By official count, the stock of short-term overseas debts dropped to $10.13 billion in December.
Officials and money-market analysts see such continuous decline in private-sector foreign debts not a good sign for the private-sector-led economy as interest rates on the global market stabilising and there has been marginal easing of import compression on the domestic market.
Apart from prevailing energy crisis in the industrial hubs and depreciation of the local currency against the American greenback, the economic stalemate following recent mass uprising that led to the fall of the Sheikh Hasina regime in early August prompted the private entrepreneurs to be very conservative regarding expansion of their businesses, according to them.
According to the latest statistics of Bangladesh Bank (BB), the outstanding balance of short-term external credits taken by the private players was $13.95 billion even in May 2023. Since then, it has been plummeting, having dropped to $11.40 billion in June 2024.
In the subsequent months, the stock of one-year-long foreign borrowings by the private entrepreneurs declined to $11.31 billion, $11.20 billion, $10.73 billion, $10.54 billion, $10.42 billion and $10.13 billion in July, August, September, October, November and December respectively.
In terms of creditor-country-wise short-term private external debts, Singapore topped the list with $1.90 billion followed by the United Arab Emirates $1.02 billion, China $0.99 billion, Hong Kong $0.85 billion, Germany $0.77 billion and the United Kingdom $0.63 billion.
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 debts from external sources started dropping significantly 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 uncertainty 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.
President of Bangladesh Chamber of Industries (BCI) Anwar-ul Alam Chowdhury says the private-sector players have been passing through a situation in recent months which is not suitable for doing 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.
Administrator at the Federation of Bangladesh Chambers of Commerce and Industry (FBBCI), the country's apex trade body, Md. Hafizur Rahman mentions that the country witnessed huge depreciation of the local currency against the US dollar in recent months which prompted the enterprises to shy away from the external sources as far as their funding needs are concerned.
On the other hand, he says, there are business entities which used to borrow bulk volume of overseas funds during the ousted prime minister Sheikh Hasina's regime. But, after the changeover, some of such business entities skipped borrowing foreign funds.
"Such shifting is also contributing to the continuous drop in corporate short-term overseas borrowing," he told the FE correspondent.
They have been observing some sorts of stability on the foreign- exchange market in recent days. "If we can maintain the stability in the upcoming months, the private-sector demand for foreign funds will start picking up again."
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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