The government is set to allocate a record Tk 1.22 trillion for interest payments in the upcoming national budget, officials have said.

This marks a 7.5% increase—or Tk 85 billion—over the current fiscal year’s allocation of Tk 1.135 trillion, with debt-service costs showing no signs of easing.

According to finance ministry sources, Tk 1 trillion of the proposed allocation will go toward servicing domestic debt and Tk 220 billion for external loans. In comparison, the current budget earmarked Tk 930 billion for local loans and Tk 205 billion for foreign debt.

The surge in interest payments comes amid plans to increase net foreign borrowing to Tk 1 trillion in the next fiscal year, up from Tk 907 billion. Domestic borrowing is projected to decline slightly from Tk 1.609 trillion to Tk 1.4 trillion.

Central bank data show the government’s domestic debt stood at Tk 9.42 trillion by January 2025, up from Tk 8.22 trillion a year earlier.

A finance division official noted that Bangladesh paid $3.36 billion in external debt servicing in FY2023–24, including $1.35 billion in interest alone. “The debt-servicing burden will rise significantly this year and next,” he warned.

The budget is being prepared under tighter fiscal space, yet interest payments remain an unavoidable priority.