Bangladesh sees sharp decline in foreign aid commitments

Bangladesh saw a sharp decline in foreign aid commitments in the first 10 months of fiscal year 2025-26, even as the government’s external debt repayment burden continued to rise, reflecting growing pressure on the country’s fiscal and external financing position.

Data from the Economic Relations Division (ERD) showed that foreign assistance commitments dropped 34 percent year-on-year to $2.81 billion during July-April of FY26.

The fall was driven mainly by lower project assistance commitments, particularly loans from development partners.

According to the ERD’s provisional Foreign Assistance Monthly Report, project aid commitments in the form of loans declined to $2.65 billion during the period, compared with $3.90 billion a year earlier.

Grant commitments also fell to $156.98 million from $356.94 million.

Economists say the slowdown in aid commitments comes at a time when Bangladesh needs substantial external financing to support infrastructure development, stabilise foreign exchange reserves and manage mounting fiscal stress.

The decline also reflects slower project negotiations, delays in implementation, and growing caution among lenders amid global economic uncertainty and domestic reform challenges.

Despite lower commitments, aid disbursement remained relatively strong.

Total foreign aid disbursement stood at $4.24 billion in the July-April period of FY26, compared with $5.16 billion in the same period of the previous fiscal year.

Project assistance disbursement amounted to $4.20 billion, accounting for nearly the entire inflow. Grants made up only a small portion of total disbursement, highlighting Bangladesh’s growing dependence on external borrowing rather than concessional support.

At the same time, Bangladesh’s debt servicing obligations continued to increase, with total repayments rising about 8 percent year-on-year.

The country paid $3.80 billion in principal and interest on foreign debt during the first 10 months of FY26, up from $3.51 billion in the corresponding period of FY25.

Principal repayments alone reached $2.47 billion, while interest payments stood at $1.33 billion.