The International Monetary Fund (IMF) has introduced a new layer of pressure on Bangladesh’s economy by imposing, for the first time, a direct ceiling on foreign borrowing.
Under this restriction, Bangladesh will be allowed to borrow a maximum of $8.44 billion in the 2025–26 fiscal year, beyond which no additional borrowing will be permitted.
The borrowing ceiling has been set in phases—$1.91 billion in the first quarter, and $3.34 billion in the first half of the fiscal year.
This means the IMF will closely monitor borrowing quarterly to prevent excessive dependence on foreign loans.
In 2023, the IMF approved a $4.7 billion loan program for Bangladesh without any borrowing cap. However, in June this year, when the fourth and fifth tranches were released together and the loan package was expanded to $5.5 billion, the new condition of a foreign borrowing ceiling was introduced.
An official at the Ministry of Finance told Bangla Tribune that the decision was based on the IMF’s latest Debt Sustainability Analysis (DSA), which showed Bangladesh’s debt profile is no longer in the “low risk” category.
For two consecutive fiscal years, 2022–23 and 2023–24, the country has been placed under “moderate risk.”
The reasoning is clear: debt repayment pressure has escalated rapidly. In FY 2023–24, the debt-to-export ratio surged to 162.7%, far above the projected 116–118%.
Similarly, the debt-to-revenue ratio rose sharply. This indicates that the government’s repayment obligations in foreign currency are increasingly exceeding the economy’s capacity.
How much foreign debt does Bangladesh hold?
Foreign debt has now reached a historic high. In June alone, Bangladesh borrowed over $5 billion from the IMF, World Bank, ADB, and other lenders, pushing total external debt to $112.15 billion.
At an exchange rate of Tk122 per dollar, this amounts to roughly Tk13.68 trillion, creating a mounting repayment burden.
What experts say
Economists view the IMF’s move as a major warning signal, urging stricter caution in the use of foreign loans. They stress that high interest rates, short grace periods, and stringent terms increase vulnerability, underscoring the need for rigorous project evaluation and good governance in implementation.
Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), told Bangla Tribune: “Foreign loans must be used with greater caution, as they carry risks. Projects should be carefully assessed and governance in loan utilization must be ensured.”
Dr Zahid Hossain, former Lead Economist of the World Bank’s Dhaka office, said: “If development projects funded by loans fail to generate revenue or production, repayments will exert heavy pressure on the economy. Every loan must therefore be maximized to contribute to economic growth.”
He added: “The IMF was once optimistic about Bangladesh’s debt profile, citing low debt-to-GDP ratios. But the situation has changed. Foreign currency shortages and reserve constraints have made repayment increasingly difficult.”
Dr Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), attributed the IMF’s stricter conditions to political uncertainty and weakened fiscal discipline.
He said: “Alongside debt-to-GDP, revenue and export earnings have become critical. Since repayments must be made in dollars, excessive borrowing during a foreign exchange shortage could destabilize the entire economy.”
How did the debt burden grow?
Bangladesh’s external debt has been rising for years. In FY 2009–10, it stood at $20.3 billion. By FY 2023–24, it reached $68.8 billion, and by June 2025, it climbed to $80.19 billion. This surge has been driven largely by mega projects and pandemic-related expenditures.
According to an ADB report, Bangladesh’s public and publicly guaranteed debt has more than tripled over the past 13 years, the steepest rise among South Asian countries.
Finance ministry officials, however, downplay concerns, noting that borrowing has slowed under the interim government.
In FY 2024–25, Bangladesh borrowed $8.32 billion, 22% less than the previous year. In July–August of the current fiscal year, loan agreements totaled only $234 million—insignificant compared to the IMF’s ceiling.
Harder terms of borrowing
What is raising greater concern are “non-concessional” loans. On September 24, the Standing Committee on Non-Concessional Loans (SCNCL) of the ERD approved seven proposals worth $1.47 billion.
These include:
The terms of these loans are based on market-linked rates, with SOFR (Secured Overnight Financing Rate) plus lending spread and maturity premiums, leaving the grant element below 25%. In effect, these are equivalent to market loans with little or no subsidy.
What lies ahead?
Although reserves have improved slightly, they remain fragile. While remittance inflows are rising, investment remains stagnant.
Economists warn that while foreign loans may provide short-term relief for budgets and projects, repayment will become a major burden in the future.
Finance Adviser Dr Salehuddin Ahmed noted that Bangladesh’s dollar reserves are still inadequate for emergencies. On September 23, after a cabinet committee meeting, he said Bangladesh Bank’s decision to purchase dollars from the market was appropriate.
According to IMF figures, foreign exchange reserves now stand at $26.39 billion, while Bangladesh Bank estimates $31.27 billion. Between September 1 and 23, remittances reached $2.2 billion, up 17.6% year-on-year. From July 1 to September 23, remittances totaled $7.06 billion, an 18.2% rise from the same period last year.
Economists argue that Bangladesh’s priority must be to reduce reliance on debt. Enhancing revenue mobilization, diversifying exports, and attracting foreign investment are essential for building a stronger economic foundation.
The IMF’s condition, therefore, is more than a borrowing cap—it is a wake-up call. Fifteen years of debt-driven growth are now creating new pressures. Unless the government expands domestic revenue, foreign borrowing may no longer serve as a lifeline but instead become a source of economic crisis.
