Bangladesh is preparing to issue its first-ever sovereign bond denominated in dollars, with the issuance most likely scheduled for December.
The initiative is consistent with the economic vision of the Bangladesh Nationalist Party (BNP)-led government, which seeks to bolster the nation’s bond and capital markets while decreasing dependence on loans from the International Monetary Fund and the World Bank.
The government intends to launch a bond issue ranging from $500 million to $1 billion. The bonds will carry a coupon rate of 7 % to 8 % for investors.
Bangladesh has been unable to attract foreign direct investment and to raise capital‑market financing for several months, recording no initial public offerings since March 2024. At the same time, the country’s banking sector remains under strain, burdened by a high volume of non‑performing loans.
Amid a deteriorating economic climate, International Monetary Fund loans were accompanied by strict conditions requiring higher revenue collection and reduced public spending, measures that at times entail cuts to social‑welfare programmes for the most disadvantaged.
The government’s decision to cancel the International Monetary Fund loan and to launch its first sovereign bond denominated in dollars is intended to give the country greater autonomy over fiscal policy and to provide an additional means of building dollar reserves.
Nevertheless, Bangladesh’s fiscal situation, together with the prevailing outlook in the global bond market and ongoing political instability, indicates that the country may not yet be prepared to assume the expense of issuing the bond and servicing its regular dollar‑denominated coupon payments.
Bangladesh has historically honored its loan repayments while maintaining steady foreign‑exchange reserves. Between 2022 and 2024, however, the country faced a temporary balance‑of‑payments strain caused by a contraction in global supply chains following the pandemic and the Russia‑Ukraine war.
The latest external balance sheet indicates a positive outlook, as remittances climbed to a record $35.6 billion in 2026.
The public debt‑to‑GDP ratio stands at 41 percent, which is lower than that of most neighboring South Asian countries, including India, Pakistan, Sri Lanka and Nepal.
In developing nations, sovereign bonds serve as a clear benchmark for both domestic and international lenders, thereby lowering the cost of capital.
A finance ministry, considering these factors separately, could plausibly move forward.
Nevertheless, two issues must be answered definitively before any issuance: whether Bangladesh can meet its obligations to foreign creditors and whether its fiscal position is sufficient to support the debt.
Regarding the first question, Bangladesh’s record is favorable, as the nation has not defaulted on any loans since its independence.
As of June 2026, the country's total outstanding external debt amounted to $110.93 billion, with annual debt‑service payments of $4.49 billion, representing roughly 5 % of its combined export and remittance receipts.
The Economic Relations Division says that, even in the year with the highest repayment level, remittances equivalent to less than three months’ worth would be enough to meet the nation’s annual external obligations.
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.
In September 2026, Bangladesh experienced one of its slowest remittance inflows in recent times, according to the verified source data.
The interest on a $1 billion bond at a 7.5 percent rate amounts to roughly $75 million per year, a sum that the balance of payments can accommodate.
However, the bond is not a one-year obligation.
Second, Bangladesh’s fiscal condition requires more nuanced consideration.
The World Bank reports that gross domestic product growth slipped to 3.4 percent in fiscal year 2026‑27, placing the economy just ahead of Afghanistan, as inflation continues to rise.
Weak economic growth combined with rising price inflation could impair Bangladesh’s capacity to service its debt in two ways.
The measure reduces the revenue base of the Bangladeshi taka that is used to purchase dollars for paying bondholders’ coupon obligations, thereby depleting foreign‑exchange reserves and exerting downward pressure on the taka’s value.
A weaker taka raises the cost of coupons owed in dollars.
The link between a local currency’s value and a country’s borrowing capacity is significant. When the currency depreciates, borrowing costs in U.S. dollars increase—a phenomenon economists label “original sin”—and the exchange‑rate risk falls on the government rather than on its creditors.
For example, Zambia, Ghana, Ethiopia, and Sri Lanka previously launched their first sovereign bonds.
All four subsequently defaulted, after most of them took out additional loans and used the proceeds for projects that generated no foreign‑exchange earnings.
Depreciation then raised the local currency cost of every coupon.
Since the government is required to repay bondholders in U.S. dollars, each depreciation of the Bangladeshi taka raises the cost of the debt domestically.
At an interest rate of 7 to 8 percent, the dollar bond appears cheaper than the roughly 8.5 percent yield paid by the Treasury on ten-year taka bonds. However, this holds true only if the taka loses less than 0.5 to 1.5 percent of its value annually.
During the last ten years, it has declined more rapidly, meaning that a dollar‑denominated bond that appears inexpensive may ultimately prove more costly.
Bangladesh’s commitments to foreign loans are gradually declining, which will lead to a smaller inflow of dollars into the country’s external accounts.
Conversely, the grace periods on the loans that finance the Rooppur nuclear power project, the metro rail system and the Padma rail link are coming to an end.
External debt servicing is projected to climb to about $5.5 billion by fiscal year 2030.
In the domestic budget for fiscal year 2027, interest payments have become the largest component of current spending, amounting to 1,275 billion taka—approximately US$10.4 billion.
In short, more dollars will go out while less comes in.
Tax revenues have provided little relief, as the National Board of Revenue (NBR) fell 875 billion taka short of its fiscal year 2026 target.
For fiscal year 2027, the company’s revenue target calls for more than 45 percent growth within a single year, a level that Fitch has said is unlikely to be achieved.
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 experiencing 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.
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?
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.
Sheikh Hasina, the leader of the Awami League, has said she intends to return in December, when the bond is to be priced.
Bangladesh’s standing as a good borrower stems from prudent debt management and timely repayment over the years.
However, issuing a Eurobond could alter that record, as payments would need 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 assume the risk unless it is prepared to meet its long-term payment obligations to foreign creditors.
Why it matters
The success of Bangladesh's debut sovereign dollar bond will determine its future fiscal autonomy and capacity to manage rising external debt obligations amid domestic economic slowdowns.