The country' private sector short-term foreign loans fell to USD 11,189.12 million in August 2024, showing a 0.58 per cent drop from $11,254.59 million in January according to latest report by Bangladesh Bank.
This decline reflects the sector's cautious approach to borrowing amid economic uncertainties and global financial fluctuations.
Throughout the year, businesses demonstrated multiple borrowing patterns. June this year recorded the highest loan amount at $11,400.51 million while March had the lowest at $11,042.83 million.
This fluctuation suggests tactical adjustments by companies to manage liquidity and avoid exposure to currency volatility.
In 2023, the private sector's total external debt stood at $11,793.08 million with buyer's credit playing a dominant role by contributing $6,241.18 million. Export bill discounting followed with $2,886.24 million while short-term loans accounted for $1,007.51 million.
This breakdown indicates a reliance on trade finance instruments, which has both benefits and risks. Deferred payment stood at $867.34 million with foreign back-to-back letters of credit at $790.81 million Heavy dependence on buyer's credit raises concerns, as currency depreciation could significantly impact repayment obligations.
By August 2024, short-term loans reached $11,189.12 million, reflecting a modest decrease from January's $11,254.59 million. Buyer's credit continued to lead, amounting to $5,696.28 million while export bill discounting reached $2,966.68 million.
Short-term loans and deferred payments amounted to $1,058.35 million and $$800.21 million respectively. These figures suggest businesses are managing their foreign borrowing strategically; balancing immediate financing needs while minimizing exposure to longer-term risks.
The reduction in loans reveals a measured approach by companies, with an emphasis on maintaining liquidity without taking excessive risks.
This caution may shield businesses from adverse effects arising from currency fluctuations and rising global interest rates.
However, the reliance on trade-based instruments such as back-to-back letters of credit indicates potential challenges if global credit conditions tighten.
Bangladesh's private sector appears to be recalibrating its debt strategies to align with both local and international financial developments.
This trend reflects a focus on debt sustainability and risk management, with businesses avoiding unnecessary expansion of foreign obligations. For policymakers, ensuring the external debt remains manageable will be crucial.
Bangladesh Bank may need to enhance monitoring efforts to prevent any unforeseen accumulation of liabilities, particularly in case of further currency depreciation or disruptions in global trade.
A senior Bangladesh Bank official said as the economy recovering these complexities, disciplined borrowing will be essential to maintain financial stability.
The coming months will determine whether the private sector continues to adopt conservative borrowing practices or increases loan uptake based on emerging business needs and opportunities.
