Dhaka: Despite mounting pressure to repay large amounts of foreign loans taken during the previous Awami League government, the incumbent government is regularly and successfully paying back both principal and interest on its external debts. At the same time, the government has adopted a cautious approach towards taking new loans. Emphasis is being placed on obtaining foreign loans only after considering the necessity of projects, their economic feasibility, investment benefits, and the country’s future debt-servicing capacity.
According to Bangladesh Sangbad Sangstha, the latest data from the Economic Relations Division (ERD) indicates that the government repaid US$453.23 million in principal and interest on foreign loans in July 2026, compared to US$446.68 million in the same month of 2025. Conversely, foreign loan disbursement stood at US$180.1 million in July, down from US$208.04 million in the previous year. The commitment for new foreign loans during the month was US$14.05 million, underscoring the government’s restraint in taking new loans.
Priority is being given to using borrowed funds for projects capable of generating investment and employment, particularly by creating momentum in productive and manufacturing sectors. The pressure of foreign debt repayment has increased significantly in recent years. According to ERD data, the amount of principal and interest repaid against foreign loans in fiscal year 2025-26 rose by around 10 percent from the previous fiscal year to US$4.49 billion, up from US$4.09 billion in FY2024-25. This increase is largely due to loans taken for large infrastructure and mega projects during the previous Awami League government, which have now entered the repayment phase.
Talking to BSS, Prime Minister’s Adviser on Finance and Planning, Professor Dr. Rashed Al Mahmud Titumir, noted that the Awami League government borrowed extensively between 2009 and 2024 in the name of infrastructure and mega projects. He emphasized that at the time of taking such loans, the government did not adequately consider the ‘value for money’ from the projects and the interest rates, creating a significant burden of loans and subsidies in sectors like power due to various factors, including capacity charges.
Dr. Zahid Hossain, former lead economist of the World Bank’s Dhaka office, told BSS that there had been a tendency in the past to take as much foreign borrowing as was available. He stressed that decisions on obtaining foreign assistance should now be based on assessing the actual necessity of various development projects. He highlighted that financing from the World Bank’s International Development Association (IDA) and Japan was no longer available on easy terms, necessitating a cautious approach to selecting development projects, considering the country’s capacity to repay both the principal and interest on loans.
Meanwhile, total foreign aid disbursement stood at US$8.07 billion in FY2025-26, down from US$8.57 billion in the previous fiscal year. Disbursement of project assistance declined to US$8.02 billion from US$8.52 billion, although grant disbursement increased to US$553.95 million from US$454.56 million in the previous fiscal year. The World Bank was the largest source of foreign assistance in FY2025-26, disbursing US$2.07 billion, followed by the Asian Development Bank (ADB) with US$1.91 billion.
Economists believe that an increasing portion of the loans taken during the previous government has now become repayable. Therefore, it is essential to accelerate implementation of ongoing projects, complete them within the stipulated timeframe, and ensure the expected economic benefits from those projects. They also recommended negotiating with development partners for loans on better terms and prioritising concessional or soft-term financing where possible.