Foreign loan disbursement falls 26% in Jul-Feb

Foreign loan disbursement to Bangladesh dropped sharply in the first eight months of the current fiscal year, reflecting a slowdown in development project implementation, according to official data.
A latest report published on Sunday by the Economic Relations Division (ERD) shows that development partners disbursed US$3.05 billion between July and February of 2025-26 fiscal year, marking a 26.2% decline from $4.13 billion during the same period of the previous fiscal year.
The decline was largely driven by a fall in project assistance disbursement, which stood at $3.03 billion in the current fiscal year, compared with $4.11 billion a year earlier. Grant disbursement also declined slightly to $266.82 million from $277.80 million a year earlier.
Officials at the ERD attributed the slowdown to weak project execution capacity and administrative distractions linked to election-related activities. These factors, they said, disrupted the pace of development work and delayed fund utilisation, ultimately reducing disbursement from foreign lenders. 
While commitments for project assistance remained relatively stable, the slower implementation on the ground meant that funds could not be released as scheduled.
At the same time, Bangladesh’s external debt servicing burden has continued to rise. The report shows that total debt servicing reached $2.9 billion during the July-February period of FY26, up from $2.64 billion in the corresponding period of the previous fiscal year. Of this, principal repayments accounted for $1.94 billion, compared with $1.69 billion a year earlier, while interest payments stood at $955.84 million, slightly higher than $944.08 million in the same period last year.

In local currency terms, total debt servicing rose to Tk35,393.82 crore, compared with Tk31,659.42 crore a year earlier.
The trend highlights growing pressure on the country’s external financing position, as lower inflows coincide with higher repayment obligations. Economists say the gap between commitments and actual disbursement has long been a structural issue for Bangladesh, often linked to delays in project approval, procurement bottlenecks and implementation inefficiencies.
Unless execution improves, they warn, the country may continue to struggle to fully utilise available foreign financing, even as demand for development funding remains high.