How foreign-funded development projects are selected in Bangladesh

The government has shortlisted 17 new projects worth about $3.9 billion for possible foreign financing. These projects will be reviewed by the Foreign Aid Search Committee before external funding is sought.

The selection process involves both government priorities and the interests of development partners.

Projects seeking foreign financing must first receive policy approval from the Planning Commission before being forwarded to the Economic Relations Division (ERD) to assess whether they are suitable for external funding.

ERD officials said the proposals are then placed before the Foreign Aid Search Committee, which identifies the most appropriate development partner based on each project’s objectives, financing needs and sectoral focus.

However, the process does not always begin with the government selecting a project independently.

Officials said projects are often designed to match the priorities and lending conditions of specific development partners, increasing the likelihood of securing loans or grants.

In such cases, project designs are aligned with the preferences of potential financiers from the outset.

Once a suitable partner is identified, the government begins formal discussions on financing terms, including whether the project will be supported through loans, grants or a combination of both.

According to ERD data, Bangladesh secured $4.794 billion in financing commitments from development partners in FY26, including $1.564 billion in budget support.

The government is targeting more than $6 billion in fresh financing commitments in FY27. To support this goal, the national budget has allocated Tk43,000 crore in external financing.

The government plans to seek funding for the newly proposed projects from development partners including the World Bank, Asian Development Bank, Asian Infrastructure Investment Bank, Islamic Development Bank, Japan International Cooperation Agency, Korea International Cooperation Agency, United Nations Development Programme, Saudi Fund for Development and others.

Several of the 17 shortlisted projects have already attracted interest from potential financiers, while the remaining proposals will be considered by the Foreign Aid Search Committee to identify suitable funding sources.