Foreign aid disbursements decline as pressure from debt repayments intensifies

Foreign aid disbursement to Bangladesh fell sharply during the July–February period of the current fiscal year (2025–26), while rising external debt repayments added pressure, straining the country’s macroeconomic stability.

Officials said the decline in aid inflows, coupled with a growing debt burden, is an increasingly concerning trend for the economy.

Provisional data from the Economic Relations Division show that development partners disbursed $3.05 billion during the period, down from $4.13 billion a year earlier—a year-on-year drop of 26.2 per cent.

At the same time, debt servicing obligations continued to climb. Bangladesh repaid $2.90 billion in external debt in the first eight months of the fiscal year, up 10.36 per cent from $2.64 billion in the corresponding period last year.

Exchange rate fluctuations have further amplified the burden in local currency terms. Total debt servicing costs rose to Tk35,393 crore this fiscal year, compared to Tk31,659 crore previously, adding strain to the national exchequer.

However, there was a modest uptick in aid commitments. Between July and February, commitments stood at $2.43 billion, slightly higher than $2.35 billion in the same period of the previous fiscal year. Project aid remained the main source of foreign assistance, though both commitments and disbursements showed signs of contraction. Food aid stayed minimal, with only $25 million disbursed as grants—unchanged year-on-year.

Data also indicate that during the period, the government repaid $1.944 billion in principal and $955.8 million in interest, compared with $1.692 billion and $944 million, respectively, in the same period a year earlier.