Corporate borrowing from foreign lenders slid further with the stock of short-term debt having dropped to $11.07 billion in February last as the demand for fresh investment weakened amid domestic and external macroeconomic uncertainties.
Economists and private sector players think such ebb tide in corporate overseas borrowing would have an adverse impact on the overall economic activities in the coming days with squeezing productions and employment opportunities.
Year-on-year basis, the outstanding balance was reduced by over $3.70 billion as the figure was $14.77 billion in February, 2023. From the previous month's (January, 2024) count, it dropped by over $180 million, according to the official data.
The continuous fall in short-term overseas debt came as businesses postponed their market-expansion plans amid uncertainties both on domestic and global markets, according to the private sector players.
According to the Bangladesh Bank (BB) statistics, the outstanding balance of short-term external credits taken by the private players stood at $15.83 billion in January 2023. Then, it dropped to $14.08 billion in March, $13.36 billion in July, $12.43 billion in September and $11.79 billion in December of 2023, according to the latest available data.
In terms of creditor country-wise short-term private sector external debt, United Arab Emirates topped the list with $2.01 billion, followed by Singapore ($1.93 billion), Hong Kong ($0.93 billion), China ($0.91 billion), United Kingdom ($0.67 billion), India (0.66 billion), Germany ($0.61billion) and United States of America ($0.56 billion).
Seeking anonymity, a BB official termed the continuous fall in one-year long external debt by the private sector a good sign for the economy as overseas liabilities of the country continues falling.
"As a matter of fact, it would lessen the pressure on the reserve of foreign exchange (forex) to some extent," the central banker said.
When contacted, 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 the clothing industry found a rebound after the pandemic.
"Within few months, the Russia-Ukraine war broke out, disrupting the global macroeconomic order," he said.
As a spillover impact, it is affecting the macroeconomic situation of Bangladesh as well, and it makes the overall situation not conducive to investment, according to him.
Simultaneously, the persisting energy crisis, especially gas, being faced by the production units has worsened the situation. "That's why the private sectors' credit appetite from both domestic and overseas sources keeps declining," the business leader said.
According to the BB data, the demand for formal credit by the private sector from the country's banking sector dropped to 9.95 per cent in January 2024 from 10.13 per cent recorded in the previous month (December 2023).
The chief financial officer (CFO) of a private commercial bank says global lenders might consider the risk of repayment before lending to private-sector players in the country where availability of the foreign currencies still remains a concern.
"This could be a reason behind the falling trend in private-sector short- term overseas borrowing," the banker added.
When contacted, founding chairman of local think-tank Policy Exchange of Bangladesh Dr M. Masrur Reaz said the ongoing import restrictions and energy supply disruptions reduced the demand for working capital and trade financing from both external and internal sources.
On the other hand, the economist said, a lack of confidence among some of the global lenders in view of Bangladesh's current macroeconomic situation might dampen the overseas credit flow.
"They (global lenders) are lending less, or not giving credits to the Bangladeshi entrepreneurs," he added.
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