Bangladesh’s foreign debt repayments more than double aid inflows in Q1 of FY27

In a concerning sign of growing foreign debt pressure, Bangladesh paid back more than double the foreign assistance it received in actual disbursements during the first quarter (July–September) of fiscal year 2026–27, according to an Economic Relations Division (ERD) report released today (26 October).  

According to ERD data, external debt servicing costs soared to $1,351.23 million, while foreign aid disbursements dropped sharply to $662.31 million, leaving net inflows deeply negative for the period.

During July–September, Bangladesh spent $2.04 on foreign debt servicing for every $1 received in foreign assistance, marking an extraordinary reversal in foreign resource flows.

The government spent $1.351 billion on principal and interest payments on foreign loans during July-September of FY27, up 5.6% from $1.28 billion in the same period of the previous fiscal year, says the ERD report.

Of the total debt servicing in the first quarter, principal repayments stood at $858.92 million, up from $816.99 million during the corresponding period of FY26.

Interest payments also increased to $492.31 million from $462.96 million a year earlier.

Disbursements down 42%

The increase in debt servicing came at a time when the inflow of foreign assistance declined substantially.

Development partners disbursed $662.31 million in foreign assistance during the first quarter of FY27, down from $1.149 billion in the corresponding period of the previous fiscal year.

This represents a year-on-year decline of about 42.3%, or $486.28 million.

Of the total disbursement in July–September this year, $541.74 million came as loans and $110.57 million as grants.

The figures mean that Bangladesh paid more than twice as much in foreign debt servicing as it received in foreign aid disbursements during the quarter. 

New commitments increase

Foreign commitments, however, showed a significant increase.

Development partners committed $1.273 billion in loans and grants during July–September of FY27, up from $910.67 million in the same period of the previous fiscal year – an increase of nearly 40%.

Of the new commitments, $1.148 billion was in loans, while $125.45 million came in grants.

Officials said the latest figures show a widening gap between new commitments and actual disbursements. Although commitments increased, the sharp decline in disbursements, alongside higher principal and interest payments, means the government’s immediate external financing flows remained under pressure during the first quarter of the fiscal year.