Bangladesh sees 37 pc drop in foreign loan commitments in FY26

New Delhi: Bangladesh recorded a 37 per cent fall in foreign loan commitments in FY26, eroding one of the country’s traditional buffers against external shocks and raising questions about future development financing, a new report has said.

The report from Bangladesh-based The Daily Star said loan commitments fell to $5.24 billion in FY26 from $8.32 billion a year earlier.

Loan commitments represent future investment capacity, and the drop signals a fewer committed resources for infrastructure, energy, climate adaptation, and human development.

The report raised doubts if Bangladesh is becoming less attractive as concessional financing declines with its transition toward middle-income status.

Actual foreign financing slipped to $8.07 billion from $8.57 billion the prior year reflecting weakening external support "precisely when Bangladesh requires substantial investment to sustain growth and strengthen resilience."

The media house also flagged a "more concerning" risk of rising burden of debt servicing. External loan repayments jumped to $4.49 billion in FY26 from $4.09 billion a year earlier.

It signalled that the repayment phase of loans dipped over the past decade, particularly for large infrastructure and mega projects.

Many of these projects experienced delays, incurred cost overruns, or failed to generate the expected economic returns within the projected time frame.

Consequently, Bangladesh faces repayment obligations before fully realising the productivity gains these investments were expected to deliver.

“The challenge is likely to intensify as grace periods expire on additional foreign loans in the coming years,” the media house said.

Though supporters of the government may point to remittances by migrant workers, which rose 15 per cent year-on-year to $2.85 billion in July it still fell short of the $3 billion monthly historical threshold.

"One month does not establish a trend, but it reminds policymakers that remittance growth cannot be taken for granted or expected to offset every external imbalance," the report warned.

Higher international fuel prices from West Asian conflict inflate the import bill of import-dependent Bangladesh, even without significant increases in import volumes.

"This places additional pressure on foreign exchange reserves, widens the trade deficit, and raises production costs across the economy," the report noted.