The amount of private sector short-term foreign loans dropped to $10.72 billion in September, hitting its lowest in three years and six months amid slow business and increased repayments.
According to Bangladesh Bank data, the amount of short-term foreign loans dropped to $10.72 billion in September compared with that of $11.19 billion in August, $11.31 billion in July and $11.40 billion in June.
September鈥檚 amount was the lowest after March 2021 when it was at $10.04 billion.
The foreign short-term loans had been rising since April 2021, reaching highest $17.75 billion in June 2022.
It has begun declining since May 2023 when it stood at $13.95 billion.
Bankers said that many businesses were reluctant to open letters of credit for imports amid political apprehension in the country.
Moreover, banks are giving efforts in repaying foreign dues which helped in reducing overseas loans in recent times, they said.
Additionally, the increasing cost of local currency loans after the central bank lifted the 9-per cent ceiling on lending rates and repeated hike in policy rates might also discourage doing business, they added.
On October 22, the Bangladesh Bank increased the policy rate to 10 per cent with the aim of tightening money supply to control inflation, which made the loan costly.
The BB has begun to hike policy rate sharply since May 2022 when it was at 5 per cent.聽 It raised the policy rate for the fifth time in the current year.
Besides, the banking sector has been struggling with a severe liquidity crunch while some banks failed to repay depositors鈥� money.
In September, short-term loans dropped to $2,451 million from $2,969 million in August while foreign back-to-back letters of credit increased to $1,143 million in September from $1,058 million in August.
Buyer鈥檚 credit also rose to $5.71 billion in September from $5.7 billion in August, while deferred payments decreased to $785 million from $801 million.
Dollars held by Bangladesh鈥檚 commercial banks hit its lowest in more than two years in October, driven by a shortage of the foreign currency in the country.
In October 2024, the gross foreign currency balance with the banks dropped to $4,981 million from $6,174 million in the same month of the past year.
Bangladesh鈥檚 economy has been struggling with high inflation, a dollar crisis, depletion of foreign exchange reserves, an energy crisis, and capital outflows.
All these issues are linked to the dollar shortage on the market.
The shortage of dollars is straining the country鈥檚 ability to pay for imports and has weakened the Bangladeshi taka.
The exchange rate jumped Tk 120 from Tk 91 against the US dollar within a couple of years.
According to International Monetary Fund guidelines, Bangladesh鈥檚 gross foreign exchange reserves plunged to $18.46 billion on November 22.
