Print: 02 Nov 2025
Foreign aid commitments to Bangladesh surged in the first two months of FY2025-26, signalling a strong turnaround from last year’s sluggish trend.
According to the officials, the rebound reflects renewed confidence among development partners in the country’s policy direction, governance reforms, and project execution capacity under the interim government.
According to provisional data from the Economic Relations Division (ERD), commitments totaled $243.81 million during July-August FY2025-26, a staggering 1,109% increase from just $20.16 million in the same period a year earlier.
The scale of the jump highlights a significant turnaround in donor sentiment after a period of subdued pledges.
“This rebound is not just numerical, it’s symbolic,” said a senior ERD official. “It shows that global lenders see Bangladesh back on track with reforms, prioritising transparency and accelerating project execution.”
The Asian Development Bank (ADB) accounted for the lion’s share of new commitments, pledging $150 million.
The World Bank’s International Development Association (IDA) followed with $9.94 million, while other bilateral and multilateral partners contributed $83.87 million. Japan, India, China, and Russia made no new pledges during the period, underscoring the concentrated nature of commitments.
On the disbursement side, flows remained robust. Actual fund releases climbed 63.7% year-on-year to $750.06 million, led by Russia ($315.40 million), IDA ($253.52 million), and ADB ($99.12 million).
Japan and India also maintained steady disbursements of $20.70 million and $20.95 million, respectively. Analysts say this pattern signals that projects on the ground are advancing despite global financial volatility.
From grants to loans: a structural shift
The composition of commitments illustrates Bangladesh’s shifting external financing profile.
Concessional loans accounted for $232.59 million of the total, while grants amounted to just $11.22 million. With the country set to graduate from LDC status in 2026, this transition reflects diminishing reliance on grants and greater dependence on debt-based financing.
“This structural shift is both an opportunity and a responsibility,” said Dr. Mustafa K Mujeri, Executive Director of the Institute for Inclusive Finance and Development (InM) and former Chief Economist at Bangladesh Bank. “Bangladesh’s external financing structure is evolving. We’re seeing more concessional loans and fewer grants, meaning our debt sustainability framework must be tighter, with every dollar spent wisely.”
Rising repayments: opportunity and risk
The surge in inflows is paired with a growing repayment burden.
During July-August FY2026, Bangladesh repaid $667.11 million, $488.79 million in principal and $178.32 million in interest, up from $589.22 million a year earlier. In local terms, total debt servicing rose to Tk8,130.87 crore from Tk6,964.79 crore.
Economists noted that while rising repayments reflect maturing projects, they also underscore the need for higher export earnings, stronger remittance inflows, and better project returns to maintain external stability.
“As Bangladesh edges closer to upper-middle-income status, debt servicing pressures will naturally rise,” Dr. Mujeri said. “The focus must shift to ensuring returns on investment through efficient project execution.”
Economists argue that while higher repayments reflect maturing projects, they also highlight vulnerabilities. “As Bangladesh edges closer to upper-middle-income status, debt servicing pressures will rise,” Dr. Mujeri said. “What matters now is not the size of the loan, but the quality of spending and timely project completion.”
Policy outlook: sustaining confidence through reforms
ERD officials note that the current borrowing strategy prioritises concessional financing from multilateral partners, with emphasis on climate resilience, infrastructure modernisation, and social protection.
Commitments have been buoyed by the interim government’s pledges to streamline project approval processes, strengthen public investment management, and accelerate aid utilisation.
Economists stressed that sustaining this momentum will require transparency, accountability, and alignment with long-term national development priorities.
“The dramatic rebound in commitments signals that Bangladesh remains on the radar of development partners,” Dr. Mujeri said. “But what’s crucial now is ensuring efficiency in spending and results on the ground.”
He added that to sustain this momentum, Bangladesh must match donor confidence with institutional reforms and timely execution.
