Foreign loan inflows slow as debt burden rises

Bangladesh is witnessing a sharp slowdown in foreign loan disbursements and fresh loan commitments in the current fiscal year, even as repayment obligations on existing external debt continue to rise, creating additional pressure on the economy and foreign exchange reserves.

According to the latest report released by the Economic Relations Division (ERD) on Sunday, both foreign aid inflows and new lending commitments fell significantly during the first 10 months of FY2025-26.

The government had set a target of receiving $7.868 billion in foreign loan disbursement during the fiscal year. However, development partners released only $4.236 billion between July and April, achieving just 53.84% of the annual target.

During the same period of the previous fiscal year, foreign loan disbursement stood at $5.128 billion, indicating a decline of nearly 18% year-on-year.

Fresh foreign loan commitments also dropped sharply. Against a target of $6.715 billion for FY26, Bangladesh secured commitments worth only $2.807 billion in the first 10 months, representing 41.84% of the annual target.

In the corresponding period of the previous fiscal year, the country had secured $4.259 billion in commitments. The latest figures show a decline of around 34% compared to a year earlier.

At the same time, the burden of repaying existing foreign loans has continued to rise.

ERD data showed that Bangladesh repaid $3.802 billion in loan principal and interest to development partners during July-April of the current fiscal year, up from $3.507 billion during the same period last year. Repayment obligations therefore increased by 8.41% year-on-year.

Economists warned that declining foreign loan inflows, coupled with rising repayment pressure, could intensify stress on Bangladesh’s foreign currency reserves and slow the implementation of development projects.