Foreign aid disbursements, commitments at half of fiscal targets as repayment rises

With only two months remaining in the current fiscal year, both foreign loan disbursements and commitments remain around half of their annual targets, even as repayments rise.

According to an Economic Relations Division (ERD) report released today (24 May), development partners released $4.236 billion during July to April period.

The government had set a foreign loan disbursement target of $7.868 billion for 2025-26. This means only 53.84% of the target has been achieved so far.

ERD data shows foreign loan disbursements declined by 18% year-on-year. Development partners had released $5.163 billion during the same period of the previous fiscal year.

The government also aimed to secure $6.715 billion in loan commitments this fiscal year. But commitments reached only $2.807 billion by April, or 41.84% of the target.

During the same period of the previous fiscal year, Bangladesh had secured $4.259 billion in commitments. As a result, commitments fell by 34% year-on-year.

Meanwhile, Bangladesh repaid $3.802 billion to development partners during July-April, compared with $3.507 billion in the same period a year earlier, marking an 8.41% increase.

M Masrur Reaz, chairman of Policy Exchange Bangladesh, said Bangladesh's political transition is one of the main reasons behind the lower commitments and disbursements.

"The interim government's tenure was limited, creating some uncertainty over major decisions," he said. "Therefore, development partners adopted a 'wait and see' approach."

He also said rising foreign debt obligations as a concern. "Debt servicing pressures have been rising since 2024, increasing the burden to foreign currency earnings."

He said the current government appeared to be signalling a more cautious approach towards future borrowing. Priority is likely to be given to projects offering high economic and human returns, while efforts may also be made to moderate foreign borrowing.

Disbursement by partners

According to ERD data, the government targeted $1.952 billion in loan disbursement from the Asian Development Bank (ADB). But only $710.6 million had been released by April.

The World Bank's (WB) disbursement target was set at $1.765 billion, but only $838.14 million was released during the first 10 months of the fiscal year.

Bangladesh projected $1.541 billion in disbursements from Asian development partners and countries excluding Japan. But actual releases amounted to $899 million during the period.

European development partners were expected to disburse $1.573 billion, although releases stood at $1.07 billion by April.

Data shows the WB disbursed the highest $838 million, followed by Russia with $828 million, the ADB with $710 million, China $533 million, Japan $422 million, and India $250 million.

Commitments

According to ERD, Bangladesh aimed to secure $2.685 billion in commitments from the ADB. Of that, $1.269 billion had been confirmed by April.

The government also targeted $1.220 billion in commitments from Japan, but no commitments had been secured so far.

Against a WB commitment target of $820.25 million, $416.25 million has been secured.

The ADB provided the highest loan commitments during July-April, pledging $1.269 billion. The WB committed $416.25 million, while China pledged $235.69 million.

ERD officials said the government has shifted its focus towards securing budget support from development partners because of economic pressures linked to the Middle East conflict.

As a result, expected commitments could not be realised. However, officials expect commitments to rise in the remaining months due to anticipated budget support loans.

Repayments

The ERD report noted that the government repaid $2.468 billion in principal to development partners during July-April, up 11.64% from the same period a year earlier.

Interest payments stood at $1.334 billion, compared with $1.296 billion during the corresponding period of the previous fiscal year.

ERD officials said debt repayments were increasing because grace periods for many previously contracted foreign loans had expired.