Foreign aid shortfall puts pressure on budget in first month of fiscal year

July sees foreign aid drop, repayments outstrip new loans

In the first month of the fiscal year, foreign aid disbursements have faced a setback, with more money being paid out in debt repayments than received.

This shortfall occurred despite a need for a boost in foreign aid to counteract the domestic economic stagnation caused by violence and unrest surrounding the Anti-discrimination Student Movement that brought down the Sheikh Hasina regime.

In July, Bangladesh received a total of $358.3 million in foreign aid.

However, during the same period, $385.6 million was paid out in debt repayments, the Economic Relations Division, or ERD, reported on Wednesday.

Of the total foreign aid received, $287 million was in the form of loans, while $71.3 million came as grants. Conversely, repayments included $265 million in principal and over $120 million in interest.

In July of the previous year, the government had repaid $250 million in interest and principal on foreign loans.

This year, there was no new commitment of foreign loans, although $16 million in grant commitments were made.

Compared with the same period last year, foreign aid disbursements in July decreased by 17.15 percent.

Last year, development partners and lenders disbursed $405.7 million against the promised amount, while in July 2022-23, the disbursement was $480 million.

In the last fiscal year, Bangladesh received $9.86 billion in loans and repaid nearly $3.36 billion in interest and principal.