In the first nine months (January-September) of this year, the amount of short-term foreign debt repayment in the country’s private sector has reached about $24 billion.
During this period, Bangladesh paid a total of $23.99 billion.
Meanwhile, the amount of foreign debt received by the private sector was $19.56 billion, leaving the gap between loan receipts and repayments at $4.43 billion in the January-September period.
This means that this amount of US dollar has left the country amidst a severe greenback crisis, which depleted the forex reserves further and left it at $20.66 billion on November 1.
These data were revealed in Bangladesh Bank's (BB) updated report on private sector short-term foreign loans released on Thursday.
According to the BB report, the private sector received $37.25 billion in short-term foreign loans in 2022. At the same time, the amount of debt repayment with interest was $36.73 billion — which indicates that last year more loans came than repayments. But this year, the trend has reversed.
Zahid Hussain, the former lead economist of 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. However, as the repayments are more than the loan inflow, the pressure on the financial account is increasing.”
According to BB’s balance of payment data, the country’s financial account deficit hit $3.99 billion in the July-September period of FY2023-24, which was $839 million surplus in the same period of FY2022-23.
Analysts said the private sector is showing little interest in short-term loans due to the still volatile USD market. Rather than taking new loans, businessmen are more focused on repaying previous loans.
On the other hand, many entrepreneurs do not want to take loans now as foreign credits were available at a 2-3 per cent interest rate even two years ago and that has increased significantly in the last two years.
Foreign loan repayments are subject to interest at a maximum Secured Overnight Financing Rate (SOFR) of 3 per cent. Currently, the SOFR stands at over 5 per cent, which was less than 1 per cent at one point.
That’s why Bangladeshi entrepreneurs have lost their interest in taking foreign loans. Besides, the amount of interest payments on loans has also increased.
According to the BB report, private sector foreign debt interest payments totalled $246 million in 2022. In the first nine months of 2023, $478 million has already been paid — which means the interest payment in the nine months has increased by $232 million compared to the whole of 2022.
Zahid said that recently many global credit rating agencies reduced Bangladesh’s rating from stable to negative. “As a result, 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.”
The short-term external debt position of the private sector fell to $12.43 billion at the end of September, from $12.83 billion in August, because the repayments were higher than received loans.
The largest amount — $2.44 billion — of short-term loan the private sector received was from the United Arab Emirates in September, followed by $2.09 billion from Singapore.
The private sector also received $1 billion each from the United Kingdom and Hong Kong, $784 million from China and $719 million from the US.
