Project aid to be trimmed by Tk 140b in FY26 RADP

FHM HUMAYAN KABIR | Published: December 14, 2025 00:52:18

The government is likely to significantly reduce the project aid portion in the upcoming Revised Annual Development Programme (RADP) for the current fiscal year (FY) 2025-26, as many agencies have failed to implement projects on time, officials said on Saturday.
The allocation from foreign project aid is expected to be slashed by Tk 140 billion, bringing it down to Tk 720 billion, they added. The cut in foreign aid in the revised budget would be 16.28 per cent lower than the original Tk 860 billion allocation in the Annual Development Programme (ADP).
Officials said the move is primarily a response to the sluggish implementation of foreign-funded development projects across various ministries and divisions during the first quarter of the fiscal year.
The government had originally prepared a Tk 2.38 trillion ADP for the current fiscal year, with Tk 1.44 trillion allocated from internal resources, Tk 860 billion from external project aid (foreign aid), and Tk 86.96 billion from autonomous and semi-autonomous government agencies.
The Planning Commission (PC) has already begun work to trim the ADP to streamline project implementation in the latter half of FY2026.
When asked about the reasons behind the foreign aid cut, officials from the Economic Relations Division (ERD) and the Planning Commission cited several key factors necessitating the downward revision.
Other factors, including slow disbursement of funds for Indian Line of Credit (LoC)-supported projects and poor implementation performance by many executing agencies, have prompted the possible budget reduction, officials from the Ministry of Finance (MoF) and PC said.
"This government has already taken an approach of slimming public spending. It is not approving fresh projects indiscriminately. At the same time, it is reviewing ongoing projects and cutting allocations," said a senior MoF official.
"Ministries and implementing agencies have struggled to effectively utilise the allocated funds, particularly in the first few months of the fiscal year," said a senior ERD official.
He added that issues such as poor project design, bureaucratic bottlenecks, delayed land acquisition, and slow tender processes continue to hamper project execution.
A senior PC official said the interim government's priority is to ensure better budget management and adopt a cautious fiscal approach amid global and domestic economic constraints, aligning the budget more closely with actual spending capacity.
A significant amount of foreign aid remains unspent due to these implementation delays.
Cuts in project aid -- which consists of loans and grants from development partners -- occur annually.
However, the magnitude of the proposed reduction highlights systemic inefficiencies in project management.
While the reduction may slightly shrink the overall development budget, economists have suggested that a strategic focus on eliminating wasteful spending and prioritising high-impact, people-centric projects is a pragmatic approach.
The Planning Commission aims to ensure that remaining funds are concentrated on projects with significant economic returns and direct public benefits, such as those in the transport and communication, power and energy, and education sectors, which typically receive the largest allocations.
The Revised ADP for FY26 is expected to be finalised at a National Economic Council (NEC) meeting likely to be held in late December or early January.
In the previous fiscal year (FY25), the government cut project aid by 19 per cent to Tk 810 billion from the original allocation of Tk 1.0 trillion. It also reduced project aid allocations by Tk 105 billion to Tk 835 billion in FY2024 and to Tk 745 billion from Tk 930 billion in FY2023.
"We have already consulted with all ministries and project implementing agencies last month while drafting the PA allocations for the upcoming RADP. Many major ministries have surrendered part of their funds from the original ADP of the current fiscal year," the ERD official added.