External debt falls $1.45b in three months
The country’s total outstanding external debt stood at $112.12 billion at the end of September this year.
Bangladesh's external debt declined by $1.45 billion in the July-September quarter, according to data released by Bangladesh Bank today (23 December).
The country's total outstanding external debt stood at $112.12 billion at the end of September this year. This marks a decrease of $1.45 billion from the previous quarter, when external debt amounted to $113.57 billion at the end of June.
The reduction reflects declines in both public and private sector external borrowing.
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Government sector external debt at the end of September stood at $92.54 billion, down from $93.74 billion in the previous quarter. Meanwhile, private sector external debt was $19.58 billion, down from $19.83 billion in June.
Former World Bank lead economist Zahid Hussain said the decline could be linked to a fall in buyers' credit.
"Because imports are lower, buyers' credit is also decreasing, which may reduce overall external debt," he added.
Bangladesh Bank data shows that buyers' credit fell by around $1.1 billion in the three-month period, standing at $4.15 billion at the end of September, down from $5.25 billion in the previous quarter.
A senior Bangladesh Bank official explained that the main reason for the decline in the September quarter was lower new external borrowing combined with higher repayments of previous loans. This, along with the drop in buyers' credit, contributed to the overall $1 billion reduction in total external debt.
The official added that after 5 August 2024, foreign banks had reduced loan limits, but limits have since gradually increased as reserves improved. "There is no concern regarding borrowing limits now. Businesses can take foreign loans if they wish," the official said.
Currently, foreign borrowing carries an interest rate of around 7.5%, compared with over 12% for domestic bank loans, making external loans more cost-effective for businesses.
The official also noted that new investments are generally lower, leading to reduced business activity and lower imports of capital machinery, which explains the drop in buyers' credit. Data shows that private sector growth was 6.23% at the end of October, reflecting slower expansion and reduced demand for bank loans.
"Before the elections, the likelihood of new borrowing is low. This trend is expected to continue until the polls, but external loan uptake may increase again afterward," the official said.
