Finance Adviser Dr Salehuddin Ahmed said on Tuesday that the government has already crossed the external borrowing limit set by the International Monetary Fund (IMF).

But, he said, development partners’ concerns over debt sustainability are understandable and rooted in ensuring prudent financial management.

Dr Salehuddin made the remarks while briefing reporters after a meeting of the Advisers Council Committee on Government Purchase held at the Secretariat with the adviser in the chair.

“We have already exceeded the ceiling—around $4 billion additional funds have been used. But overall, we have shown progress,” Dr Salehuddin said.

When asked about the reason behind the borrowing ceiling, the Adviser explained that the limit was introduced to maintain the country’s debt sustainability and repayment capacity.

“The rationale behind the ceiling is that our development partners want to make sure we don’t become overambitious and undertake projects beyond our repayment ability. If borrowing grows too rapidly, there’s a risk of inefficiency and waste. So, their concern is quite genuine,” he said.

The International Monetary Fund (IMF) has for the first time set a maximum US$ 8.44 billion ceiling of foreign borrowing for Bangladesh. The global lender sets the external borrowing limit for the fiscal year 2025-26.

The new condition was revealed in the IMF’s ‘Bangladesh Country Report,’ published recently after the approval and release of the fourth and fifth tranches of the loan, totaling $1.34 billion.

This new limit is a key benchmark Bangladesh must meet to secure subsequent loan installments.

The report stipulates quarterly ceilings to monitor the country's debt management closely. A maximum of $1.91 billion in external borrowing in the first three months, $3.34 billion by the six-month mark, $4.34 billion after nine months, and the overall limit of $8.44 billion for the full fiscal year.

This borrowing limit was not part of the original $4.7 billion IMF loan program approved in 2023.

However, with the approval of the fourth and fifth tranches in June, the overall loan amount was increased by $800 million, and the program's duration was extended by six months. Bangladesh has so far received $3.6 billion under this programme.

The limit was set based on the IMF’s latest Debt Sustainability Analysis (DSA).

The DSA has categorized Bangladesh as a 'medium-risk' country for two consecutive fiscal years, an escalation from its previous 'low-risk' status. This change reflects an increased debt-repayment burden relative to export and revenue earnings.

According to the DSA, the debt-to-export ratio soared to 162.7 percent in the FY2023-24, significantly surpassing the projected 116-118 percent range.

The foreign debt-to-revenue ratio has also climbed, consequently restricting the country’s capacity for new borrowing.

Official data indicate that foreign debt stood at only $2.03 billion in the 2009-10 fiscal year that ballooned to $8.02 billion by FY2024-25.

Officials in the interim government, however, claim that the trend of taking on new debt has slightly slowed down compared to the past.

Finance Adviser Dr Salehuddin regarding the upcoming visit for the World Bank and IMF annual meeting said that discussions are ongoing with international development partners, including the IMF, ADB, IDB and the World Bank.

“Currently, two agreements are expected to be signed soon with the World Bank, while the rest are progressing as usual under ongoing commitments,” he said.

He said future negotiations will focus on demonstrating progress under the IMF pipeline and outlining the government’s future plans. “After the new government takes office, it will take major decisions regarding future borrowing and project implementation,” Dr Salehuddin said.