Nearly half of Bangladesh’s budget expenditure in the first seven months of the current fiscal year has gone towards interest payments and subsidies, highlighting mounting fiscal pressures.

According to a finance ministry report, the government spent Tk 2465.83 billion from July to January, with Tk 1180.46 billion—or 48%—absorbed by debt servicing and subsidies.

Interest payments surged 27% year-on-year to Tk 75,902 crore during the period. While the FY25 budget earmarked Tk 113,500 crore for loan repayments, officials now anticipate this figure will rise due to increased yields on government securities, higher global interest rates, and the weakening taka.

“This problem is structural,” said Prof Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD). “We’ve accumulated a lot of debt, and now the cost of servicing that debt is rising.”

Subsidy spending also jumped 53% year-on-year to Tk 42,144 crore. The full-year allocation of Tk 88,000 crore is expected to be exceeded, with power-sector subsidies alone projected to rise from Tk 40,000 crore to Tk 62,000 crore in the revised estimate.

Rahman criticised the lack of reform in subsidy management. “We’ve had persistent problems with inclusion and exclusion. What we’re seeing now is the direct result of that.”

Public debt reached Tk 18.3 lakh crore in FY24, a 13.3% increase year-on-year, amounting to 36.3% of GDP. Rahman called for reforms, including sunset clauses and targeted reductions, to restore fiscal sustainability.