Foreign Loan Disbursement Drops 30% Amid Rising Debt Burden

Representational image. Photo: Collected

Bangladesh’s fresh foreign assistance fell sharply in the first half of FY2025–26, even as debt repayment obligations continued to rise, raising concerns over fiscal space and project financing, according to the latest monthly report from the Economic Relations Division (ERD).
The ERD data, released on 28 January, shows total foreign aid commitments dropped to $1.99 billion from $2.30 billion a year earlier, while grant inflows shrank from $290 million to just $95 million. Loan commitments also declined slightly, reflecting the country’s continued reliance on external borrowing even as concessional aid dwindles.
Actual disbursements—the funds that reached government coffers—fell more sharply, from $3.53 billion to $2.50 billion. Food aid remained stable at $25 million, but project assistance disbursements saw a significant dip, pointing to delays in donor project execution or slower implementation of pipeline projects.
Meanwhile, debt servicing obligations rose to $2.20 billion, up from $1.98 billion in the first half of FY25. Both principal and interest payments increased, putting renewed pressure on foreign exchange reserves and narrowing net aid inflows to just $300 million for the period.
Economists warn that the trend signals a shift from concessional, grant-heavy financing to harder-term borrowing, increasing Bangladesh’s vulnerability to exchange rate fluctuations and global financial shocks.
“The report highlights a narrowing window for fiscal manoeuvre. Bangladesh must focus on better project execution, securing climate and blended finance, and strengthening debt sustainability,” said a senior ERD official.