Bangladesh’s interim government is grappling with a severe financial crisis caused by declining revenue collection, the burden of repaying massive debts inherited from the previous Awami League government, and soaring inflation that has raised the cost of goods and services. Despite adopting austerity measures and cutting development spending, the government is increasingly reliant on borrowing, both from domestic sources and international development partners. Central bank data show that while government sector credit rose by 1.79% during July–August, private sector lending fell slightly, indicating a broader economic slowdown. Revenue collection remains below target despite a 21% year-on-year rise, leaving an 11% shortfall. With shrinking liquidity in banks and reduced business activity, the government’s borrowing space is tightening. Most loans are being used for operational expenses rather than production or job creation, raising concerns about long-term economic stability.
The interim government is facing a severe financial crisis due to three main reasons: a decline in revenue collection, increased debt repayments from the previous government, and rising prices of goods and services caused by inflation.
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