Debt Repayments Mount: Foreign loan disbursement drops 30pc
Staff Reporter :
Bangladesh saw a sharp decline in fresh foreign assistance in the first half of the current fiscal year, even as its external debt repayment burden continued to grow, raising concerns about shrinking fiscal space and constraints on development financing.
According to the latest monthly foreign assistance report released by the Economic Relations Division (ERD) on Wednesday, total foreign aid commitments during July–December of FY2025–26 fell to $1.99 billion, down from $2.30 billion in the same period a year earlier. Grant inflows recorded the steepest fall, sliding to just $95 million from $290 million.
Loan commitments also edged down, highlighting Bangladesh’s continued dependence on external borrowing at a time when concessional and grant-based assistance is diminishing.
The decline was even more pronounced in actual disbursements the funds that were ultimately released to the government. Disbursements dropped by nearly 30 percent, from $3.53 billion in the first half of FY25 to $2.50 billion in the corresponding period of the current fiscal year. While food aid remained unchanged at $25 million, disbursements for project assistance fell significantly, suggesting delays in donor-funded projects or slower implementation of approved programmes.
At the same time, external debt servicing obligations increased to $2.20 billion, compared with $1.98 billion a year earlier. Both principal repayments and interest payments rose, adding pressure on foreign exchange reserves and reducing net aid inflows to around $300 million during the period.
Economists caution that the figures point to a structural shift away from concessional, grant-heavy financing toward costlier borrowing, which heightens Bangladesh’s exposure to exchange rate volatility and global financial risks.
“The report indicates that the room for fiscal manoeuvre is narrowing,” said a senior ERD official. “Going forward, Bangladesh needs to improve project execution, tap climate and blended finance, and place greater emphasis on maintaining debt sustainability.”