The global multilateral development finance landscape is undergoing a structural shift, as declining aid budgets, geopolitical fragmentation and rising fiscal pressures in donor countries are reshaping the availability, affordability and predictability of development finance. For South Asian countries, including Bangladesh, this transition raises critical concerns over climate finance, concessional resources, debt sustainability and the financing needs associated with LDC graduation.
The Centre for Policy Dialogue (CPD), in collaboration with the Organisation for Economic Co-operation and Development (OECD), organised the virtual discussion titled ‘OECD Multilateral Development Finance 2026 Report (MDFR): Perspectives from South Asia’ on Wednesday, 8 July 2026. The session brought together experts from South Asia and the OECD to discuss how declining aid, geopolitical fragmentation and changing donor priorities are reshaping development finance.
Reflecting on Bangladesh’s position, Dr Rashed Al Mahmud Titumir, Hon’ble Prime Minister’s Adviser on Ministry of Finance & Planning, Prime Minister’s Office, said the report should not be read only as a warning about declining aid, but as ‘a call to rethink how development will be financed over the coming decades.’ He noted that Bangladesh is pursuing a more diversified financing strategy through domestic resource mobilisation, capital market reform, bond market development and greater private investment. He also urged multilateral organisations to regain their ‘moral authority’ by responding to the ground realities faced by countries vulnerable to climate, food and energy shocks.
Setting the context for the discussion, Dr Fahmida Khatun, Executive Director, Centre for Policy Dialogue (CPD), said the report is particularly timely for Bangladesh and South Asia, as the global multilateral development finance system has reached ‘a historic turning point.’ She observed that Bangladesh has benefited significantly from development finance in infrastructure, health, education and social sectors, but the reversal in global financing trends could create new challenges as the country approaches LDC graduation.
The question today is no longer only how to improve the multilateral system, but ‘whether and how we can preserve it and renew it,’ said Mr Henri-Bernard Solignac-Lecomte, Senior Economist and Head of Unit, Architecture and Analysis, OECD. He added that the system’s unique value is under threat, but it can still be preserved through ‘bold and well-designed reforms.’
Presenting the key findings of the MDFR 2026, Mr Leonardo Altieri, Co-author of the MDFR 2026, OECD, said the multilateral development finance system is entering ‘a different phase’ marked by resource contraction. He noted that both core and earmarked contributions declined in 2024, leading to a reduction of around 15 per cent in a single year, while DAC members’ multilateral contributions could fall by 23–30 per cent between 2023 and 2027.
Although multilateral outflows reached almost USD 300 billion in 2024, this masks ‘early signs of strain,’ observed Mr Marius Guérin, Co-author of the MDFR 2026, OECD. He cautioned that concessional resources remain the backbone of support for the poorest and most fragile countries, yet they are often among the first to be reduced during periods of fiscal constraints.
From Pakistan’s perspective, Dr Abid Qaiyum Suleri, Executive Director, Sustainable Development Policy Institute (SDPI), Pakistan, argued that developing countries should speak with ‘a single voice’ to defend multilateral financing while also improving its governance. He stressed that emergency financing, concessional funding and non-concessional windows should be treated separately, particularly for countries facing climate disasters and development shocks.
Cuts to central multilateral organisations may not remain contained within those agencies, warned Dr Pratyush Sharma, Head of Research and Innovation, Southern Voice. Referring to the reverse leverage effect, he said such cuts could spread through wider delivery chains and affect development activities on the ground. He also underlined the need to go ‘beyond GDP measures’ to understand development needs, especially as several South Asian countries approach LDC graduation.
For Nepal, the challenge is closely linked to graduation, climate vulnerability and aid effectiveness. Dr Paras Kharel, Executive Director, South Asia Watch on Trade, Economics and Environment (SAWTEE), Nepal, said continued support is essential for sustainable and irreversible LDC graduation, as development gains can be reversed by adverse shocks. He also stressed the importance of leveraging climate finance for productivity, growth and employment generation.
Drawing on Sri Lanka’s experience, Dr Roshan Ann Perera, Team Leader, Growth and Economic Transformation, The Centre for Poverty Analysis (CEPA), Sri Lanka, described multilateral finance as a ‘stabilising anchor.’ She cautioned that premature loss of concessional access can push countries towards expensive commercial borrowing, and said grants and concessional finance must serve as a bridge until economic recovery becomes more established.
Development finance is increasingly becoming ‘an instrument of geopolitics’ and can no longer be treated merely as a budgeting issue, said Mr Muhammad Asif Iqbal, Managing Director, Social Policy and Development Centre (SPDC), Pakistan. He urged that concessional finance eligibility should move beyond income per capita and incorporate climate vulnerability, multidimensional poverty, debt sustainability and economic resilience.
The financing dimension of sustainable development needs greater attention, observed Mr Shah Asif Rahman, Director General, Multilateral Economic Affairs Wing, Ministry of Foreign Affairs, Bangladesh. Referring to Bangladesh’s engagement at the High-Level Political Forum on Sustainable Development, he said countries such as Bangladesh need stronger commitments from developed countries, development partners and financial institutions to create an enabling environment for progress, particularly in relation to SDG implementation, climate financing and LDC graduation.
Mr Abdoulaye Fabregas, Economist, Architecture and Analysis Unit, OECD Development Co-operation Directorate, noted that uncertainty, growing competition for concessional resources and fragmentation are key trends shaping the development finance landscape.
The discussion concluded by underscoring that South Asian countries must engage more actively in shaping reforms of the multilateral development finance architecture, while strengthening domestic resource mobilisation and ensuring continued access to affordable, predictable and development-aligned finance.
Report Link: https://www.oecd.org/en/publications/multilateral-development-finance-2026_0720370a-en/full-report.html
Facebook Live Link: https://www.facebook.com/cpd.org.bd/videos/2243919443045688
