Amid a tenuous political transition, Bangladesh is absorbing one of the most severe aid shocks in its history while simultaneously benefiting from an unprecedented surge in remittances and multilateral development bank (MDB) lending. The net effect is a development finance landscape that is growing in aggregate volume but deepening in inequality—with hard infrastructure increasingly well resourced and humanitarian, health, and governance programming facing massive cuts.
Bangladesh is not running out of external finance; it is running out of the right kind of finance. MDB loans finance bridges, power grids, and ports repayable over 20-40 years. They cannot replace grant-funded primary healthcare, rations for Rohingya refugees, or civil society capacity. The most vulnerable populations—stateless Rohingya refugees, ultra-poor households in char and coastal communities, women and children dependent on reproductive health services—are bearing the brunt of the sharp cuts in grants that served them most directly. Restoring even a fraction of flexible grant-based programming would have outsized impact relative to cost in a portfolio now dominated by multibillion-dollar infrastructure loans.
This study offers four priority recommendations. First, the government of Bangladesh should convene, at an early date, a conference bringing together Western and Islamic foundations alongside corporations operating significant CSR programs in the country. The event should mobilize the flexible, grants-based resources that infrastructure-heavy financing cannot supply—particularly for health, education, governance, and humanitarian aid. Second, the government should undertake a retrospective study of the country’s five-plus decades of donor engagement. This would provide useful historical context for policymakers and donors as they adjust to new development assistance realities and would offer useful lessons learned on what was done well and what could have been done better.
Third, Bangladesh should front-load concessional borrowing while the window remains open. Bangladesh is one of the world’s largest recipients of funding from the International Development Association, the World Bank’s arm that provides assistance to low-income counties. Bangladesh’s graduation from Least Development Country status, which is expected to happen by 2029, will harden borrowing terms. Finally, efforts to assist Rohingya refugees should shift toward Gulf and Islamic donors already focused on this crisis, and to multiyear rather than annual financing, since yearly appeals guarantee a recurring gap.
Together, these steps can help convert a moment of acute disruption into an occasion for strategic, well-targeted, and accountable use of the considerable external resources still available.
About the authors
Leon “Skip” Waskin is a nonresident senior fellow focused on South Asia at the Atlantic Council. He previously was DevTech’s senior executive director for operations. Before DevTech, Skip was the coordinator for economic and development assistance at the US Embassy in Islamabad, where he worked to ensure that assistance from the United States supported US national interests and contributed effectively to Pakistan’s long-term stability, prosperity, and growth.
Jon Danilowicz is a nonresident senior fellow on South Asia at the Atlantic Council and a retired US Department of State senior foreign service officer with extensive diplomatic experience in Bangladesh and Pakistan. He currently serves as president of Right to Freedom, a Washington, DC–based nonprofit dedicated to advancing democracy and human rights.
Imran Shauket is a senior adviser on South Asia at the Atlantic Council’s Middle East Programs. He is also a consultant advisor to the Gates Foundation and founder of JOBS Group, an association of myriad entities sharing the common goal of economic empowerment and poverty alleviation.
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Image: People walk on a street in Bangladesh. Niloy Biswas via Unsplash