The latest figures on Bangladesh’s foreign debt situation highlight an important economic challenge: Foreign debt commitments have declined by more than $1 billion compared to the previous fiscal year, while repayments of principal and interest have crossed the $4 billion mark.
What this means is that the country is facing a situation where new foreign financing is slowing down while the responsibility of paying existing loans is increasing.
This does not mean that foreign borrowing itself is harmful; for a developing economy, foreign loans can play an important role in financing infrastructure, energy, and development projects.
The real concern, however, is whether these loans are being used effectively enough to generate returns that justify the repayment burden. Borrowing without ensuring productivity and economic gains can create unnecessary pressure for future generations.
The government must now focus on improving foreign debt management. The first priority should be ensuring that every foreign-funded project is carefully evaluated before approval.
Projects that have weak economic returns, unnecessary costs, or limited public benefit should not become a burden simply because financing is available.
At the same time, project implementation must be improved, with delays, cost overruns, and administrative inefficiencies reduced. Strengthening institutional capacity and ensuring transparency in project execution are essential steps.
Bangladesh must also work to build a stronger revenue base, which will reduce dependence on external borrowing and provide greater flexibility in managing debt obligations. Expanding the tax net, improving compliance, and reducing unnecessary exemptions can help create more sustainable finances.
Finally, foreign borrowing should increasingly focus on sectors that strengthen the economy’s ability to earn foreign currency, such as export diversification, industrial development, and skills development.
As debt repayments rise, the country needs investments that create long-term economic capacity rather than short-term benefits.
The current situation is manageable, but it requires careful planning. We have to ensure that foreign debt remains a tool for development, not a source of future vulnerability.