Foreign loan commitments and disbursements from development partners have declined in the first seven months of the current fiscal year, reflecting a reduced appetite for external borrowing.
However, Bangladesh’s debt servicing burden has risen sharply as loan repayments surged, raising concerns over financial sustainability.
According to data from the Economic Relations Division (ERD), foreign loan commitments fell by 67.2% to $2.35 billion between July and January, while disbursements declined by 10.4% to $3.94 billion.
During the same period last year, loan commitments were significantly higher at $7.17 billion, with total disbursements reaching $4.40 billion.
Meanwhile, loan repayments increased by 30.3% year-on-year, amounting to nearly $2.42 billion. Principal repayments rose from $1.09 billion to $1.544 billion, while interest payments surged from $160.7 million to $874 million.
ERD officials attribute the sharp decline in foreign loan commitments to the government’s new medium-term debt strategy, which aims to reduce foreign borrowing.
Despite development partners expressing willingness to extend more loans, the government has been cautious in taking on new debt, focusing primarily on emergency budget support and high-priority projects. As a result, loan agreements have slowed, leading to a drop in commitments.
This strategy is designed to manage increasing debt repayment pressure, as the grace period for many project loans has expired.
In the last fiscal year, the government paid $4.166 billion in principal and $1.35 billion in interest to development partners, while securing $10.739 billion in new loan commitments.
The implementation of foreign-funded projects has also slowed under the new government. Several projects have lost contractors, while others have seen changes in project directors, affecting execution. Political instability has further hindered development activities, contributing to lower foreign fund disbursements.
World Bank Leads in Disbursements
Among development partners, the World Bank disbursed the highest amount in the first seven months of this fiscal year, providing $944.5 million, including $500 million in budget support.
The Asian Development Bank (ADB) followed with $700 million in commitments, including $600 million in budget support. Other major commitments came from Japan ($252.12 million) and the Asian Infrastructure Investment Bank (AIIB) ($160 million).
In terms of disbursements, ADB led with $1.09 billion, World Bank followed with $867.64 million, Japan disbursed $696.32 million, Russia provided $536.87 million, China disbursed $267.81 million, and India contributed $80.14 million.
The declining loan commitments and disbursements, combined with rising debt repayments, signal a shift in Bangladesh’s external financing approach—with a greater emphasis on debt management amid economic and political challenges.
