Bangladesh is looking for new ways to manage its growing public debt as rising interest costs and foreign loan repayments put increasing pressure on government finances.
The Finance Division and the Asian Development Bank (ADB) are jointly organising the country’s first international debt conference, which begins at Ocean Paradise Hotel in Cox’s Bazar today (15 November).
Finance and Planning Minister Amir Khosru Mahmud Chowdhury will inaugurate the two-day event, titled “International Debt Conference Bangladesh 2026”, under the theme “Public Debt Management in a Changing Global Landscape”.
According to a report prepared by the Finance Division, the conference will bring together policymakers, representatives of international financial institutions, debt management specialists and professionals from Bangladesh and abroad. Experts from the United States, the United Kingdom, Malaysia, Indonesia, Pakistan and Sri Lanka are expected to share their experiences.
The discussions will focus on government borrowing strategies, debt costs and risk management, raising funds from international bond markets, and attracting private investment.
The initiative comes amid rising public debt, growing debt-servicing costs, exchange rate volatility and higher borrowing costs in international markets. Bangladesh also faces the challenge of securing financing for long-term development projects while pursuing its target of building a $1 trillion economy by 2034.
Against this backdrop, the government is looking beyond conventional foreign borrowing to diversify financing sources and strengthen the domestic capital market.
Debt management reforms on agenda
The Finance Division has already taken several initiatives to improve debt management, including preparing a Medium-Term Debt Management Strategy (MTDS), conducting regular debt sustainability analyses and publishing public debt bulletins.
It is also preparing to introduce an Annual Borrowing Plan in the current fiscal year.
The establishment of a separate Debt Management Office (DMO) will also be discussed at the conference. Currently, responsibilities for borrowing, debt repayment, risk assessment and debt management are divided among several institutions.
Experts will examine international experiences and ways to bring these functions under a more coordinated and efficient framework.
Another key objective is to attract international investors to Bangladesh’s government bond market.
To encourage foreign investment in government securities denominated in taka, the country needs to improve market liquidity, settlement infrastructure, currency convertibility and policy predictability.
Bangladesh is also exploring the possibility of connecting with international securities settlement platforms Euroclear and Clearstream.
The Finance Division sees potential for attracting foreign investment through Bangladesh’s inclusion in JPMorgan’s Government Bond Index-Emerging Markets Global Diversified (GBI-EM GD) index.
The conference will discuss how to make the local currency bond market more accessible to international investors by leveraging such opportunities.
Alternative financing sources under consideration
The conference will also explore financing options beyond conventional borrowing, including sovereign sukuk, green bonds, blue bonds, Sustainable Development Goal-linked bonds, sovereign Eurobonds and blended finance, according to Finance Division officials.
Blended finance combines funding from development partners with private investment to support large-scale projects. The discussions will also cover ways to bring public and private investment together for infrastructure development and share project risks.
However, the potential fiscal risks arising from government guarantees and other financial commitments associated with such arrangements will also need to be assessed.
The first day will feature three sessions on financing strategies amid high interest rates, developing the local currency bond market and attracting private capital to public investment.
The second day will include four sessions on sukuk and Islamic finance, the IMF-World Bank’s new debt sustainability framework, establishing a debt management office and alternative financing.
IMF warns of debt vulnerabilities
The discussion on the new IMF-World Bank debt sustainability framework is particularly important for Bangladesh, as future borrowing capacity needs to be assessed against export earnings, revenue collection, foreign exchange availability and debt repayment capacity.
In its debt sustainability analysis accompanying the 2025 Article IV consultation, the International Monetary Fund (IMF) classified Bangladesh as facing a moderate risk of both overall and external debt distress.
The IMF has stressed the need for higher revenue mobilisation, financial sector reforms and effective management of public debt risks. It has also highlighted the country’s narrow investor base for government securities and heavy reliance on the banking sector.
The Finance Division expects the conference to generate practical recommendations on balancing borrowing costs and risks, developing the domestic bond market, diversifying financing sources and strengthening institutional capacity for debt management.
The government is expected to use its discussions and recommendations to guide reforms in public debt management.
LDC graduation may increase borrowing costs
Another major reason for seeking new debt management strategies is Bangladesh’s preparation for graduation from the least developed country (LDC) category.
The United Nations General Assembly decided on 29 October to extend Bangladesh’s preparatory period for graduation by three years, shifting the graduation date from 24 November 2026 to 24 November 2029.
As an LDC, Bangladesh has benefited from access to loans on relatively favourable terms from various international development partners. Some of these financing advantages may change after graduation.
If the availability of long-term concessional loans declines, the government may have to rely more heavily on financing at comparatively higher interest rates to implement development projects.
The IMF’s debt sustainability analysis accompanying its 2025 Article IV consultation has also warned that the availability of long-term concessional external financing could decline over the medium term.
The IMF has therefore emphasised the need to develop the domestic bond market and extend the maturity of government borrowing.
However, graduation from the LDC category does not mean that all development partners will immediately stop offering concessional loans. Financing terms will continue to depend on factors such as per capita income, debt repayment capacity and individual lenders’ policies.
Nevertheless, reduced access to concessional financing could increase borrowing costs and future debt-servicing pressure.
Bangladesh also faces the risk of losing some duty-free market access for its exports following graduation. Maintaining export earnings, foreign exchange inflows and repayment capacity will therefore require improvements in the economy’s competitiveness.
In this context, the economic returns generated by borrowed funds will be as important as the amount and cost of borrowing.
Public debt exceeds Tk22 lakh crore
Bangladesh’s total public debt has already exceeded Tk22 lakh crore.
On 12 July, the finance minister told parliament that the government’s total outstanding debt stood at Tk22,06,462 crore, including Tk9,59,311 crore in foreign debt.
This means a substantial portion of government borrowing comes from domestic sources.
The FY27 budget has allocated Tk1,27,500 crore for interest payments. Of this, Tk1,05,000 crore is earmarked for domestic debt interest and Tk22,500 crore for foreign debt interest.
The rising interest burden is putting pressure on the government’s capacity to allocate funds for education, healthcare, social protection and development projects.
Data from the Economic Relations Division (ERD) also highlights the growing pressure of foreign debt repayments.
According to an ERD report, Bangladesh repaid a record $4.494 billion in foreign loan principal and interest in FY2025-26. Of the total, $2.95 billion went towards principal repayment and $1.54 billion towards interest payments.
Meanwhile, new foreign loan commitments stood at $5.243 billion during the fiscal year, the lowest in 14 years, according to the report.
The figures highlight the growing importance of managing the cost, source and maturity of government borrowing as repayments on existing loans increase and new commitments decline.
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