External debt falls $1.45bn in 3 months

Staff Reporter :

Bangladesh’s external debt fell by $1.45 billion during the July–September quarter, Bangladesh Bank data released on Thursday shows.
The country’s total outstanding external debt stood at $112.12 billion at the end of September, down from $113.57 billion at the end of June. The fall reflects reduced borrowing by both the public and private sectors.

Government sector external debt decreased to $92.54 billion at the end of September from $93.74 billion in the previous quarter, while private sector external debt fell to $19.58 billion from $19.83 billion over the same period.

Former World Bank lead economist Zahid Hussain said the decline is likely linked to a reduction in buyers’ credit. “As imports have fallen, buyers’ credit has also decreased, which in turn lowers overall external debt,” he said.

Bangladesh Bank data shows buyers’ credit dropped by about $1.1 billion during the quarter, falling to $4.15 billion at the end of September from $5.25 billion three months earlier.
A senior Bangladesh Bank official said the decline was driven mainly by lower new external borrowing alongside higher repayments of existing loans. The fall in buyers’ credit also contributed significantly to the overall reduction.

The official noted that after 5 August 2024, foreign banks had reduced loan limits, though these have gradually been restored as foreign exchange reserves improved.
“There is no concern over borrowing limits at present, and businesses can access foreign loans if they choose,” the official added.

Currently, foreign loans carry interest rates of around 7.5 percent, compared with more than 12percent on domestic bank borrowing, making overseas financing more attractive for businesses.
The official further explained that weaker investment activity and slower business expansion have reduced imports of capital machinery, contributing to the decline in buyers’ credit.
Private sector credit growth stood at 6.23percent at the end of October, indicating subdued expansion and lower demand for loans.
“Before the elections, new borrowing is likely to remain limited. However, external loan uptake may pick up again after the polls,” the official said.