Bangladesh’s foreign-aided development projects are facing severe implementation setbacks, prompting the government to consider slashing nearly Tk21,000 crore from the current fiscal year’s Annual Development Programme (ADP).

Officials confirmed that sluggish project execution and shrinking external inflows have forced the Economic Relations Division (ERD) to begin revising foreign loan allocations. The revision process, which began on 2 November, is now underway.

Slow implementation despite repeated directives

Despite multiple instructions from the interim administration to accelerate implementation, progress has remained stagnant, especially in foreign-funded projects plagued by weak monitoring, delayed tenders, and bureaucratic bottlenecks.

ERD officials cited several factors behind the slowdown: poor project design, irregular meetings of steering committees, delays in land acquisition, lengthy tendering processes, and frequent turnover of project directors. Limited managerial capacity and sluggish fund releases have compounded the problem.

The ongoing meetings, chaired by ERD Secretary Md Shahriar Kader Siddiky, aim to assess three months of progress and identify areas for budget cuts in the revised ADP.

Foreign-aid utilisation remains low

In the fiscal 2025-26, the government allocated Tk86,000 crore, about 36% of the total ADP, from foreign sources.

Yet in the first quarter (July-September), only Tk5,074 crore was spent, barely changing from Tk5,360 crore in the same period last year.

Twenty-one ministries have yet to open spending accounts. Nine major ones – including Bridges, Civil Aviation, Primary and Mass Education, and Water Resources – have not spent a single taka from their allocations.

Another eight divisions, such as Technical and Madrasa Education, Statistics and Data Management, and Commerce, have reported less than 1% implementation.

The Planning Division now anticipates a Tk21,000 crore cut in the foreign-aid component, bringing it down to about Tk65,000 crore in the revised ADP – lower than last year’s Tk81,000 crore after a similar Tk19,000 crore reduction.

Rising repayment burden

The shortfall coincides with mounting foreign debt repayments. The ERD data show that in the first quarter of FY26, Bangladesh repaid US$1.28 billion in external loans – $240 million more than it received in new disbursements ($1.04 billion). This marks a 13.6% year-on-year increase in debt servicing.

Of the repayments, $816.9 million was principal and $463 million was interest. In taka terms, the total repayment reached Tk15,592 crore, up from Tk13,412 crore a year earlier.

Officials attributed the rise to the maturing of earlier concessional loans and growing dependence on costlier bilateral and non-concessional financing.

“We are paying more than we are receiving, which signals growing pressure on external financing,” said a senior ERD official.

Disbursement gap widens

Data show that the World Bank’s International Development Association (IDA) and Russia led disbursements in Q1, providing $322.6 million and $315 million respectively.

The Asian Development Bank (ADB) ranked third with $187.7 million.

In contrast, China, once a major financier, recorded no disbursement this quarter, reflecting persistent project delays.

Although new commitments totalled $910 million, mostly for project assistance, actual disbursements lagged far behind, underscoring ongoing execution hurdles.

Experts urge reform

Economists warn that sluggish implementation and rising repayments could strain Bangladesh’s balance of payments and limit fiscal flexibility.

“When repayments start exceeding inflows, it reflects a shift from a growth-driven borrowing cycle to a repayment-driven one,” said Dr Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM), recently.

He added, “Bangladesh must strengthen project management, accelerate disbursements, and prioritise low-cost loans. Otherwise, external liquidity stress could become a real concern.”

The ERD’s early ADP revision, months ahead of schedule, underscores the urgency of the situation. With national elections expected in February, officials aim to complete adjustments before the poll period begins.

Planning Adviser Dr Wahiduddin Mahmud earlier said revising the ADP ahead of the election was essential for maintaining fiscal discipline.

He stressed that while implementation has been weak, the focus should remain on “quality execution, not just expenditure.”