Commitments and disbursement of overseas project funds plummeted in the first half of the fiscal year due to the interim government’s stringent spending controls aimed at easing economic pressure.
Fresh fund commitments from development partners dropped to $2.3 billion between July and December—a 67% decline from $7 billion in the same period last fiscal year, according to data released by the Economic Relations Division (ERD).
Disbursement of previously committed funds also fell, declining 13% to $3.532 billion compared to $4.06 billion in the same period of FY24.
Formed on August 8 after the fall of the Awami League government through a mass uprising, the interim government halted unnecessary expenditures, particularly on politically motivated projects. It also adopted a cautious approach to new foreign loans while canceling several projects under the Annual Development Programme (ADP) prepared by the previous government, ERD officials noted.
Proposals for foreign-funded projects are now undergoing rigorous scrutiny by the Planning Commission, leading to a significant reduction in fund commitments. Moreover, the implementation of foreign-funded projects has been reprioritized, with pipeline projects re-evaluated based on their importance.
This cautious approach has impacted overall ADP execution, which fell to a five-year low of 18% in July-December. Expenditure on foreign-funded projects dropped to 19.61%, according to data from the Implementation Monitoring and Evaluation Division (IMED).
Additionally, many foreign contractors and project officials left the country following the fall of the Sheikh Hasina government, further hampering project execution.
Meanwhile, debt servicing has surged as Bangladesh repaid $1.98 billion in loan interest and principal during the first half of FY25, up from $1.567 billion in the same period the previous year.
