Bangladesh's Debt Crisis: A Warning for South Asia

A new report has raised alarm bells about Bangladesh's growing debt, particularly to China, echoing the debt crises faced by neighboring countries like Sri Lanka and Pakistan. This issue carries significant implications for the region, including North East India.

Bangladesh's Debt-to-GDP Ratio Soars

According to the World Bank's International Debt Report 2025, Bangladesh's external debt has increased by 42% over the last five years, reaching nearly $105 billion by the end of 2024. This surge in debt has pushed the debt-to-GDP ratio above 39%, a significant jump from the 2017-18 figure of about 34%.

Debt Servicing Becomes a Major Budget Expense

The report also highlights that debt servicing has become the second-largest budget expense for Bangladesh. In the current year, the national budget has shrunk compared to the previous year, a situation compared to a "thin man asked to lose even more weight."

China's Influence and the Debt Trap

The report suggests that Bangladesh's increased dependence on China's Belt and Road Initiative (BRI) has led to this debt trap. China, however, has not limited its engagement with Bangladesh to the interim government led by Mohammed Yunus. The report notes that China has also been engaging with other power centers in the country, including the fundamentalist pro-Pakistan organization, Jamaat-e-Islami.

Implications for the Region and India

The debt crisis in Bangladesh serves as a cautionary tale for other South Asian countries, including India's Northeastern states. The region shares economic and cultural ties with Bangladesh and could potentially be impacted by any economic downturn there. Moreover, the increasing influence of China in the region is a matter of concern for India, given its border disputes with China.

Reflections and the Road Ahead

As Bangladesh grapples with its debt crisis, it is crucial for the country to learn from the experiences of Sri Lanka and Pakistan. Pursuing sustainable economic policies and diversifying sources of funding are essential to avoid falling into a debt trap. For India, it is important to engage with its neighbors, including Bangladesh, to promote economic cooperation and stability in the region.