Foreign Loan Commitments Drop by 98% in First Two Months

Due to the decision to reassess projects in the foreign loan pipeline, there has been a significant decline in loan commitments from development partners during the first two months of the fiscal year 2024-25, specifically in July and August.

According to a recent report from the Economic Relations Division (ERD), foreign loan commitments in July and August of the current fiscal year have decreased by 98.2% compared to the same period last year.

During these two months, only $20.16 million has been pledged as project funding and budget support from development partners, compared to $1.14 billion during the same period last year.

The decline comes amid national political instability, following a popular uprising that led to the fall of the previous Awami League government.

ERD officials have stated that the interim government is currently reassessing loan proposals made during the previous administration, which has resulted in a halt to loan agreements with development partners.

However, officials are hopeful that the proposed loan processes will commence after the reassessment, leading to the recovery of commitments according to targets.

Since the formation of the interim government, multilateral and various bilateral development partners, including the World Bank and the Asian Development Bank (ADB), have given initial assurances of loans and budget support for various projects in Bangladesh.

In the meantime, the interim government has begun reviewing all ongoing, proposed, and under-discussion projects financed by foreign aid to identify priority projects and terminate those deemed unnecessary.

As part of this process, the ERD has already requested project implementing agencies to submit a priority list along with information on project feasibility, viability, and progress by the end of this month.

ERD sources indicate that foreign loan lists are being submitted from various ministries and departments. The ERD will review these lists and send them to the Planning Commission.

Subsequently, the Planning Commission will initiate the project approval process based on priorities, and the ERD will begin the loan processes.

After a meeting of the Executive Committee of the National Economic Council on 18 September, Planning Adviser Wahiduddin Mahmud informed reporters that "all projects in the pipeline will be scrutinised."

He stated, "We are trying to complete the verification of foreign-funded projects promptly, as we have a need for foreign financing."

"There are billions of dollars' worth of projects waiting for approval in the pipeline; however, not all foreign-funded projects will be considered good projects," he added.

In the previous fiscal year 2023-24, Bangladesh received $9.88 billion in support from development partners as project funding and budget assistance. This amount was 8.92% lower than the previous fiscal year 2022-23.