New Delhi, Jan 8 (IANS) Bangladesh is facing a major economic problem as rising debt repayments, much of them linked to Chinese loans, squeeze public finances and limit policy choices.

Senior officials now openly acknowledge that the country has fallen into a debt trap like Sri Lanka and Pakistan, according to a report in the London-based ‘Asian Lite’ newspaper.

Chairman of Bangladesh’s National Board of Revenue M Abdur Rahman Khan said at a seminar recently that the country “has already fallen into a debt trap” and unless the scale of the problem was recognised, recovery would be impossible.

The allocation for debt servicing in Bangladesh’s national budget exceeds priority sectors such as agriculture and education. The country’s debt-to-GDP ratio has surged past 39 per cent, from around 34 per cent in 2017–18, reflecting years of heavy borrowing to finance infrastructure and development projects, the article points out.

Finance Secretary Md Khairuzzaman Mozumder underscored the severity of the situation, noting that for the first time in the country’s history the current budget is smaller than the previous year.

Since joining China’s Belt and Road Initiative (BRI) in 2016, Bangladesh has steadily expanded its exposure to Chinese financing. Dhaka now expects total Chinese commitments to reach about $40 billion, including $14 billion in joint ventures.

Economists warn that shrinking fiscal space will inevitably affect social spending and long-term growth prospects, even as the government struggles to meet rising repayment obligations.

The World Bank’s International Debt Report 2025 has highlighted that Bangladesh’s external debt has jumped by 42 per cent over the past five years, reaching nearly $105 billion by the end of 2024, compared with just $26 billion in 2010.

External debt now amounts to almost 192 per cent of Bangladesh’s export earnings, while debt servicing consumes around 16 per cent of exports — a level analysts say signals mounting repayment stress and growing vulnerability to external shocks.

Bangladesh’s predicament has revived comparisons with Sri Lanka, which defaulted on its sovereign debt in 2022 after years of unsustainable borrowing, much of it linked to Chinese-funded projects.

Pakistan, meanwhile, has sought a $7 billion IMF bailout to stabilise its economy while grappling with nearly $30 billion in liabilities under the China–Pakistan Economic Corridor.

Analysts are of the view that Bangladesh risks meeting the same fate unless drastic changes are made in borrowing patterns and more transparency is imposed on loan terms and project viability.

–IANS

sps/rad