["Asian-Pacific Economic Literature, EarlyView. ", "\nABSTRACT\nIn recent years, Bangladesh has adopted a deficit‐biased fiscal policy, supported by robust GDP growth and relatively low interest rates, capitalizing on its access to concessional financing. However, Bangladesh's graduation to lower‐middle‐income status and its gradual integration into the global economy have exposed the country to external macroeconomic shocks. This paper employs a Structural Vector Autoregression (SVAR) model with short‐run restrictions to identify three external shocks: an increase in foreign interest rates, a rise in commodity prices, and an appreciation of the exchange rate. It examines the impact of these shocks on Bangladesh's economy using impulse response functions based on annual data from 1983 to 2023. The results show that commodity price inflation and exchange rate appreciation worsen the government's fiscal balance, while higher foreign interest rates primarily raise domestic interest rates, with an insignificant impact on fiscal balance. Additionally, by employing a standard VAR model with macroeconomic variables that directly influence the government's debt dynamics, this paper projects government debt over the 2024–2028 periods in a stochastic framework. The projection shows that the government's median debt remains at 37.1% of GDP by the end of 2028, with a 30.1% probability that it exceeds 40% of GDP. Two alternative scenarios: (i) a 2% rise in the foreign interest rates and (ii) a 10% depreciation of the real exchange rate above the baseline raise this probability to 38.7% and 56.2%, respectively.\n"]