Foreign loan disbursements for development projects in Bangladesh declined nearly 12% year-on-year last July, adding to the pressures on the country’s foreign exchange reserves.

According to the Economic Relations Division (ERD), Bangladesh received $358.3 million in foreign loans during the first month of the current fiscal year 2024-25.

The decline in loan disbursements is partly attributed to inefficiencies among the agencies responsible for implementing these development projects. Typically, these agencies submit bills based on their progress, and the government subsequently seeks the disbursement of the corresponding loan amounts from foreign entities and countries.

Delays in project implementation, especially at the beginning of a fiscal year, often result in lower disbursements, according to ERD officials.

Political unrest, particularly student protests throughout July, also contributed to the slowdown in project execution, further affecting loan disbursements. This combination of factors has hampered the flow of foreign funds, which is critical for maintaining the country’s development momentum and stabilizing its foreign exchange reserves.

In terms of sources, Japan provided the highest loan amount of $105 million in July, followed by the Asian Development Bank with $81.56 million, the European Union with $64.57 million, the World Bank with $38.39 million, Russia with $29 million, and India with $21.59 million.

The reduced inflow of foreign loans has exacerbated concerns over Bangladesh’s foreign currency reserves, which stood at $20.48 billion as of August 21, according to calculations based on International Monetary Fund (IMF) methods used by Bangladesh Bank.

This amount is sufficient to cover approximately three months of import bills, which the IMF considers the minimum reserve level for a low-income country.

Compounding the situation, loan repayments in July surged by 52.34% to $4.5 billion. Of this, $264.88 million was the principal amount, marking a significant 80.76% increase compared to the same period last year when it stood at $146.53 million.

The interest payments also rose, totaling $120.79 million in July, up from $106.56 million in the same month of the previous year.

Despite the drop in disbursements, foreign loan commitments in July showed a positive trend, amounting to $16.40 million, up from $6.92 million in the same period last year.

However, the increase in commitments has yet to translate into disbursements, which remain critical for the country’s economic stability.