Rising interest payments on government borrowings swallow a huge sum of Tk 712.53 billion during July-December of this fiscal year, in a 22-percent annualised increase.
A latest report prepared by the Finance Division says the increase was driven largely by domestic interest payments, which accounted for nearly 87 per cent of the total interest expenditure during the first of the fiscal.
The government paid a total of Tk 618.66 billion in interest on domestic borrowings while external borrowings cost Tk 93.87 billion, the report shows.
Treasury securities remained the largest component of domestic interest payments, amounting to Tk 378.96 billion, followed by National Savings Certificates (NSCs) at Tk 239.7 billion.
The country's leading external lenders include the World Bank, the Asian Development Bank, Japan and Russia.
The report mentions that most domestic loans were raised through government securities.
"A key feature of the government's approach was a clear shift towards long-term debt," the finance ministry report says.
Financing through government securities accounted for 66 per cent of total domestic debts, followed by NSCs at 27 per cent, with the remainder sourced from the General Provident Fund (GPF).
Reforms in the NSC taken earlier are expected to reduce fiscal pressure and promote a more balanced debt portfolio over time.
Meanwhile, the public debt stock stood at Tk 22.06 trillion at the end of December 2025, up from Tk 21.44 trillion as of June 30, 2025 or 13-percent up from the period.
Domestic borrowing continues to dominate government's overall debt portfolio.
As of December 31, 2025, domestic and external liabilities accounted for 57 per cent and 43 per cent of total government debt respectively.
The government has prioritised domestic borrowing to insulate the economy from foreign exchange risks.
By focusing on the local market, it aims to deepen domestic liquidity while reducing exposure to exchange-rate fluctuations.
Although increased domestic borrowings often stoke concerns about crowding out private investment, the finance ministry says current conditions suggest otherwise.
It lists ample liquidity in stronger banks, falling yields on government securities and subdued private-sector credit demand as factors supporting sustainable domestic financing without displacing private borrowers.
By leveraging domestic liquidity, the government is seeking to build a more resilient fiscal framework while maintaining stability on the private-credit market, the report remarks.
jasimharoon@yahoo.com