Foreign aid to Bangladesh has experienced a significant drop in the first two months of the fiscal year 2023-24, posing challenges to the country’s foreign exchange reserves.

During this period, foreign loan repayments surged by over 34%.

Official data reveals that development partners provided 14.5% less in loans and grants compared to the same period in the previous fiscal year.

In the initial two months of the current fiscal year, they disbursed $739.06 million in medium-to-long-term loans (MLTs) and grants, down from $864.29 million in the previous year.

The government repaid $400.50 million of outstanding debts during the same period, compared to $289.78 million in interest and principal payments to overseas lenders in the previous year.

Meanwhile, Bangladesh’s merchandise exports in September decreased by 9.83% to $4.31 billion compared to the previous month.

Remittances also saw a sharp decline, dropping by around 16% from August and 13% year-on-year.

These declines in remittances and exports have raised concerns about the country’s macroeconomic stability, especially given the dwindling foreign currency reserves.

Economists worry that the government’s focus on political issues instead of economic recovery may lead to further economic hardships in the coming months.

The Economic Relations Division reports that development partners like the World Bank, Asian Development Bank, and Japan disbursed $727.24 million in loans and $11.83 million in grants during the considered period.

This is a decrease from the $832.88 million in loans and $31.41 million in grants disbursed during the same period last year.

Out of the $400.50 million spent on debt servicing in the first two months, the government repaid $254.11 million in principal and $146.39 million in interest for outstanding MLTs.

In the previous July-August period, the government had repaid $196.98 million in principal and $92.80 million in interest.

Despite the decline in foreign aid disbursements, foreign aid commitments to Bangladesh increased to $1.14 billion during the July-August period of FY2024, up from $304.92 million in the same period last year.

Economists and experts warn that the decreasing foreign aid, coupled with the challenges posed by falling remittances and export earnings, could further deteriorate the country’s balance of payments and economic stability.

They express concern that the government’s current focus on upcoming elections might overshadow economic fragility, making the coming months more precarious.

Japan provided the highest amount of assistance during this period, with $308.87 million, followed by the World Bank at $132.97 million, the Asian Development Bank at $157.47 million, and Russia at $42.53 million.