External corporate borrowing squeezes with short-term overseas debt stock having dropped to $10.73 billion in latest count as entrepreneurs postpone business expansion in wait for a feel-good ambiance after recent unrest.
Officials and money-market analysts say such continuous downturn in private-sector foreign borrowing, despite interest rates on the global market stabilising and marginal easing of import compression on the domestic market, is not a good sign for the private sector-led economy.
Come first among the dampers a persistent energy crisis facing the industrial hubs and depreciation of the local currency against the American greenback. Thereafter, volatility stemming from the recent mass uprising that spelt doom on the Sheikh Hasina regime in early August made private entrepreneurs cautious on expansion of their businesses, according to them.
According to latest statistics of Bangladesh Bank (BB), the outstanding balance of short-term external credits taken by the private players stood at $13.95 billion in May 2023. Thereafter began a downslide, taking the amount to $13.36 billion in July, $12.43 billion in September, $11.97 billion in November 2023, $11.25 billion in January 2024 and $11.14 billion in April.
In June last, the stock of one-year-long foreign borrowings by the private entrepreneurs made a significant upturn to $11.40 billion. But there again starts a squeeze in Jul, with the figure having dropped to $11.32 billion in the month and $11.19 billion in August.
In terms of creditor-country-wise short-term private external debts, Singapore topped the list with $1.95 billion followed by the United Arab Emirates $1.62 billion, Hong Kong $1.00 billion, China $0.91 billion, Germany $0.79 billion and India $0.67 billion.
The central bank, however, relish such a fall in external debts and resultant debt-servicing obligations as the country's foreign-exchange reserves pass through a crunch time. Seeking anonymity, a BB official said the fall in overseas debts would certainly relieve pressure on the forex reserves to some extent.
He said the private-debt buildup was expected to increase because interest rates on the global market have been stabilising since last May.
And it had increased significantly since June 2024 when the stock of short-term overseas debts rose to $11.40 billion.
But the sum started dropping after July when the country witnessed buildup of the recent student-mass uprising that ultimately led to the fall of the Sheikh Hasina government on August 05, 2024.
The central banker thinks the ruckus associated with the changeover in state power might prompt the private- sector players to be very careful as far as their business-expansion plans are concerned.
"This could be a major reason behind the continuous ebb in private- sector overseas borrowing," he says.
President of Bangladesh Chamber of Industries (BCI) Anwar-ul Alam Chowdhury has said the private-sector players have been passing through a situation for the last several months which is not suitable for business.
He mentions that industrial production has been severely affected because of the persisting energy crisis and ongoing unrest in the industrial belts. On the other hand, the complete resumption of business activities after the latest mass uprising is still uncertain.
"Then, why people will invest under such situation? That's why the volume of overseas debts as well as the domestic borrowing by the private entrepreneurs went down," Mr Chowdhury, also chairman of Evince Group, says on a note of frustration.
Dr M Masrur Reaz, an economist and chairman of the Policy Exchange of Bangladesh, points out that despite favourable condition externally for lower borrowing costs, the private-sector players did not take the opportunity due to severe disruptions to supply chains and production, particularly in the industrial hubs, because of the mass movement since mid-July till early August.
"There were also too many post-uprising uncertainties like governance, law and order and resumption of business activities, which probably forced the entrepreneurs to defer their investment and business-expansion plans," he told the FE.
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