Bangladesh is gradually moving toward heightened debt vulnerability due to overpriced infrastructure projects, opaque contracts, and weak governance structures, researchers have warned at a roundtable discussion titled “Public Debt and Governance.” The central argument was clear: borrowing itself is not inherently problematic; the risk emerges when borrowed funds are mismanaged, inflated in cost, or fail to generate sustainable returns.

The study, conducted by a research institution under the University of London in collaboration with an international charity and the local research body Change Initiative, analyzed 42 major projects implemented between 2009 and 2025 across transport, power, ports, aviation, and industrial zones.

According to the findings, Bangladesh’s external debt rose from $23.5 billion in 2009 to approximately $112 billion in 2025—an increase of nearly 377 percent in 16 years. During the same period, interest payments surged significantly. Currently, about one-fifth of government revenue is spent solely on servicing interest, limiting fiscal space for development and social spending.

Of the 42 projects reviewed, 29 experienced average cost escalations of 70.3 percent. In many cases, 23 to 40 percent of total project expenditures were allegedly lost to corruption, inefficiency, or collusion. Economist Professor Mushtaq H. Khan noted that even marginal overpricing in contracts can accumulate into billions of dollars in long-term liabilities. Non-competitive procurement, political influence, and weak accountability mechanisms were identified as key structural weaknesses.

The study highlighted two main forms of project failure. First, some projects were completed but at excessively inflated costs, making it difficult to generate sufficient revenue to repay loans. Second, poor planning, flawed design, and inadequate preparation meant that certain projects failed to deliver anticipated economic benefits. In both scenarios, debt repayments continued regardless of performance, intensifying fiscal strain.

The power sector was identified as the most vulnerable. By 2025, fixed capacity charges could reach 380 billion taka, meaning the government must pay power producers even if electricity is not generated. High-priced contracts require annual subsidies of nearly $4.9 billion to keep retail tariffs affordable. Removing subsidies could increase electricity prices by up to 86 percent. Between 2011 and 2024, payments to producers increased elevenfold and capacity charges twentyfold, while actual generation rose only fourfold. A director of the Bangladesh Power Development Board noted that repealing special laws and introducing competitive bidding had helped reduce solar tariffs substantially.

The discussion also referenced international lessons. The 2022 financial crisis in Sri Lanka was cited as a cautionary example. Around 65 percent of Sri Lanka’s external debt had been invested in infrastructure, yet many projects failed to produce expected returns. Several initiatives undertaken during the tenure of former President Mahinda Rajapaksa later proved economically unviable, contributing to mounting repayment pressures and eventual crisis.

Researchers estimate that Bangladesh’s adjusted debt-to-GDP ratio now stands at approximately 42 percent, exceeding the previously considered safe threshold of 33 percent. If current trends persist, the ratio could rise to between 65 and 70 percent by 2030.

A country economic advisor from the United Nations Development Programme stressed the importance of aligning borrowing with coherent policy planning to ensure sustainable development outcomes. Meanwhile, governance experts suggested leveraging diagnostics and technical support from the International Monetary Fund and the Foreign, Commonwealth & Development Office to strengthen procurement systems and institutional capacity.

The overarching message was that transparency, competitive tendering, rigorous pre-project preparation, performance-linked disbursement, and enforceable accountability are essential for sustainable debt-financed development. Without structural reforms, rising debt, mounting subsidies, and inefficient investments could gradually push the economy toward severe financial stress.