Foreign aid falls sharply amid rising debt servicing

Foreign aid disbursements, including loans and grants, to Bangladesh declined by 17.96 per cent during the first 10 months of the current fiscal year compared to the corresponding period of FY25, while fresh aid commitments fell sharply by more than 34 per cent, according to the latest data from the Economic Relations Division (ERD).
Released on Sunday, the Foreign Assistance Monthly Report FY2025-26 found that external debt servicing burden continued to rise, with repayment obligations on previously disbursed foreign loans increasing by 8.42 per cent year-on-year in US dollar terms and by 9.89 per cent in local currency.
The report shows all development partners disbursed a sum of $4.24 billion in the July-April period - $390 million in grants and $3.85 billion in loans.
The amount is $927.24 million lower than last year's disbursement, with a 9.92 per cent increase in grants and 20.01 per cent decrease in loans.

Data analysis reveals the government spent over $3.80 billion on the obligations of previous loans, with a combination of $2.47 billion for repayment of principal and $1.33 billion for that of interest.
The loan servicing cost increased by $295.13 million, with an 11.64 per cent increase in principal cost and only 2.91 per cent rise in interest expense.
Debt service spending reached Tk 464.65 billion in terms of domestic currency, which was Tk 41.83 billion higher than that in the same period during the last fiscal year.
Bangladesh recorded a surplus of only $44.31 million in net foreign loans during the first 10 months of FY26 as disbursements exceeded repayment costs.
The report reveals $1.92 billion, 68.44 per cent of the commitment, was received from three major development partners - Asian Development Bank (ADB), International Development Association (IDA) of the World Bank, and China.
ADB ranked top with a commitment of $1.27 billion, which was over 45 per cent of the total commitment.
IDA and China secured second and third positions with commitments of $416.25 million and $235.69 million, respectively.
The Asian Infrastructure and Investment Bank (AIIB), Japan, India, and Russia have committed no amount so far in the current fiscal year.
IDA emerged as the largest source of foreign aid disbursement to Bangladesh during the July-April period, releasing $838.13 million.
Russia ranked second with disbursements of $828.38 million, mainly for the ongoing Rooppur Nuclear Power Plant project, while ADB released $710.60 million.
China disbursed $532.88 million during the period, followed by Japan at $422.37 million and India at $250.49 million under various ongoing development projects and credit lines.
AIIB released $73.09 million, while other development partners collectively disbursed $580.26 million.
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