Bangladesh's foreign loan commitments from development partners have fallen by 93 per cent in the first four months of the current fiscal year compared to the same period of the previous fiscal year.
According to the Economic Relations Division (ERD), development partners pledged only $254.57 million in assistance during July-October, significantly lower than the $3.628 billion committed in the same period last year.
ERD officials say the new government is reviewing projects proposed for foreign loans, which has led to a decline in loan commitments as new agreements have not been signed. Meanwhile, the interim government has begun repaying foreign loans incurred during the previous administration, leading to an increase in development assistance repayments.
Officials explained that loan applications would resume after the review, enabling the government to secure promised financing in line with optimistic targets. Multilateral and bilateral development partners, including the World Bank and the Asian Development Bank (ADB), have already offered preliminary assurances for loan assistance and budget support since the interim government assumed office.
Mustafa K Mujeri, Executive Director of the Institute for Inclusive Finance and Development, noted the current situation is far from normal, with preparatory work for foreign loans not progressing as expected. He attributed the delay to the government's review of project proposals but acknowledged that several development agencies are ready to provide loans and budget support, stressing the need to expedite the process.
According to ERD data, foreign loan repayments in the first four months exceeded the disbursements received. Bangladesh received $1.2 billion in foreign aid during July-October but repaid $1.437 billion in principal and interest over the same period.
The ERD reported a 16 per cent decline in foreign fund forgiveness, amounting to $1.6 billion compared to the same period last year. Increased repayments, especially for loans from China linked to the Padma Rail Link project, were a major factor.
Foreign debt repayments rose by 30.5 per cent compared to the previous year, with principal repayments increasing by 41.2 per cent to $895.58 million. Interest payments also rose to $542.32 million, up from $467.42 million.
During July-October, Japan disbursed the highest amount of foreign aid, totalling $266.30 million. Other contributions included $266.11 million from ADB, $178.16 million from the World Bank, $149.53 million from Russia, and $63.83 million from India. China, however, did not disburse any funds during this period.
Economist Professor Dr Mohammad Helal Uddin remarked that rising loan repayments are normal, as borrowed funds must be repaid.
However, he stressed the need for rational decision-making in future loan approvals. He noted that foreign loan commitments reached a record low between July and September, with only $27.4 million pledged.
According to the International Monetary Fund (IMF) and the World Bank, the risk of a foreign debt crisis in Bangladesh remains low. However, the ERD report highlights risks, including the need for additional investment to achieve the "Smart Bangladesh" goal by 2041.
The report also identifies challenges such as the global economic slowdown, Euro-centric debt complexities, and shifting geopolitical conditions, which have restricted access to easy credit. It further warns that state-owned enterprises and autonomous institutions borrowing against government guarantees are heightening foreign debt risks.
