Bangladesh also plans to secure $500m fertiliser guarantee.
Illustration: TBS
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Illustration: TBS
Highlights:
- Government targets $1.86 billion in budget support for FY27
- The target is lower than the $2.71 billion received in FY26
- AIIB is expected to provide the largest share at $1 billion
- ADB and World Bank are projected to provide $380 million and $300 million
- The government is also seeking funding from OFID and AFD
The government has set a target to secure $1.86 billion in budget support from development partners for the fiscal 2026-27 as it seeks to maintain macroeconomic stability, revive economic growth, and drive key policy reforms.
Although the FY27 target is lower than the $2.71 billion received in FY26, official figures suggest the final pledged assistance could rise depending on ongoing negotiations, reform progress, and the fulfillment of programme conditions.
According to an updated report from the Finance Division, the Asian Infrastructure Investment Bank (AIIB) is expected to provide the largest share of funding at $1 billion, up from $600 million in FY26. The Asian Development Bank (ADB) and the World Bank are projected to extend $380 million and $300 million, respectively.
The government is also targeting $100 million from the OPEC Fund for International Development (OFID) and $77 million from the French Development Agency (AFD). Further engagement with multilateral partners may expand this pool. Additionally, discussions are underway with the International Monetary Fund (IMF) regarding a new budget support facility, though the total commitment remains to be finalised. No targets have been earmarked for FY27 from the Japan International Cooperation Agency (Jica) or the European Union.
Infograph: TBS
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Infograph: TBS
Recent Economic Relations Division (ERD) data highlights shifting trends in budget support over recent years, peaking at a record $3.44 billion in FY25, following $2.03 billion in FY24, $1.77 billion in FY23, $2.59 billion in FY22, and $1.09 billion in FY21.
During FY26, the World Bank provided $713 million via its Contingent Emergency Response Project (CERP) mechanism, a framework that allows unutilised funds from active or completed projects to be repurposed rapidly for emergencies without lengthy approval cycles. A further $300 million agreement under CERP has already been signed for the current financial year.
Mixed insights on reduced borrowing target
Independent economists offer differing perspectives on the lower borrowing trajectory.
Zahid Hussain, former lead economist at the World Bank’s Dhaka office, noted that reduced demand for budget support should not be viewed automatically as a positive or negative signal.
“Budget support is not merely a source of financing; it is directly linked to policy and structural reform programmes,” he said. “If the government scales back budget support, it is critical to evaluate how that impacts the implementation of those underlying reforms. It would be a strong positive if the government pushes forward with structural reforms on its own initiative, regardless of foreign assistance.”
Conversely, M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, sees the scaled-back target for FY27 as an encouraging sign of economic self-reliance.
“Gradually declining demand for budget support signals that foreign exchange reserve stability is improving and reliance on external loans is easing, even amidst ongoing fiscal pressure on domestic revenue,” Masrur explained. However, he cautioned that given sluggish revenue growth, budget support remains a crucial cushion for preserving foreign exchange reserves.
$500m guarantee sought for fertiliser imports
Alongside budget support, the government is moving to secure a $500 million credit guarantee facility for fertiliser imports. The move follows the World Bank’s $350 million payment guarantee model used by Petrobangla to support liquefied natural gas (LNG) imports amid ongoing energy challenges.
Proposed for urea and non-urea imports handled by the Bangladesh Agricultural Development Corporation (BADC) and the Bangladesh Chemical Industries Corporation (BCIC), the framework will be backed jointly by the World Bank Group’s International Development Association (IDA) and the Multilateral Investment Guarantee Agency (Miga).
ERD officials said a World Bank mission also visited Bangladesh in August last year for this purpose.
Preliminary market soundings conducted in 2025 and 2026 led to a proposed framework offering the BADC and the BCIC revolving letter-of-credit (LC) and working capital facilities spanning five to seven years. This structure aims to lower commercial borrowing costs and enable long-term contracts with global suppliers.
Commenting on the initiative, Zahid Hussain noted that multilateral guarantees significantly bolster supplier confidence, enabling importing agencies to negotiate better credit terms and deferred payment windows while lowering overall finance costs.
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