Bangladesh’s External Debt Dynamics: the Recent Evidence

Abstract Between 2012 and 2023, Bangladesh’s external debt grew by 248%, from $29.16 billion to $101.45 billion. This debt accumulation was largely driven by public sector borrowing. We focus on the recent years of this period as it coincides with the country’s political transition and also captures most of the debt buildup during the previous government’s tenure. We evaluate Bangladesh’s external debt level through the lens of various theories developed in the literature. Using descriptive and analytical methods, we find several interesting results. First, there is a shift toward bilateral creditors such as Japan, China, and Russia, which reflects a broader “looking East” trend seen among developing nations. The Herfindahl-Hirschman Index confirms this with a 36% decline in creditor concentration as Bangladesh diversified from multilateral to bilateral sources. Second, two particular indicators – debt-to-exports (170.9%) and debt-to-gross national income (22.3%) – have breached critical threshold levels compared to those reported in the literature. Third, results from the threshold regression suggest that at a debt-to-exports threshold of approximately 170–250%, additional debt has a negative impact on economic growth.