Foreign Loan Commitments Hit 14-Year Low In FY26

Representational image. Photo: Collected

Bangladesh secured $5.24 billion in foreign loan commitments from development partners in FY26, marking the lowest level in 14 years, according to the latest data from the Economic Relations Division (ERD).

The last time foreign loan commitments were lower was in FY12, when the figure stood at $4.76 billion. The FY26 amount was also slightly lower than FY15's $5.26 billion and significantly below the $8.32 billion recorded in FY25.

Before the interim government took office, annual foreign loan agreements or commitments generally remained between $9 billion and $10 billion, ERD data showed.

According to an ERD report released on Sunday, $1.56 billion of the FY26 commitments came as budget support. Officials said the government focused more on budget support instead of traditional project loans amid global uncertainties, including conflicts in the Middle East.

The government also shifted financing from slow-moving projects to priority sectors such as energy and food security. Around $1.06 billion was reallocated and released in June for energy-related needs.

M Masrur Reaz, chairman and founder of Policy Exchange Bangladesh, said the interim government's cautious spending approach and limited project expansion contributed to slower public investment.

He said development partners also adopted a wait-and-see approach after the election schedule was announced, assessing the new government's priorities, financing plans and policy direction.

Mustafa Kamal, executive director of the Institute for Inclusive Finance and Development (InM), said the new government would need time to restart negotiations as development partners evaluate its policies and implementation capacity.

Record foreign loan repayment

Bangladesh recorded its highest-ever foreign loan repayment in FY26, paying $4.49 billion to development partners, compared with $4.09 billion a year earlier.

The repayment increased by 9.96% year-on-year, with principal payments reaching a record $2.95 billion, up 13.82%. Interest payments also rose to $1.54 billion from $1.49 billion.

ERD officials said repayments increased as grace periods for several earlier loans ended. Experts warned that rising repayment obligations could put pressure on foreign currency earnings and create macroeconomic challenges.

They advised the government to remain cautious about future borrowing and prioritise projects with strong economic and social returns.

Foreign loan disbursement declines

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, slower project implementation due to elections, lower confidence among development partners and reviews of several projects after the new government assumed office.

The Asian Development Bank (ADB) provided the highest loan commitments in FY26 at $2.69 billion, including $1 billion in budget support. The World Bank committed $820 million, followed by Japan with $314 million, China with $279.94 million and the Asian Infrastructure Investment Bank (AIIB) with $250 million.

In terms of disbursement, the World Bank topped the list with $2.74 billion, followed by ADB with $1.91 billion and Russia with $1.05 billion. AIIB disbursed $692 million, Japan $795.32 million, China $532.88 million and India $278.66 million.