Bangladesh used nearly half of its foreign aid receipts in the 2024-25 fiscal year to repay external debts, marking the highest annual debt repayment in its history, according to Economic Relations Division (ERD) data.

The country received $8.11 billion in foreign loans during FY25 but repaid $4.087 billion—an increase from $3.37 billion in FY24 and significantly higher than repayments in previous years. Three years earlier, the debt servicing cost stood at just over $2 billion.

Of the total repaid, $2.59 billion went towards principal, while $1.5 billion was paid in interest. In comparison, FY24 saw repayments of $2.02 billion in principal and $1.35 billion in interest.

The ERD figures show that total foreign aid disbursement, including loans and grants, amounted to $8.518 billion in FY25. Of this, $404.56 million came as grants. Key multilateral and bilateral donors included the World Bank, Asian Development Bank (ADB), Japan, China, and the Islamic Development Bank.

ERD officials stated that the rising debt burden is a result of substantial external borrowing undertaken by the previous administration, particularly for large infrastructure projects. With grace periods for many loans nearing expiry, repayments are expected to increase further in the coming years.

In FY25, total foreign aid commitments dropped to $8.323 billion—down $2.415 billion from FY24. Disbursements also declined by $1.715 billion compared to the previous year.

A senior ERD official warned of a sharp spike in repayments in FY27, when the grace period for a $11.38 billion Russian loan linked to the Rooppur nuclear power project ends. Other budgetary loans, mostly on harder terms, will also enter repayment phases around the same time.

Bangladesh has traditionally relied on medium- to long-term concessional loans from development partners for its infrastructure and development agenda. However, the rising repayment obligations now pose significant fiscal challenges, particularly as loan terms become more stringent and disbursements decrease.