Decline in foreign aid threatens development efforts in Bangladesh

The declining flow of foreign aid to Bangladesh's development sector has become a serious concern, particularly for initiatives focused on improving the lives of marginalised communities.

Experts attribute the crisis to several interrelated factors: a drop in global donor interest, Bangladesh's reclassification as a middle-income country, shifting international priorities due to global crises, and evolving aid policies. As a result, there is now an urgent need to identify sustainable and alternative funding sources to continue supporting vulnerable communities.

This concern was raised at a roundtable discussion held on Thursday, 8 May, at the BRAC Centre Inn, Mohakhali, Dhaka, organised by ActionAid Bangladesh on the theme: 'Strengthening Community Support Amid Changing Funding Landscapes'. The event brought together representatives from civil society organisations, national and international development agencies, the private sector, climate and environmental experts, policy analysts, journalists, and development researchers.

Speakers highlighted that while Bangladesh received approximately one billion USD in foreign assistance in 2020, this figure has steadily declined. According to the NGO Affairs Bureau, non-governmental organisations operating in the country received USD 655 million in foreign aid last year—an 11.6% decrease from the previous year. Sudden policy shifts by major donor countries, including the United States, have led to the suspension of substantial funding, forcing many critical projects to halt their operations. Development financing opportunities have narrowed considerably. Rising trade tariffs and recent economic instability at both national and global levels are also expected to impact marginalised communities, generating serious concern among stakeholders.

Experts emphasised that to sustain ongoing development efforts, greater focus is needed on resilient and sustainable funding models, such as microfinance, social enterprises, and corporate social responsibility (CSR) contributions from the private sector.

Dr Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD), stressed the importance of a robust policy framework for utilising CSR funds. "As LDC graduation is set to impact CSOs significantly, we must explore south-south funding, adopt a CSR policy, that could be led by the Finance Ministry, to channel private sector support, promote digital and structural reforms in both government and CSOs, ensure democratic leadership transitions, and advocate for a dedicated BDT 1000 crore budget to sustain rights-based social development amid shifting political mindsets," he added.

ActionAid Bangladesh's Country Director, Farah Kabir, called for collective action and innovative solutions to overcome the ongoing crisis. "The current funding shortage is disrupting access to essential primary healthcare and social protection services in underserved urban and rural areas. Women, children, and marginalised populations are particularly at risk. If left unaddressed, this situation could lead to increased inequality, rising poverty, and declining public trust in development initiatives. Active and collaborative steps are urgently needed to ensure the sustainability of community development efforts," she warned.

In light of Bangladesh's graduation from LDC (Least Developed Country) status, civil society organisations must undergo strategic and visionary transformation to continue contributing to the Sustainable Development Goals, said M Zakir Hossain Khan, Chief Executive of Change Initiative. He noted, "Amid ongoing funding shifts and crises, we must adopt proactive, forward-looking strategies that prioritise nature-based solutions, renewable energy, and agrotechnology—engaging CSOS and communities in public-private partnerships, exploring government-monitored zakat funds for social safety nets, enabling youth-led natural resource monitoring, and ensuring governance frameworks that support evidence-based engagement and local resource conservation. "

Professor Dr Sharmin Nilormi of Jahangirnagar University's Department of Economics stated that while Bangladesh is progressing towards graduation from LDC status, mere planning is insufficient without robust implementation. "As Bangladesh moves beyond LDC status, we must shift from just focusing on adaptation to scaling its implementation, ensure better monitoring of tax expenditure rebates and advocate for redirecting non-government tax benefits into seed funding for grassroots CSOs; at the same time, local CSOs need to update themselves with knowledge of evolving technologies and their practical application," she remarked.

The roundtable discussion concluded with a closing speech by AAIBS Board Chairperson Ibrahim Khalil Al-Zayad. Representatives of various NGOs and civil society, researchers, academics, development experts, and media professionals attended the event. The speakers emphasised the need for collective efforts to address the funding crisis.