Several development projects in Bangladesh financed by the World Bank have large amounts of foreign loan funds lying unused, unadjusted or idle because of various complications in project planning and implementation. According to the lender’s latest report, more than Tk2,500 crore in such funds remains idle in designated accounts across different sectors.
The findings are contained in a report, “Bangladesh Outstanding Refunds Update October 2026”, sent by the World Bank to the Economic Relations Division (ERD) on 12 October.
Weak project preparation, land acquisition, procurement complications, bureaucratic delays, shortages of project directors, and limited implementation capacity often prevent development projects from utilising foreign loans on time, according to ERD officials.
However, as in the previous fiscal year, the government can use idle funds from ongoing projects in the current fiscal year to meet urgent energy and food security needs, they said.
But economists said while this opportunity to redirect unused funds, known as “repurposing” by the World Bank, is viewed positively, it should not be treated merely as an alternative source of emergency financing.
They said authorities must consider which projects the funds are being withdrawn from, where the money is being spent and how significant the impact will be on society and the economy. Otherwise, there is a risk of undermining the original objectives of loans.
In FY26, more than $1 billion in idle funds from ongoing projects and expired or undisbursed loans was redirected to meet urgent needs. Of this, $713 million was disbursed to finance fuel purchases, while $300 million for emergency food and fertiliser imports.
Billions tied up in inactive accounts
According to the World Bank’s report, substantial funds remain tied up in designated accounts whose disbursement deadlines have expired, are due to expire within four months, or have recorded no spending for at least six months. Taka-denominated accounts alone contain Tk1,910.63 crore in outstanding and inactive balances.
Balances in inactive accounts range from less than Tk1 crore to Tk70 crore or more.
Funds awaiting resolution over ineligible expenditure or misprocurement relate to several projects, including the Scaling-up Renewable Energy Project, Sustainable Coastal and Marine Fisheries Project, Emergency Multi-sectoral Rohingya Crisis Response Project, Supporting Rural Bridges, Livestock and Dairy Development Project, and Private Investment and Digital Entrepreneurship Project.
The report also flags $3.75 million in unused funds under Advance ID-2 of the Electricity Distribution Modernisation Project. Funds under the Learning Acceleration in Secondary Education project have likewise remained inactive for six months.
Seven designated accounts linked to projects whose implementation periods have ended contain Tk114.6 crore in outstanding balances classified as refundable. Two other accounts hold Tk412.35 crore in account balances despite the expiry of their disbursement deadlines.
A further Tk1,100.91 crore remains unused in accounts linked to two major projects whose disbursement deadlines expire within four months. Unless the required expenditure details are submitted on time, these balances risk being classified as overdue.
Why loans remain unspent
ERD officials said weaknesses in project planning and implementation are preventing projects from using foreign loans on time. Funds remain idle even after deadlines expire, while intended development outcomes go unrealised.
Poor feasibility studies and land acquisition complications are major obstacles. Administrative and legal disputes over land, complex procurement procedures, delays in contractor selection, and lengthy tender evaluations all slow implementation. Prolonged file processing and slow decision-making further impede progress.
A shortage of experienced, full-time project directors and frequent changes in leadership also disrupt continuity and weaken implementation capacity.
The government aims to cut the approval period for foreign-funded development projects to five months to speed up implementation, ERD sources said. A high-level Bangladeshi delegation conveyed the commitment at a meeting with World Bank Managing Director Anna Bjerde in Bangkok on 13 October.
An ERD assessment found that it takes an average of 11.8 months from World Bank board approval to the first disbursement. A substantial part of the loan’s grace period can therefore elapse before implementation begins.
The process takes even longer when feasibility studies and pre-approval procedures are included. Administrative and technical complications can cause further delays, while poor coordination over project extensions and additional financing adds to the problem.
As a result, projects often take years to get off the ground, delaying development and preventing Bangladesh from benefiting from foreign financing on time.
‘Repurposing from where, to where, and for what purpose?’
Zahid Hussain, former lead economist at the World Bank’s Dhaka office, told TBS that repurposing funds from ongoing projects could provide an alternative source of financing, provided the new use does not face the same implementation problems.
He said repurposing should not be judged solely by how quickly funds become available. “Authorities must assess where the money is being taken from, where it is going and what outcomes the reallocation is expected to deliver.”
The economist added that repurposing can be faster than securing fresh financing. However, the viability and future benefits of the project losing funds must also be assessed.
Slow progress alone is not sufficient reason to withdraw financing. Withdrawing funds to meet urgent needs could leave the original project requiring additional financing later, he said.
“The central question in repurposing should be: ‘Repurposing from where, to where, and for what purpose?'” he said.
Authorities must weigh the potential harm to the original project against the expected benefits of the alternative use. Without such an assessment, repurposing could leave both objectives unfulfilled, added the economist.
“Repurposing just to get cash leaves you neither here nor there,” Zahid said, stressing the need to determine whether reallocating funds would produce better outcomes.
According to Zahid, both the government and the World Bank have their own interests. Bangladesh wants to secure funds quickly to meet its financing needs, while the World Bank may have an interest in increasing disbursements. “Neither objective, on its own, guarantees better development outcomes,” he added.
‘Repurposing needs extreme caution’
M Masrur Reaz, chairman of Policy Exchange Bangladesh, said repurposing funds could be an alternative financing strategy amid the current economic crisis and limited fiscal space, but decisions must be made with extreme caution.
He said funding should not be cut from projects that are already underway, progressing according to schedule or are critical to the economy.
Instead, the government could consider reallocating funds from completed projects with unspent balances, projects at a very early stage that are not immediately important to the economy, or those significantly behind their original implementation schedules.
The economist said repurposing should be considered only after protecting important ongoing projects that are progressing on schedule. “The priority should be to identify funds allocated to less critical projects at an early stage of implementation.”
About The Author
