Due to a reduced credit flow to the private sector, Bangladesh’s external debt amount dropped by $791 million to $95.71 billion in the March quarter of this year, compared to $96.50 billion in the December quarter of last year.
Bangladesh Bank (BB) revealed the information in a report, titled “External Sector Debt of Bangladesh,” published on Sunday.
The report showed that compared to December, the amount of foreign debt decreased in March this year. However, year-on-year foreign debt increased by $2.48 billion.
The country's external debt position was at $93.23 billion in March last year.
Policy Research Institute Executive Director Ahsan H Mansur told The Business Post that the foreign debt decreased in March this year mainly due to the decline in private sector loans.
“Private sector credit is decreasing due to two reasons. Firstly, the sector is not borrowing as the cost of the US dollar is increasing. Secondly, they are not getting new loans because they are struggling to repay the previous loans,” he said.
According to the BB report, at the end of December last year, the foreign debt position of the private sector was $24.31 billion. It declined by $2.13 billion to $22.18 billion in March this year.
However, the amount of the government’s foreign debt has increased. In December, this debt amount was $72.19 billion and it went up by $1.34 billion to $73.53 billion in March.
Ahsan said that the government’s debt increase is a positive thing because most of this debt is long-term. If more of these types of loans come, it will help mitigate the USD crisis.
Responding to a question, he said that although foreign debt is risky, the state must run with this risk. If the management is good, then it can be easy to deal with it.
The government has set a foreign loan borrowing target of Tk 1.27 lakh crore, which is around $12 billion, to cover the budget deficit for the new fiscal year of 2023-24.
Recently, the international credit rating agency Moody's downgraded the credit rating of Bangladesh, placing it at B1 from the previous Ba3 category. As a result, the availability and cost of foreign loans both are expected to increase.
In this context, Ahsan said that the downgrading will not affect the government's foreign debt availability and cost. However, there will be an impact on the loans taken by the private sector. In this case, companies will get a lower amount of loans and that will push up the cost as different charges will rise.
But if any company wants to renew the present loan that was taken earlier, the cost will increase due to the downgraded credit rating, he added.
