expenditure on the Padma Bridge project was officially stated to be Tk 30,000 crore, the actual cost was less than Tk 10,000 crore, with the remainder simply plundered. Similarly, although the Rooppur Nuclear Power Plant project is said to be costing Tk 113,000 crore, its actual cost was reportedly less than half that amount.
Although the Karnaphuli Tunnel project was reported to have cost Tk 10,500 crore, funds were embezzled through the project. Hundreds of crores of taka were simply wasted by constructing a completely unnecessary five-star resort in the Anwara section of the project. After more than Tk 2,800 crore had been squandered on the Dhaka–Gazipur Bus Rapid Transit (BRT) project, a decision to cancel it was recently announced.
We can only wait and see whether the current BNP government will actually be able to rescue the country from this ocean of debt.
* Dr Moinul Islam is an economist and a retired professor of the Department of Economics at the University of Chittagong.
* The views expressed here are the author’s own.
* This article appeared in Prothom Alo online and has been translated for Prothom Alo English Online by Ayesha Kabir