Written by The Banking Post
The government is set to sharply reduce foreign project aid in the Revised Annual Development Programme (RADP) for FY2025-26, trimming allocations by Tk 140 billion amid persistent delays in project implementation.
Officials said the foreign aid component of the ADP is likely to fall to Tk 720 billion from the original Tk 860 billion, marking a 16.28 per cent cut. The decision reflects weak progress in executing donor-funded projects across ministries during the early months of the fiscal year.
The original ADP for FY26 stands at Tk 2.38 trillion, with Tk 1.44 trillion from domestic resources, Tk 860 billion from external project aid, and Tk 86.96 billion from autonomous and semi-autonomous bodies. Work is already underway at the Planning Commission to revise the size and composition of the programme.
Officials at the Economic Relations Division (ERD) and the Planning Commission said sluggish disbursement of foreign funds, particularly under Indian Line of Credit-supported projects, and poor performance by implementing agencies have driven the proposed reduction.
“This government has taken a cautious approach to public spending,” said a senior finance ministry official. “New projects are not being approved indiscriminately, while ongoing projects are being reviewed and allocations cut where utilisation is weak.”
Senior ERD officials pointed to long-standing problems such as poor project design, bureaucratic delays, slow land acquisition and tendering bottlenecks, which have continued to constrain implementation capacity.
A Planning Commission official said the interim government is prioritising fiscal discipline and realistic budgeting amid both global and domestic economic pressures, aligning development spending more closely with actual execution ability.
Although cuts to project aid are routine in revised budgets, officials acknowledged that the size of the proposed reduction highlights deeper inefficiencies in project management. A large volume of foreign loans and grants remains unutilised due to delays.
Economists say the move, while shrinking the development envelope, could improve budget quality if it redirects resources toward high-impact, people-oriented projects. The Planning Commission plans to concentrate the remaining allocations on sectors with strong economic and social returns, including transport and communication, power and energy, and education.
The RADP for FY26 is expected to be finalised at a meeting of the National Economic Council, likely in late December or early January.
In recent years, foreign project aid has consistently been scaled back. In FY25, allocations were cut by 19 per cent to Tk 810 billion. Reductions of Tk 105 billion and Tk 185 billion were made in FY24 and FY23, respectively.
“We consulted all ministries and implementing agencies while preparing the revised allocations,” an ERD official said. “Many major ministries have already surrendered part of their original ADP funds due to slow progress.”
