The recent political upheaval in Bangladesh has significantly impacted foreign loan commitments, with inflows declining sharply as development activities stalled.
According to the latest report from the Economic Relations Division (ERD), foreign loan commitments plummeted by $4.69 billion—a staggering 67%—in the first six months (July-December) of the ongoing fiscal year (2024-25).
Notably, India, China, and Russia refrained from committing any new loans during this period.
Meanwhile, actual loan disbursements also fell by $531 million, a 13% decline, even as debt repayment surged by over 26%.
The ERD report reveals that Bangladesh secured only $2.29 billion in foreign loan commitments in the past six months, a steep drop from the $6.99 billion pledged during the same period last year.
This decline persisted despite receiving $1.1 billion in budgetary support from the World Bank and the Asian Development Bank (ADB) in December.
Among the lenders, the World Bank made the highest commitment of $914.5 million, followed by ADB with $700 million.
Loan disbursements also witnessed a downturn, with creditors providing $3.53 billion, compared to $4.06 billion in the previous fiscal year's corresponding period.
ADB topped the list of disbursers with $1.05 billion, followed by the World Bank at $800 million.
Russia ranked third, disbursing $531 million, while India contributed the least, extending only $72.1 million in loans.
Despite the slowdown in loan commitments and disbursements, foreign debt repayment surged by $414 million—over 26%—in the past six months.
Bangladesh paid $1.98 billion in principal and interest payments to development partners, up from $1.57 billion in the same period last fiscal year.
ERD officials attributed this rise to the expiration of grace periods for several large-scale projects initiated under the previous administration, necessitating principal repayments.
Additionally, higher interest rates on market-based loans have increased debt servicing costs.
Following the formation of the interim government, a cautious approach has been adopted towards foreign-funded projects.
Ongoing pipeline projects are under review, with the Ministry of Planning prioritising loan processing based on project significance and urgency.
As a result, new agreements with development partners are progressing at a slower pace.
Government officials acknowledged that foreign loan-backed projects, much like domestically funded ones, have lost momentum under the new administration due to various factors, including prevailing political uncertainty.
The stagnation in development activities has disrupted project implementation, further limiting loan disbursements.
The absence of continuity in previously planned initiatives has also contributed to the decline in foreign loan commitments, with fewer large-scale projects currently being pursued.
