REJAUL KARIM BYRON and AHSAN HABIB

At one time, it was possible to finance a portion of development expenditure through revenue surplus. However, in recent years, not only development expenditure but even the operational budget has had to be financed through borrowing.

The deterioration has been rapid since fiscal year 2022-23, when actual revenue fell Tk 463 crore short of what was needed just to cover operating expenditure. The gap was plugged through borrowing.

The following year, that shortfall shot up to Tk 3,630 crore. By FY25, the entire Annual Development Programme (ADP), the primary fiscal instrument for financing public sector development, had to be financed through loans.

The roots of the problem lie in a combination of the government taking up large mega-projects, expanding budgets, but failing to grow revenue collection as required. As the gaps between expenditure and revenue grew larger over the years, the necessary money came through loans.

By FY25, Bangladesh’s total public debt reached $188.79 billion, equivalent to 41 percent of GDP, according to the IMF’s latest Article IV Consultation Report. The rate was 39 percent in FY24.

The IMF, one of Bangladesh’s biggest multilateral lenders, has responded by moving the country from a low-risk to a moderate-risk classification in its debt sustainability analysis, reflecting deteriorating metrics across debt volume, debt servicing relative to GDP, exports, and revenue earnings.

The mounting repayment obligations are emerging as one of the biggest challenges for the BNP-led government as it prepares its first budget since coming to power in February.