In the first ten months (January-October) of this year, the amount of short-term foreign debt repayment in the country’s private sector has reached about $26.41 billion. During this period, Bangladesh has received a total of $21.61 billion in loan.
The gap between loan receipts and repayments stood at $4.8 billion in the January-October period of this year.
It means that this amount of US dollar has been paid off amidst a severe greenback crisis in the country. Foreign currency reserves dropped to $19.4 billion on November 29.
The data were revealed in an updated report on private sector short-term foreign loans released by Bangladesh Bank (BB) on Monday.
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 more loans came than repayments last year.
But the trend has reversed in the current year, which affected the country’s balance of payment.
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 volatile USD market. Rather than taking new loans, businessmen focused more 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 ten months of 2023, $525 million has already been paid — which means the interest payment in the ten months has increased by $279 million compared to the whole year of 2022.