Bangladesh is set to issue its first-ever sovereign bond denominated in dollars, most probably in December. The initiative aligns with the current Bangladesh Nationalist Party (BNP)-led government’s economic vision to strengthen the country’s bond and capital markets and reduce reliance on IMF and World Bank loans.
Initially, the government plans to issue bonds between $500 million and $1 billion, offering a regular yield, known as a “coupon,” of 7-8 percent to bondholders.
For months, Bangladesh has struggled to attract foreign direct investment and raise funds through the capital market, with zero initial public offerings since March 2024, while its banking sector has been distressed, with overwhelming non-performing loans. Amid the worsening economic situation, IMF loans came with stringent conditionalities to raise revenue collection and cut public spending, which at times means cutting social welfare expenses for the most underprivileged. Hence, the government’s decision to cancel the IMF loan and issue its debut sovereign bond in dollars promises autonomy in fiscal decision-making and an alternative channel to increase dollar reserves.
However, fiscal conditions, combined with the global bond market outlook and political instability, suggest that Bangladesh may not yet be ready to bear the cost of issuing the bond and making regular coupon payments in dollars.
Historically, Bangladesh has met its loan repayments while maintaining steady reserves, except during 2022-2024, when it faced a temporary balance-of-payments crisis due to the contraction in the global supply chain following the pandemic and the Russia-Ukraine war. The current external balance sheet signals a positive outlook, with remittances reaching a record ceiling of $35.6 billion in 2026. The public debt-to-GDP ratio is 41 percent, lower than in most of its neighboring South Asian countries, including India, Pakistan, Sri Lanka, and Nepal.
For developing countries, sovereign bonds establish a clear benchmark for domestic and international lenders, reducing the cost of capital. A finance ministry, considering these factors separately, could plausibly move forward.
Yet, two questions require robust answers before issuance: whether Bangladesh can meet its obligations to foreign creditors and whether its fiscal condition can support the debt.
On the first question, the record favors Bangladesh, as it has never defaulted on its loans since independence. As of June 2026, its total outstanding external debt stands at $110.93 billion, with debt servicing at $4.49 billion, about 5 percent of total export and remittance receipts. According to the Economic Relations Division, less than three months’ worth of remittances would meet annual external obligations, even in the year with the highest repayment level. This raises the question of whether the reliance on remittance inflow as the source of funding coupon payments is prudent. A global slowdown might cause remittance flows to fluctuate. For example, in September 2026, Bangladesh saw one of its slowest remittance inflows in recent times. Interest on a $1 billion bond at 7.5 percent is roughly $75 million per year, a sum the balance of payments can absorb. However, the bond is not a one-year obligation.
Second, Bangladesh’s fiscal condition requires more nuanced consideration. According to the World Bank, GDP growth fell to 3.4 percent for FY26-27, only ahead of Afghanistan, amid rising inflation. Sluggish growth combined with price inflation can affect Bangladesh’s ability to service debt in two ways. It narrows the revenue base of the Bangladeshi taka used to buy dollars to pay bondholders’ coupons, effectively depleting foreign reserves and putting downward pressure on the taka’s value. A weaker taka raises the cost of coupons owed in dollars. The correlation between local currency value and borrowing power is significant, because when the local currency’s value drops, borrowing costs in dollars rise (known as “original sin” in economic terms) and the government, rather than creditors, bears the exchange risk.
For example, Zambia, Ghana, Ethiopia, and Sri Lanka previously launched their first sovereign bonds. All four later defaulted, as most borrowed again and spent the proceeds on projects that earned no foreign exchange. Depreciation then raised the local currency cost of every coupon.
That exchange rate exposure can be costly. Since the government must pay bondholders in dollars, every fall in taka’s value makes the debt more expensive at home. At 7-8 percent interest, the dollar bond looks cheaper than the roughly 8.5 percent the Treasury pays on ten-year taka bonds, but only if the taka loses less than 0.5-1.5 percent of its value each year. Over the past decade, it has fallen faster than that, so the cheaper-looking dollar bond could end up costing more.
Additionally, Bangladesh’s foreign loan commitments are gradually dropping, meaning fewer dollars will be on the country’s external account. In contrast, grace periods on loans used to finance Rooppur, the metro rail, and the Padma rail link are ending, and external debt servicing is expected to rise to about $5.5 billion by FY30. At home, interest has become the largest item of current spending, standing at 1,275 billion taka (approximately $10.4 billion) in the FY27 budget. In short, more dollars will go out while less comes in.
On the income side, tax revenue offers little help either, as the National Board of Revenue (NBR) fell 875 billion taka short of its FY26 target. For FY27, the revenue target requires growth of more than 45 percent in one year, a target Fitch says is unlikely to be reached. Therefore, spending is likely to exceed NBR’s revenue collection target.
Initiating more sovereign bond programs, such as Panda, Samurai, Sukuk, and diaspora bonds, and oversubscription could worsen Bangladesh’s debt situation. In Zambia, for example, the country’s initial outstanding Eurobond debt rose from $750 million to $3 billion within three years, leading to its subsequent default.
Beyond fiscal pressure, Bangladesh should also consider investor sentiment in the global bond market, which is experiencing a significant sell-off. Spiking energy prices, geopolitical tensions, and the boom in the equity market are pushing bond prices lower. As a result, central banks are being forced to offer higher yields to stabilize the market. As of October 9, the U.S. Federal Reserve – the largest bond issuer – raised interest rates to 5.34 percent on 10-year Treasury bonds, the highest since 2002, while the British 30-year bond offers 6 percent – the highest since 1998. With higher-yield bonds denominated in dollars, euros, or pounds available in comparatively stable markets, along with the boom in the artificial intelligence-led equity market, the question is: will Bangladesh’s sovereign dollar bond generate any enthusiasm among foreign investors?
Politics adds further risks. Although the February election gave the BNP a two-thirds majority, the Awami League’s non-participation and a ban on its political activities are a ticking time bomb that could increase political instability and drive away risk-averse investors. Further, Sheikh Hasina – the leader of the Awami League – has said she intends to return in December, when the bond is to be priced. Investors will factor that into their considerations.
Bangladesh’s standing as a good borrower stems from prudent debt management and timely repayment over the years. However, issuing a Eurobond could change that record, since payments would have to be made in a currency the central bank cannot produce. Slow economic growth, fiscal strain, low dollar inflows, political instability, and a downturn in the international bond market mean Bangladesh should proceed with caution. The country should not take on the risk if it is not ready to meet the long-term payment obligations to its foreign creditors.
