Foreign Finance Imbalance, Disbursements Decline as Debt Servicing Costs Double

Foreign-debt servicing by Bangladesh more than doubled the amount of fresh loans disbursed in the first month of the current fiscal year, highlighting a growing imbalance in the country’s external financing.

Foreign-loan disbursements fell 13.38% year on year to $180.18 million in July, down from $208.04 million in the same month of FY26, according to data released by the Economic Relations Division (ERD) on Sunday.

In contrast, Bangladesh paid $453.23 million in principal and interest on medium- to long-term loans from development partners during July, compared with $446.68 million a year earlier.

Foreign-assistance commitments also plunged by more than 83% to just $14.05 million during the month, from $83.46 million in July of FY26.

Government projections indicate that the gap between external debt repayments and new foreign financing could widen sharply over the next three fiscal years. Bangladesh is projected to repay $5.61 billion in principal and interest during FY2027, followed by $6.89 billion in FY2028 and $7.565 billion in FY2029.

Meanwhile, grant disbursements rose by $0.20 million, or nearly 64.5%, in July. No foreign assistance was disbursed under the food-aid category in either July 2026 or July 2025.

Foreign assistance remains a key source of funding for Bangladesh’s development programmes, particularly in infrastructure, energy, transport, healthcare and other priority sectors. The release of loans and grants largely depends on project implementation progress and compliance with conditions set by development partners.