Foreign loan commitments fall to 14-year low, repayment reaches record $4.49b
Loan commitments fell to $5.243 billion in FY26, while the country made its highest-ever annual external debt repayment of $4.494 billion.
Highlights:
- Foreign loan commitments fell to $5.24b in FY26, the lowest in 14 years
- Bangladesh repaid a record $4.49bn in foreign loans, up nearly 10% year-on-year
- Budget support accounted for $1.56b of total commitments in FY26
- Foreign loan disbursement declined to $8.07b from $8.57bn a year earlier
- ADB was the largest lender with $2.69b in commitments, including $1bn in budget support
- World Bank led disbursements with $2.74b, followed by ADB at $1.91b
- Principal repayments rose to a record $2.95b, while interest payments reached $1.54b
Bangladesh secured $5.24 billion in foreign loan commitments from development partners in FY26, the lowest in 14 years, according to the latest Economic Relations Division (ERD) data.
The last time commitments were lower was in FY12 at $4.76 billion. In FY15, the figure was almost similar at $5.26 billion. FY26 commitments were also significantly below FY25's $8.32 billion. Before the interim government took office, annual foreign loan agreements or commitments generally remained between $9 billion and $10 billion, ERD data show.
The ERD report released today (2 August) said $1.56 billion of FY26 commitments came as budget support. Officials of the Division said the government focused more on budget support than conventional project loans amid global uncertainty, including Middle East conflicts.
Keep updated, follow The Business Standard's Google news channel
It also reallocated financing from slow-moving projects to energy and food security. Around $1.06 billion was repurposed and released in June for energy needs.
M Masrur Reaz, chairman and founder of Policy Exchange Bangladesh, said the interim government's non-political nature and highly conservative spending policy slowed public investment and almost halted new projects.
"Since there was little need to start new projects, the interim government did not extensively negotiate new foreign financing beyond IMF and World Bank budget support," he said.
He added that development partners adopted a wait-and-see approach after the election schedule was announced, assessing the elected government's priorities, financing strategy and policies before making new commitments.
Mustafa Kamal, executive director of the Institute for Inclusive Finance and Development (InM), said the new government needs time to restart negotiations as development partners assess its policies and implementation capacity.
"Many projects had preliminary discussions and commitments during the interim government. After the new government took office, those require fresh coordination, understanding and agreements," he said.
Record foreign loan repayment
Bangladesh made its highest-ever foreign loan repayment in FY26, paying $4.49 billion to development partners, up from $4.09 billion a year earlier. The repayment rose 9.96% year-on-year, with principal payments reaching a record $2.95 billion, up 13.82%, while interest payments increased to $1.54 billion from $1.49 billion.
ERD officials said repayments rose as grace periods for many earlier loans expired. Masrur Reaz said loans taken since FY20 have entered the repayment phase, increasing pressure on foreign currency earnings and creating macroeconomic challenges.
He urged the government to remain cautious about future borrowing and prioritise projects with high economic and human returns.
Foreign loan disbursement falls
Foreign loan disbursement fell to $8.07 billion in FY26 from $8.57 billion a year earlier. ERD officials attributed the decline to administrative uncertainty, lower confidence among development partners, slower project implementation due to elections and reviews of several projects after the new government took office.
The Asian Development Bank (ADB) provided the highest loan commitment in FY26 at $2.69 billion, including $1 billion in budget support. The World Bank committed $820 million, Japan $314 million, China $279.94 million and the Asian Infrastructure Investment Bank (AIIB) $250 million.
The World Bank led disbursement with $2.74 billion, followed by ADB with $1.91 billion and Russia with $1.05 billion. The AIIB disbursed $692 million, Japan $795.32 million, China $532.88 million and India $278.66 million.
