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For the first time, the International Monetary Fund (IMF) has set a borrowing cap of US$ 8.44 billion for Bangladesh for the fiscal year 2025-26. This new limit is a key requirement for Bangladesh to secure future installments of its ongoing IMF loan program.

The ceiling, revealed in the IMF’s recent Bangladesh Country Report, comes after the approval of the fourth and fifth tranches of a $4.7 billion loan. The IMF released $1.34 billion in these two tranches, bringing the total disbursed under the program to $3.6 billion.

According to the IMF, the borrowing cap will be monitored with quarterly limits: $1.91 billion in the first quarter, $3.34 billion by the halfway mark, $4.34 billion at nine months, and the overall $8.44 billion limit for the full fiscal year.

This borrowing restriction was not part of the original loan agreement approved in 2023. However, after the approval of the additional funds in June, the total loan amount was increased by $800 million and the program’s timeline extended by six months.

The new borrowing ceiling was based on the IMF’s latest Debt Sustainability Analysis (DSA), which downgraded Bangladesh’s status from “low-risk” to “medium-risk” for debt sustainability. This shift comes as Bangladesh’s debt-repayment burden grows, driven by rising foreign debt, which the IMF attributes to increased spending on large infrastructure projects initiated by the previous government.

The DSA highlighted a sharp increase in Bangladesh’s debt-to-export ratio, which soared to 162.7% in FY2023-24, far exceeding the projected 116-118% range. The foreign debt-to-revenue ratio also surged, further restricting the country’s ability to take on new loans.

Official data shows Bangladesh’s foreign debt has grown significantly over the past 13 years, from just $2.03 billion in FY2009-10 to an expected $8.02 billion in FY2024-25. While the trend of new borrowing has slowed recently, officials in the interim government continue to monitor the situation closely.

With this new limit, Bangladesh faces tighter scrutiny of its borrowing practices, as it works to manage its rising debt burden.