Budget Support Rises, Food Aid Declines

Bangladesh’s foreign assistance profile has undergone a significant shift in recent years, with budget support accounting for a growing share of external financing while food aid continues to decline. Economists and former officials view the trend as a positive sign of the country’s economic progress.

According to a recent report by the Economic Relations Division (ERD), project assistance remains the largest component of foreign aid, accounting for 77.7% of total loans and grants. Budget support ranks second at 9.6%, followed by commodity assistance at 7.7%. Food aid now represents the smallest share, at just 5%.

Former ERD Senior Secretary Kazi Shofiqul Azam said Bangladesh’s changing aid profile reflects the country’s development over the past five decades.

“After independence, Bangladesh was a war-ravaged country, and food was the top priority. Over time, the country has made remarkable progress and is now nearly self-sufficient in food production. In that context, declining food aid is a positive development,” he told Agamir Somoy.

He also described the increase in budget support as encouraging, noting that such financing is typically linked to economic reform commitments.

“Our priority should now be securing more budget support because these loans come with reform conditions. If we successfully implement those financial reforms, the country will benefit in the long run. At the same time, budget support offers greater flexibility, allowing the government to allocate funds to any priority sector without spending restrictions,” he said.

ERD data show that Bangladesh received more than $100 million in food aid during fiscal year 1971-72. The figure rose to about $400 million in 1979-80 before gradually declining to around $200 million in 1989-90 and approximately $100 million in 1999-2000. By fiscal year 2024-25, food aid had fallen to below $50 million.

According to the ERD, food assistance is now used only in limited circumstances, mainly to respond to natural disasters. The declining need for food aid reflects Bangladesh’s growing self-reliance in food production.

Meanwhile, budget support has increased sharply over the past several years. It stood at nearly $200 million in fiscal year 2018-19, climbed to around $1 billion in 2020-21, reached nearly $2 billion in 2022-23, and rose to $3.5 billion in fiscal year 2024-25.

The ERD report said budget support is generally provided in one or more installments to finance priority policy programs. Disbursement depends on recipient countries meeting pre-agreed policy actions and reform benchmarks set by multilateral financial institutions.

Compared with project assistance, budget support offers greater flexibility by allowing governments to align resources more directly with national development priorities and fiscal needs. Although such financing remains selective and is not provided regularly, the ERD said it has become an increasingly important source of development funding.