Short-term foreign debt repayment in the country’s private sector has reached about $31.14 billion in 2023.
Bangladesh Bank published the data on Sunday.
However, short-term foreign debt outstanding stood at $25.80 billion last year. This figure indicated that in 2023, private sector’s short-term net debt was negative $5.36 billion.
The insiders think that the inflow of foreign loan from foreign countries is less than the repayment. As a result, this private sector short-term debt was repaid from the country’s forex reserves.
Zahid Hussain, the former lead economist of The World Bank’s Dhaka office, told The Business Post, “Those who are repaying the loan are buying USD from the banks. Ultimately, this puts pressure on the country’s USD market. As the repayments are more than the loan inflow, the pressure on the financial account is increasing.”
“Many global credit rating agencies have recently reduced Bangladesh’s rating from stable to negative. This is why foreign lenders are now showing less interest in providing loans. On the other hand, Bangladeshi businessmen are not interested in taking loans at high interest rates,” he added.
Ahsan H Mansur, Executive Director of Policy Research Institute of Bangladesh (PRI) said, “The country has been facing the USD crisis since 2022. Also forex reserves declined. So, foreign investors are not interested to invest in the country for risk of repayment as well.”
He also said that 8.62 per cent interest has to be paid for the short-term loans. According to the central bank, foreign loan interest rate is calculated with the Secured Overnight Financing Rate (SOFR) and 3.5 per cent is added with the bench mark.
SOFR is now over 5.62 per cent. In 2020, it was below 1 per cent. That is the interest rate in the international market has increased several times. This is one of the reasons why Bangladeshi borrowers are not much interested in taking new loans. They want to pay off old loans.
SOFR is a benchmark interest rate for dollar-denominated derivatives and loans that replaced the London Interbank Offered Rate.
