When the past repeats: From Tughlaq's treasury to today’s debt pressures

In the 14th century, Sultan Muhammad Bin Tughlaq ruled over Delhi with a mind far ahead of his time, with ideas brilliant in theory but disastrous in execution. Historians call him the "wisest fool", a man whose grand visions collapsed under the weight of practical realities.

His legacy remains a cautionary history about whimsical expenditure, the dangers of state-led experiments, and the ruin that follows when ambition outpaces economic sense.

Tughlaq's most infamous reform was the introduction of token currency; copper and brass coins meant to hold the same value as gold and silver. The idea was strikingly modern, but the implementation was catastrophic.

Firstly, the coins were easy to forge. Markets flooded with fake currency, trade disintegrated and to fix the chaos, Tughlaq ordered that all copper coins be exchanged for genuine gold and silver from the royal treasury. Mountains of counterfeit coins piled up outside the fort, draining the state's reserves.

His capital transfer from Delhi to Daulatabad was another extravagant gamble. Tens of thousands marched 1,500 kilometres under imperial orders, only for Tughlaq to reverse the decision shortly afterwards. The journey back was even deadlier. The double migration devastated the economy and exhausted the royal coffers.

Then came the military follies, the Khorasan expedition, where 370,000 soldiers were paid a full year's salary in advance for a campaign that never materialised, and the Himalayan Qarachil expedition, where harsh terrain wiped out almost the entire army.

Tughlaq was not malicious, he was simply disconnected from economic reality. His story stands today as a reminder that even well-intentioned development, when poorly aligned with financial capacity, can hollow out a treasury.

It is a warning that several modern nations have painfully re-learnt.

The same pattern has played out in the modern era: ambitious infrastructure projects, easy loans during good years, and then the sudden tightening of global financial conditions. When grace periods ended and revenues lagged, countries found themselves cornered.

Laos was among the first to feel the shock. Like Tughlaq, it embarked on grand ventures, a high-speed railway and massive hydropower dams, fueled by heavy borrowing. For years, the terms felt comfortable — only interest had to be paid.

But once the principal repayment began, the country discovered its projects were not yet profitable enough to carry the burden. Its currency collapsed, inflation soared above 40%, and the economy spiralled into negotiations to escape outright default.

Illustration: TBS

Sri Lanka became the most dramatic example. Its Hambantota Port and Mattala Airport, projects now globally cited as "white elephants", were financed by foreign loans despite limited returns. When tourism, its main source of foreign currency, crashed during Covid-19, the government used reserves to pay debt until the reserves were gone. By 2022, Sri Lanka defaulted. Fuel stations emptied, medicines became scarce, and the government itself fell.

Pakistan's crisis showed a different layer of Tughlaq's mistakes; not grand projects, but chronic mismanagement. With a tax-to-GDP ratio as low as 8%, the government borrows simply to function. Trapped in a cycle of rollovers, Pakistan now survives through repeated IMF bailouts.

Ghana, once an African success story, stumbled when global interest rates surged. After shifting from concessional borrowing to expensive Eurobonds, rising US Federal Reserve rates caused its debt servicing costs to explode. Its currency, the Cedi, crashed, and in December 2022 Ghana defaulted as interest payments became unmanageable.

These stories are not the same as Bangladesh's, but the similarities cannot be ignored.

Bangladesh today stands at a critical crossroads, shaped by global shocks, domestic constraints, and years of ambitious infrastructure expansion. The country's annual foreign debt servicing has crossed $4 billion for the first time. 

In FY2023–24, foreign loan payments stood at $3.36 billion; in the current fiscal year, projections exceed $4 billion, with some estimates nearing $4.5 billion. Only a few years ago, the figure was below $2 billion.

This surge is part of a larger shift captured by the World Bank's International Debt Report 2025, which states that Bangladesh's external debt servicing grew by 61.7% year-on-year, the fastest rise in South Asia. 

Total external debt, public and private combined, has reached $104.48 billion, up 42% from $73.55 billion in 2020. In 2020, Bangladesh paid $3.73 billion in instalments; by 2024, repayments nearly doubled to $7.35 billion.

The pressure stems from four converging forces. 

Tughlaq was not malicious, he was simply disconnected from economic reality. His story stands today as a reminder that even well-intentioned development, when poorly aligned with financial capacity, can hollow out a treasury. It is a warning that several modern nations have painfully relearnt.

First, the "grace period cliff"; loans for megaprojects such as Rooppur Nuclear Power Plant, Metro Rail, Karnaphuli Tunnel, Elevated Expressways, and the Padma Rail Link are now entering repayment phases simultaneously. 

Second, the taka's devaluation means that buying the same amount of US dollar now requires around 40% more taka than when the loans were taken, because the exchange rate has shifted from Tk85 per dollar to around Tk120.

Third, interest rates on floating-rate loans tied to benchmarks like SOFR have risen sharply, pushing long-term interest payments to $2.44 billion in 2024, up from $1.72 billion the year before. 

Fourth, the country's tax-to-GDP ratio has slipped to 7.7%, limiting the state's capacity to service debt without borrowing more.

Exports, meanwhile, have not kept pace. With total external debt now equal to 192% of export earnings, the struggle to generate enough dollars becomes more acute.

Bangladesh is not Sri Lanka, Ghana, Pakistan, or Laos. Its export base driven by ready-made garments is more stable than tourism or commodity-dependent economies. Its megaprojects are intended to strengthen industrial capacity, not sit idle. And crucially, it sought an IMF programme before reserves reached crisis levels.

Tughlaq's downfall was not because of his vision, rather for timing, execution and financial overreach. Bangladesh is far from his fate, yet his cautionary tale reminds us that even the soundest ambitions demand discipline, realism and economic balance to avoid tipping into turmoil.