Bangladesh needs urgent and strategic action to strengthen public debt management as rising interest payments, shrinking reserve buffers and growing short-term borrowing increase fiscal risks, the Asian Development Bank (ADB) said.
The warning and suggestion came in the policy challenge section of the Asian Development Outlook April 2026, which said Bangladesh has so far avoided a public debt default but warning signs are becoming clearer.
The report said public debt is projected to rise to 42.4 per cent of gross domestic product in FY26 from an estimated 42.1 per cent in FY25.
ADB said the debt stock has grown in both scale and complexity, driven by years of infrastructure-led growth financed through borrowing.
It said the composition of debt has shifted towards short-term domestic borrowing, which now accounts for more than 55 per cent of total public debt and has increased liquidity and rollover risks.
Interest payments are also taking up a bigger share of public resources.
The report said debt servicing absorbed 16.3 per cent of total expenditure in FY25 and is projected at 15.4 per cent in FY26, limiting room for priority spending on human capital and infrastructure.
ADB said Bangladesh’s reserve cover has weakened sharply relative to external liabilities, falling from more than 75 per cent of total external debt in 2016 to just 21.5 per cent in 2023.
That erosion, it said, has reduced the economy’s capacity to absorb global shocks and increased vulnerability to liquidity pressure and sudden stops in external financing.
The lender said the International Monetary Fund assesses Bangladesh as facing a moderate risk of both external and overall debt distress, not because of a sharp deterioration in headline debt ratios, but because of weak reserves, a low revenue-to-GDP ratio and shallow domestic debt markets.
ADB said Bangladesh has already taken some steps, including the Public Debt Management Act 2022, the preparation of a medium-term debt management strategy and publication of quarterly debt reports.
But it said major institutional gaps remain.
The law does not clearly define borrowing purposes, set explicit debt ceilings or require parliamentary approval, reducing its strength as a fiscal anchor, the report said.
ADB recommended revising the law, creating an autonomous debt management office, strengthening audit and oversight, publishing fuller debt reports and improving coordination between fiscal and debt authorities.
It also said closer monitoring of state-owned enterprise liabilities and contingent risks is needed to prevent deeper fiscal stress.
