Staff reporter :
Bangladesh’s private sector has adopted a cautious approach to external borrowing, repaying more short-term foreign loans than it has taken in fresh credit during the first seven months of 2025.
The trend underscores a combination of political uncertainty, subdued investment appetite, and improved dollar liquidity within domestic banks.
According to Bangladesh Bank data, between January and July businesses borrowed $12.21 billion in short-term foreign loans, while repayments—including principal and interest—reached $12.82 billion. This means repayments exceeded new borrowings by over $600 million.
Monthly figures show that borrowing ticked up in July to $1.82 billion, compared to $1.55 billion in June. Repayments also rose, from $1.84 billion to $1.94 billion over the same period.
Bankers attribute the simultaneous rise in both borrowing and repayment to better dollar availability in local banks and a focus on meeting existing obligations rather than assuming fresh risks.
Industry insiders recall that during the 2023–24 dollar crisis, banks had deferred significant portions of short-term loan repayments, which later triggered higher interest costs and reputational damage.
To prevent a repeat, lenders are now ensuring obligations are cleared promptly while discouraging excessive new borrowing.
Despite the higher repayments, outstanding short-term foreign loans rose slightly—from $9.8 billion in January to $10 billion in July—breaking nearly eight months of continuous decline.
Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank, observed that falling global policy rates have eased international loan costs, while the local exchange rate has shown signs of stabilisation.
However, many businesses remain hesitant to commit to major investments until an elected government takes office. “Once the elections are held in February, borrowing could rise again. Banks have enough dollars, and businesses may also rely more on local financing channels,” he said.
Central bank figures point to sectoral shifts in trade activity. Import LCs opened and settlements rose by 7percent and 18percent year-on-year, respectively, in FY2025. Yet capital machinery imports fell by 25percent and intermediate goods by 6percent, reflecting a slowdown in fresh industrial investment.
Since late 2022, exchange rate volatility and political instability have eroded confidence. Outstanding private sector short-term loans shrank from $16.42 billion in December 2022 to $11.79 billion a year later—a steep $4.63 billion fall.
Borrowing stabilised somewhat in early 2024, but the fall of the Awami League government during the August 2024 student–people’s uprising further weakened sentiment.
Bangladesh Bank data also reveals changes in loan components. Buyer’s Credit, which allows importers to defer payments via overseas banks, fell by $286 million in July, while disbursements of short-term loans rose by $184 million, indicating a cautious but ongoing adjustment in financing patterns.
