Bangladesh is ready to problem its first-ever sovereign bond denominated in {dollars}, most likely in December. The initiative aligns with the present Bangladesh Nationalist Occasion (BNP)-led authorities’s financial imaginative and prescient to strengthen the nation’s bond and capital markets and scale back reliance on IMF and World Financial institution loans.
Initially, the federal government plans to problem bonds between $500 million and $1 billion, providing a daily yield, referred to as a “coupon,” of 7-8 p.c to bondholders.
For months, Bangladesh has struggled to draw international direct funding and lift funds by means of the capital market, with zero preliminary public choices since March 2024, whereas its banking sector has been distressed, with overwhelming non-performing loans. Amid the worsening financial scenario, IMF loans got here with stringent conditionalities to boost income assortment and reduce public spending, which at instances means reducing social welfare bills for essentially the most underprivileged. Therefore, the federal government’s determination to cancel the IMF mortgage and problem its debut sovereign bond in {dollars} guarantees autonomy in fiscal decision-making and another channel to extend greenback reserves.
Nevertheless, fiscal circumstances, mixed with the worldwide bond market outlook and political instability, recommend that Bangladesh could not but be able to bear the price of issuing the bond and making common coupon funds in {dollars}.
Traditionally, Bangladesh has met its mortgage repayments whereas sustaining regular reserves, besides throughout 2022-2024, when it confronted a short lived balance-of-payments disaster because of the contraction within the international provide chain following the pandemic and the Russia-Ukraine conflict. The present exterior steadiness sheet indicators a constructive outlook, with remittances reaching a file ceiling of $35.6 billion in 2026. The general public debt-to-GDP ratio is 41 p.c, decrease than in most of its neighboring South Asian international locations, together with India, Pakistan, Sri Lanka, and Nepal.
For growing international locations, sovereign bonds set up a transparent benchmark for home and worldwide lenders, decreasing the price of capital. A finance ministry, contemplating these elements individually, may plausibly transfer ahead.
But, two questions require strong solutions earlier than issuance: whether or not Bangladesh can meet its obligations to international collectors and whether or not its fiscal situation can assist the debt.
On the primary query, the file favors Bangladesh, because it has by no means defaulted on its loans since independence. As of June 2026, its complete excellent exterior debt stands at $110.93 billion, with debt servicing at $4.49 billion, about 5 p.c of complete export and remittance receipts. Based on the Financial Relations Division, lower than three months’ price of remittances would meet annual exterior obligations, even within the yr with the very best reimbursement stage. This raises the query of whether or not the reliance on remittance influx because the supply of funding coupon funds is prudent. A worldwide slowdown may trigger remittance flows to fluctuate. For instance, in September 2026, Bangladesh noticed certainly one of its slowest remittance inflows in latest instances. Curiosity on a $1 billion bond at 7.5 p.c is roughly $75 million per yr, a sum the steadiness of funds can take in. Nevertheless, the bond just isn’t a one-year obligation.
Second, Bangladesh’s fiscal situation requires extra nuanced consideration. Based on the World Financial institution, GDP progress fell to three.4 p.c for FY26-27, solely forward of Afghanistan, amid rising inflation. Sluggish progress mixed with value inflation can have an effect on Bangladesh’s capacity to service debt in two methods. It narrows the income base of the Bangladeshi taka used to purchase {dollars} to pay bondholders’ coupons, successfully depleting international reserves and placing downward strain on the taka’s worth. A weaker taka raises the price of coupons owed in {dollars}. The correlation between native forex worth and borrowing energy is important, as a result of when the native forex’s worth drops, borrowing prices in {dollars} rise (referred to as “authentic sin” in financial phrases) and the federal government, somewhat than collectors, bears the trade threat.
For instance, Zambia, Ghana, Ethiopia, and Sri Lanka beforehand launched their first sovereign bonds. All 4 later defaulted, as most borrowed once more and spent the proceeds on initiatives that earned no international trade. Depreciation then raised the native forex price of each coupon.
That trade fee publicity might be pricey. For the reason that authorities should pay bondholders in {dollars}, each fall in taka’s worth makes the debt dearer at house. At 7-8 p.c curiosity, the greenback bond appears to be like cheaper than the roughly 8.5 p.c the Treasury pays on ten-year taka bonds, however provided that the taka loses lower than 0.5-1.5 p.c of its worth every year. Over the previous decade, it has fallen quicker than that, so the cheaper-looking greenback bond may find yourself costing extra.
Moreover, Bangladesh’s international mortgage commitments are regularly dropping, which means fewer {dollars} can be on the nation’s exterior account. In distinction, grace durations on loans used to finance Rooppur, the metro rail, and the Padma rail hyperlink are ending, and exterior debt servicing is predicted to rise to about $5.5 billion by FY30. At house, curiosity has turn into the biggest merchandise of present spending, standing at 1,275 billion taka (roughly $10.4 billion) within the FY27 finances. Briefly, extra {dollars} will exit whereas much less is available in.
On the earnings facet, tax income provides little assist both, because the Nationwide Board of Income (NBR) fell 875 billion taka in need of its FY26 goal. For FY27, the income goal requires progress of greater than 45 p.c in a single yr, a goal Fitch says is unlikely to be reached. Due to this fact, spending is more likely to exceed NBR’s income assortment goal.
Initiating extra sovereign bond applications, comparable to Panda, Samurai, Sukuk, and diaspora bonds, and oversubscription may worsen Bangladesh’s debt scenario. In Zambia, for instance, the nation’s preliminary excellent Eurobond debt rose from $750 million to $3 billion inside three years, resulting in its subsequent default.
Past fiscal strain, Bangladesh must also think about investor sentiment within the international bond market, which is experiencing a major sell-off. Spiking power costs, geopolitical tensions, and the increase within the fairness market are pushing bond costs decrease. Consequently, central banks are being compelled to supply larger yields to stabilize the market. As of October 9, the U.S. Federal Reserve – the biggest bond issuer – raised rates of interest to five.34 p.c on 10-year Treasury bonds, the very best since 2002, whereas the British 30-year bond provides 6 p.c – the very best since 1998. With higher-yield bonds denominated in {dollars}, euros, or kilos obtainable in comparatively secure markets, together with the increase within the synthetic intelligence-led fairness market, the query is: will Bangladesh’s sovereign greenback bond generate any enthusiasm amongst international buyers?
Politics provides additional dangers. Though the February election gave the BNP a two-thirds majority, the Awami League’s non-participation and a ban on its political actions are a ticking time bomb that might enhance political instability and drive away risk-averse buyers. Additional, Sheikh Hasina – the chief of the Awami League – has mentioned she intends to return in December, when the bond is to be priced. Traders will issue that into their issues.
Bangladesh’s standing as a superb borrower stems from prudent debt administration and well timed reimbursement over time. Nevertheless, issuing a Eurobond may change that file, since funds must be made in a forex the central financial institution can not produce. Sluggish financial progress, fiscal pressure, low greenback inflows, political instability, and a downturn within the worldwide bond market imply Bangladesh ought to proceed with warning. The nation mustn’t tackle the chance if it isn’t prepared to satisfy the long-term cost obligations to its international collectors.
