Bangladesh proposes doubling foreign borrowing to meet deficit in Budget 2026-27

The government has proposed borrowing nearly Tk 1.56 trillion in foreign loans in the next fiscal year, which is 2.28 percent of GDP

Finance Minister Amir Khosru Mahmud Chowdhury has proposed a substantial increase in borrowing from foreign sources to meet the deficit for government spending in the next fiscal year.

In his plan for the 2026-27 budget, the amount of net foreign borrowing will be over double the net foreign borrowing in the revised budget for 2025-26.

Khosru presented the Tk 9.38 trillion budget for the 2026-27 fiscal year in parliament on Thursday afternoon.

Of the outlay, the finance minister hopes to finance Tk 6.95 trillion through tax revenue.

This leaves an overall deficit between expenditure and revenue of Tk 2.43 trillion, which is equal to 3.6 percent of Bangladesh’s total GDP.

To meet this deficit, Khosru plans to borrow Tk 1.55 trillion from abroad, 2.28 percent of the GDP.

In other words, the new BNP government hopes to finance 63.79 percent of the total deficit through foreign borrowing at a time of uncertain economic headwinds.

Of this amount, Tk 460 billion will be spent on loan payment instalments and interest on previous loans taken out by the government.

This brings the net foreign borrowing to nearly Tk 1.1 trillion, a 89.4 percent jump from the revised budget of the outgoing fiscal year.

In the initial budget for 2025-26, external borrowing was estimated at Tk 1.35 trillion, but it was revised down to Tk 950 billion in the budget revision. And after repayment of instalments and interest, the net foreign borrowing was Tk 580 billion.

In the introduction to his budget speech, the finance minister said: “The budget has been formulated with economic stability, investment, production, employment and building a society without discrimination as the main considerations.

“The main philosophy of this budget is stable economic growth with the aim of ensuring the financial recovery and welfare of the people through economic democratisation and turning Bangladesh into a $1 trillion economy by 2034.

“In the medium term, by increasing the pace of revenue collection, the budget deficit will be kept at a tolerable level, and discipline will be restored in debt management, bringing it back from a medium-risk to a low-risk credit rating.

“Initiatives will be taken to move away from debt-dependent growth and build an economy focused on production, employment and private investment.

He said, “This time, the target has been set to reduce the budget deficit to 3.6 percent of GDP; which will help keep the debt risk at a tolerable level.”

Khosru has targeted domestic borrowing of Tk 1.27 trillion to meet the remainder of the deficit.

Of this, it plans to borrow Tk 1.18 trillion from the banking sector, which is 1.73 percent of GDP. It also aims to raise Tk 85 billion from savings certificates and Tk 150 billion from non-banking sources.

In addition, Tk 85 billion is planned to be borrowed from savings certificates and Tk 150 billion from non-bank financial institutions.

The domestic borrowing target in the original budget for the outgoing fiscal year 2025-26 was Tk 1.25 trillion. After the revision, it was increased to Tk 1.37 trillion.

Of this, Tk 1.04 trillion was to come from the banking sector, which increased to Tk 1.18 trillion after revision.