Major Development Partners Turn Away as Loan Pledges Fall Short, Repayment Pressure Mounts

❐ Staff Reporter

A worrying trend is becoming evident in Bangladesh’s external financing flows. No new loan commitments were received from some of the country’s most important development partners and international financial institutions in the first 11 months (July-May) of the current fiscal year 2025-26.

The latest report published by the Economic Relations Department (ERD) shows that Japan, India, Russia and the Asian Infrastructure Investment Bank (AIIB)—the four key development partners—have not approved or committed any new loans.

Although these countries and organizations have continued to release funds against previously approved projects, the absence of new commitments raises questions about future development financing.

According to experts, the lack of new loan commitments is not just a signal of financial flows; it also carries important messages about the confidence of development partners, project readiness, and the state of diplomatic relations.

India’s credit assistance virtually stagnates

Neighboring India has not pledged any new loans to Bangladesh since the political upheaval of August 5, 2024. That trend continues in the current fiscal year as well.

Bangladesh was supposed to receive a total of $7.36 billion under three Lines of Credit (LoC) programs from the Indian Exim Bank, but the pace of disbursement has slowed significantly.

According to ERD data, India disbursed only $250 million between July and May. While Indian loans have played a significant role in Bangladesh’s infrastructure development in the past, the current lack of new commitments raises questions about the pace of economic cooperation between the two countries.

Money is being released in Rooppur, but Russia is not interested in new initiatives

Russia is financing the construction of the Rooppur Nuclear Power Plant, one of Bangladesh’s largest infrastructure projects. However, the country has not committed any new loans in the first 11 months of the current fiscal year.

ERD sources said that Bangladesh has also not sent a financing proposal to Russia for any new project. As a result, existing cooperation between the two countries is limited to the Rooppur project.

While Russia has released $930 million under old commitments during the same period, the absence of new investment or financing structures creates uncertainty about the expansion of future cooperation.

Traditional development partner Japan also has no new commitments

Japan, long known as one of Bangladesh’s largest development partners, also did not commit any new loans in the first 11 months of the current fiscal year.

According to ERD sources, although discussions are ongoing with Japan regarding financing for various projects, it has not yet been transformed into a commitment. Between July and May, Japan has disbursed more than $430 million under the previous loan agreement.

However, the lack of new commitments is raising concerns about the financing structure for implementing future mega projects.

AIIB’s silence, consortium waiting for loan

There have also been no new loan commitments from the Asian Infrastructure Investment Bank (AIIB) in the last 11 months. Although the agency has expressed interest in participating in a joint or consortium lending mechanism with the Asian Development Bank (ADB) and other international institutions, no final decision has been made yet.

As a result, while there have been discussions about potential funding, no new numbers have been added to the list of actual commitments.

Absence of four out of seven major donors

Of the seven major countries and organizations that provide the most credit assistance to Bangladesh, four have not made any new commitments in the last 11 months. Only the World Bank, ADB and China have made new commitments.

This has had a direct impact on overall external debt commitments.

According to ERD data, Bangladesh received a total of $4.22 billion in new loan commitments during July-May of the current fiscal year, compared to $5.5 billion in the same period of the previous fiscal year.

This means that new loan commitments have fallen by about $1.28 billion, or about 23 percent, in the space of one year. This decline can be considered an important negative trend in foreign development financing.

New loans are decreasing, while the pressure to repay old loans is increasing

Another worrying issue in foreign debt management is the rapid increase in debt repayments.

According to ERD data, Bangladesh had to repay a total of $4.1323 billion in loans to various development partner countries and organizations in the first 11 months of the current fiscal year. This is a new record for foreign debt repayment in the country’s history.

During the same period, foreign loans and grants totaled about $4.58 billion, meaning the gap between foreign remittances and debt repayments has narrowed significantly.

There are concerns that managing foreign financing may become more difficult in the future, as new loan commitments decline and debt repayment obligations increase rapidly.

Where does the future lead?

The latest data from the ERD shows that four of Bangladesh’s major development finance partners—Japan, India, Russia, and the AIIB—made no new loan commitments in the first 11 months of the current fiscal year. At the same time, total external debt commitments have declined significantly, while external debt repayments have reached a record high.

As a result, new questions and concerns have arisen about the implementation of development projects, the continuity of foreign financing, and the trust of international partners.