Short-term external credit squeeze under the hovering uncertainties both in domestic and global markets upsets private enterprises' business expansion with its cascading impact on Bangladesh economy's rebound, sources said.
The entrepreneurs, mostly from export-oriented units, said under such ambience of uncertainty they held back their business-expansion initiatives.
According to the statistics of Bangladesh Bank (BB) the private-sector short-term overseas borrowings came down to US$13.66 billion in the just-past month of June from US$14.08 billion recorded in the previous month (May 2023).
The volume of short-term external credits taken by the private players was $15.58 billion in January 2022. Then, it dropped to $14.77 billion in February, $14.08 billion in March, and $13.87 billion in April. But it made a little increase in May when the amount was $14.08 billion, the data showed.
Although the central bank's officials are taking the downturn in private sector's one-year-long overseas borrowing as a blessing in disguise as it would lessen pressure on the country's forex reserves, businesspeople and market analysts think it would not be a good sign for normal economic activities.
Seeking anonymity, a BB official says it is a good sign for the country that its overseas liabilities keep declining that would lessen pressure on the forex reserves to some extent.
Asked whether the ongoing dollar dearth poses any problem as far as repayment of the debts is concerned, the central banker said things started improving as foreign-currency balance in commercial banks rose to $6.0 billion and it is rising because of growing earnings from remittance and export receivables while import orders plummeted significantly.
"One or two banks might face problem and make differed payment, but majority of them are paying regularly," the official adds.
Talking to the FE, Executive President of Bangladesh
Knitwear Manufacturers and Exporters Association (BKMEA) Mohammad Hatem said they were planning to put more money into business in early 2022 when the export growth of clothing industry was surging. Within couple of months, the Russia-Ukraine war broke out, disrupting the global macroeconomic orders.
"As a spillover impact, it is affecting the macroeconomic situation of Bangladesh as well and it makes the overall situation not conducive to investment," he says.
The manufacturers have been struggling to operate their production units on a full scale because of gas and power outages. "I bought a machine for my factory investing lot of money but I could not operate it because of not getting gas. So, why people will invest under such situation? That's why it (overseas debt) is falling," he explains the conundrum.
Anwar-Ul- alam Chowdhury (Pervez), managing director at a leading textiles and woven-garment exporter-Evince Group--told the FE there is slower buy-order due to the war in Ukraine.
"The orders from both US and the Europe have fallen significantly. "We think that the consumption of clothing items has dropped in advanced economies on the back of war in Ukraine."
Apart from that, the growing inflation has hit hard many economies, leading to reduction in the clothing demand. But they have been receiving good order from new market like Japan.
"But the volume of order is not big," he adds.
When contacted, chairman of local think-tank Policy Exchange of Bangladesh Dr M. Masrur Reaz said the ongoing import restrictions and energy disruption slowed down the demand for working capital and trade financing.
"The falling trend in private-sector short-term external debt is good in crisis- management point of view but it is not good for normal economic activities," he says.
The economist feels that it needs to see how many proposals for overseas borrowing by the private sector were placed to the government committee designated for approving the loan proposals.
"The committee may have become strict in approving overseas-loan pleas under current macroeconomic context because of the ongoing forex dearth," he says.
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