Bangladesh is facing an escalating debt challenge as the vast majority of incoming foreign assistance is now being diverted to settle existing loan obligations.
According to the latest provisional report from the Economic Relations Division (ERD) released on Tuesday, both new loan commitments and the actual release of funds declined significantly during the first 11 months of the 2025-26 fiscal year.
From July 2025 to May 2026, foreign aid disbursements totalled $4.58 billion, representing a sharp drop from the $5.61 billion received during the same period in the previous financial year.
Simultaneously, the pressure of repaying principal and interest on past loans has intensified, with the country paying out $4.13 billion in debt servicing during these 11 months.
This figure, which includes $2.68 billion for the principal amount and $1.44 billion in interest, marks a total increase of $350 million compared to the $3.78 billion paid during the corresponding period last year.
Shift in major donor commitments
The ERD data reveals that new foreign loan commitments fell to $4.23 billion, down from $5.49 billion recorded in the previous year.
The Asian Development Bank (ADB) emerged as the primary source of new funding, accounting for approximately 64 per cent of total commitments with agreements worth $2.69 billion, a substantial rise from its $700 million commitment during the same period last year.
In contrast, commitments from the World Bank (IDA) saw a drastic decline, plummeting from $2.34 billion to just $420 million.
Other commitments included $570 million from ‘Asia, JEC & FF’, $390 million from European sources, and $40 million from the United Nations. However, no new financing commitments were received from the United States, Japan, or the Administration and Middle East Wing during this period.
Net inflow reaches critical lows
The government has struggled to meet its aid mobilisation targets, achieving only 58 per cent of the $7.87 billion disbursement goal set for the 11-month period.
Russia was a leading contributor in terms of fund releases, providing $930 million for various projects, including the Rooppur Nuclear Power Plant, despite no new loan agreements being signed with the country this year.
The World Bank followed with $960 million in disbursements, though this was only slightly more than half of its $1.77 billion budget. Despite its high commitments, the ADB’s disbursement pace remained slow, releasing $790 million against a target of $1.95 billion.
Additional disbursements included $530 million from China, $440 million from Japan, $260 million from India, and $80 million from the Asian Infrastructure Investment Bank, although the latter three provided no new loan commitments.
With $4.58 billion coming in and $4.13 billion going out, the net foreign aid inflow stands at a mere $450 million, indicating that almost the entire volume of incoming foreign loans is being consumed by the repayment of previous debts.
