Private sector short-term foreign loans dropped below $10 billion in January for the first time in four years as businesses prioritised repaying existing loans over securing new ones, amid ongoing political unrest in the country.
According to Bangladesh Bank data, short-term foreign loans fell to $9.8 billion in January from $10.13 billion in December.
The amount had peaked at $16.41 billion in December 2022 but has been gradually declining since then.
The downward trend continued from $13.65 billion in June 2023 to $11.79 billion in December 2023.
In December 2020, short-term foreign loans stood at $9.18 billion, which surged to $15.46 billion in December 2021 after the central bank relaxed regulations amid optimism fueled by a surge in foreign exchange reserves during the coronavirus pandemic.
In January 2025, buyers鈥� credit also declined to $5.08 billion from $5.22 billion in December.
Bankers attributed the decline in short-term foreign loans to businesses focusing on loan repayments rather than acquiring fresh credit.
They pointed out that businesses are struggling to secure new foreign loans due to declining confidence from foreign lenders.
Foreign lenders have raised red flags about investing in Bangladesh due to poor credit ratings, widespread irregularities, corruption in the banking sector, and the country鈥檚 ongoing economic crisis.
Additionally, the collapse of the Awami League-led government on August 5, following a student-led mass uprising that began in July, has contributed to continued violence and unrest.
Furthermore, a dollar shortage and high foreign exchange rates have also contributed to subdued business activities.
Debt servicing obligations fell to $2.1 billion in January from $2.31 billion in December 2024. Similarly, deferred payments declined to $643 million in January from $670 million in December.
However, foreign back-to-back letters of credit (LCs) rose to $1.31 billion in January from $1.27 billion in December.
Bangladesh鈥檚 total external debt reached $104 billion by the end of September 2024, up from $65.27 billion in June 2020.
This rapid accumulation of foreign debt has raised concerns about the country鈥檚 ability to manage its obligations efficiently.
External debt refers to the total amount a country owes to foreign creditors, including foreign governments, international organisations, and private foreign entities.
The depreciation of the local currency against the US dollar has also made interest payments on foreign loans more expensive. In July 2021, the exchange rate stood at Tk 84.80 per US dollar, which is now Tk聽122 per dollar.
As per the International Monetary Fund鈥檚 guidelines, Bangladesh鈥檚 gross foreign exchange reserves stood at $20.9 billion on February 27.