The reporter can be reached at [email protected]
Edited by: Anayetur Rahaman
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Foreign aid commitments rebound sharply in Jul-Aug FY26, rising over 1,100%
Foreign aid commitments to Bangladesh surged in the first two months of FY2025-26, signalling a strong turnaround from last year’s sluggish trend.
According to the officials, the rebound reflects renewed confidence among development partners in the country’s policy direction, governance reforms, and project execution capacity under the interim government.
According to provisional data from the Economic Relations Division (ERD), commitments totaled $243.81 million during July-August FY2025-26, a staggering 1,109% increase from just $20.16 million in the same period a year earlier.
The scale of the jump highlights a significant turnaround in donor sentiment after a period of subdued pledges.
“This rebound is not just numerical, it’s symbolic,” said a senior ERD official. “It shows that global lenders see Bangladesh back on track with reforms, prioritising transparency and accelerating project execution.”
The Asian Development Bank (ADB) accounted for the lion’s share of new commitments, pledging $150 million.
The World Bank’s International Development Association (IDA) followed with $9.94 million, while other bilateral and multilateral partners contributed $83.87 million. Japan, India, China, and Russia made no new pledges during the period, underscoring the concentrated nature of commitments.
On the disbursement side, flows remained robust. Actual fund releases climbed 63.7% year-on-year to $750.06 million, led by Russia ($315.40 million), IDA ($253.52 million), and ADB ($99.12 million).
Japan and India also maintained steady disbursements of $20.70 million and $20.95 million, respectively. Analysts say this pattern signals that projects on the ground are advancing despite global financial volatility.
From grants to loans: a structural shift
The composition of commitments illustrates Bangladesh’s shifting external financing profile.
Concessional loans accounted for $232.59 million of the total, while grants amounted to just $11.22 million. With the country set to graduate from LDC status in 2026, this transition reflects diminishing reliance on grants and greater dependence on debt-based financing.
“This structural shift is both an opportunity and a responsibility,” said Dr. Mustafa K Mujeri, Executive Director of the Institute for Inclusive Finance and Development (InM) and former Chief Economist at Bangladesh Bank. “Bangladesh’s external financing structure is evolving. We’re seeing more concessional loans and fewer grants, meaning our debt sustainability framework must be tighter, with every dollar spent wisely.”
Rising repayments: opportunity and risk
The surge in inflows is paired with a growing repayment burden.
During July-August FY2026, Bangladesh repaid $667.11 million, $488.79 million in principal and $178.32 million in interest, up from $589.22 million a year earlier. In local terms, total debt servicing rose to Tk8,130.87 crore from Tk6,964.79 crore.
Economists noted that while rising repayments reflect maturing projects, they also underscore the need for higher export earnings, stronger remittance inflows, and better project returns to maintain external stability.
“As Bangladesh edges closer to upper-middle-income status, debt servicing pressures will naturally rise,” Dr. Mujeri said. “The focus must shift to ensuring returns on investment through efficient project execution.”
Economists argue that while higher repayments reflect maturing projects, they also highlight vulnerabilities. “As Bangladesh edges closer to upper-middle-income status, debt servicing pressures will rise,” Dr. Mujeri said. “What matters now is not the size of the loan, but the quality of spending and timely project completion.”
Policy outlook: sustaining confidence through reforms
ERD officials note that the current borrowing strategy prioritises concessional financing from multilateral partners, with emphasis on climate resilience, infrastructure modernisation, and social protection.
Commitments have been buoyed by the interim government’s pledges to streamline project approval processes, strengthen public investment management, and accelerate aid utilisation.
Economists stressed that sustaining this momentum will require transparency, accountability, and alignment with long-term national development priorities.
“The dramatic rebound in commitments signals that Bangladesh remains on the radar of development partners,” Dr. Mujeri said. “But what’s crucial now is ensuring efficiency in spending and results on the ground.”
He added that to sustain this momentum, Bangladesh must match donor confidence with institutional reforms and timely execution.
The reporter can be reached at [email protected]
Edited by: Anayetur Rahaman