Foreign aid disbursement falls, debt repayment pressure rises

Foreign aid disbursement to Bangladesh declined significantly during the July–February period of the current fiscal year (2025–26), while pressure from external debt repayments increased, putting strain on the country’s macroeconomic stability.

Officials concerned said that while the inflow of assistance is decreasing, the burden of existing foreign debt is rising—an alarming trend for the national economy.

According to the latest provisional data from the Economic Relations Division, development partners disbursed a total of $3.05 billion during the period, down from $4.13 billion in the same period of the previous fiscal year. This represents a decline of 26.2 per cent year-on-year.

Despite the drop in aid, debt servicing obligations have continued to grow. ERD data show that Bangladesh repaid a total of $2.90 billion in external debt during the first eight months of the current fiscal year—an increase of 10.36 per cent compared to $2.64 billion in the same period last year.

Fluctuations in exchange rates have further intensified the burden in local currency terms. Total debt servicing costs rose to Tk35,393 crore in the current fiscal year, up from Tk31,659 crore in the previous year, placing additional pressure on the national exchequer.

However, there was a slight improvement in aid commitments. During the July–February period, total commitments reached $2.43 billion, compared to $2.35 billion in the same period of the previous fiscal year.

Project aid remains the primary source of foreign assistance, although a degree of contraction has been observed in both commitments and disbursements. Meanwhile, food aid remained minimal, with only $25 million disbursed as grants—unchanged from the same period a year earlier.

Data further show that, in the first eight months of the current fiscal year, the government repaid $1.944 billion in principal and $955.8 million in interest. In the same period of the previous fiscal year, principal repayments stood at $1.692 billion, while interest payments were $944 million.