Originally posted in বণিক বার্তা on 29 July 2025
Foreign aid declines, debt repayment rises in FY2024–25
For more than two years, the pressure of foreign debt repayments has been increasing steadily, and it is expected to rise further.
Due to slow project implementation and the ongoing economic downturn, both foreign aid commitments and disbursements declined in the recently concluded FY 2024–25. At the same time, foreign debt repayments continued to rise for earlier loans. This scenario has been highlighted in the latest report from the Economic Relations Division (ERD). Analysts believe the pressure of loan repayments on the government will persist in the current fiscal year as well.
According to ERD data, foreign aid disbursement stood at $8.57 billion against commitments of $8.32 billion in the last fiscal year. In comparison, in FY 2023–24, a total of $10.28 billion was disbursed against commitments of $10.74 billion. Based on this, foreign aid commitments fell by 22.5 percent, and disbursements declined by 16.63 percent. Most of the foreign aid in the previous fiscal year came in the form of loans, while grants accounted for only a small portion. During this period, Bangladesh received $380 million in grants and $7.94 billion in foreign loans. In contrast, in FY 2023–24, grants amounted to $850 million and foreign loans totaled $9.89 billion.
Although foreign loans and grants decreased, foreign debt repayments increased during the previous fiscal year. The government repaid $4.09 billion in foreign loans during this time, of which $2.6 billion was principal and $1.49 billion was interest. Back in FY 2023–24, foreign debt repayments totaled $3.37 billion, with $2.02 billion as principal and $1.35 billion as interest. This marks a 21 percent year-on-year increase in foreign debt repayments by the government.
ERD officials said that while the government repaid $3 billion in foreign loans during FY 2023–24, that figure exceeded $4 billion in the recently concluded FY 2024-25. The pressure of repayments will continue to rise gradually. This is because the pace of interest payments has increased even more rapidly than principal repayments.
Analysts say that due to slow project implementation, both new aid commitments and disbursements have declined. However, once the government finalizes the plans for its ongoing reform initiatives, the volume of support from development partners is expected to increase.
Among the development partners, the Asian Development Bank (ADB) disbursed the highest amount in the previous fiscal year—$2.52 billion. The International Development Association (IDA), a part of the World Bank Group, disbursed $2.01 billion. Japan provided $1.58 billion, while Russia contributed $670 million. The Asian Infrastructure Investment Bank (AIIB) disbursed $530 million, China gave $410 million, and India provided $180 million. An additional $650 million came from other development partners.
To implement major megaprojects, the previous government borrowed a large amount of foreign loans. Many of those projects have been implemented, while work on several others is still ongoing. Repayment of foreign loans for many completed projects has already begun. For more than two years, the pressure of foreign debt repayments has been increasing steadily, and it is expected to rise further.
Meanwhile, due to delays in development project implementation, the Annual Development Program (ADP) implementation rate in the previous fiscal year was the lowest in two decades. By the end of the fiscal year, only 67.85 percent of the revised ADP allocation had been spent, compared to 80.63 percent in FY 2023–24. According to data published by the Implementation Monitoring and Evaluation Division (IMED) under the Ministry of Planning, the revised ADP allocation for FY 2024–25 was BDT 2.26 trillion. Out of that, only BDT 1.52 trillion was spent.
Officials at the Planning Ministry said that development activities came to a standstill at the very beginning of the previous fiscal year due to student-led protests and political unrest. Curfews were in place for several days, and government offices and operations remained shut. After the shift in political scenario, many project directors went missing, and several contractors reportedly fled the country. As a result, even though funds were allocated, project implementation could not move forward.
Dr. Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), told Bonik Barta, “Repayment time has arrived for several of the loans that were taken. Since 2024, the pressure of loan repayment has been increasing. Foreign aid disbursement depends on project implementation. So if projects aren’t implemented, the aid money often stays stuck in the pipeline and isn’t released. Political instability in the country led to reduced spending and disruptions. That’s why foreign aid commitments have gone down. Naturally, disbursements have decreased as well. The more efficient project implementation becomes, the more foreign aid commitments and disbursements will rise.”
