Published :
Updated :
For all latest news, follow The Financial Express Google News channel.
The outstanding balance of short-term external borrowing by private sector came down to US$12.43 billion in September, as businesses jettison their market-expansion plans amid hovering uncertainties both on domestic and global markets.
Such ebb tide in capital inflow stokes fears of resultant contraction of industrial production and employment generation in the US$460-billion- plus economy led by the private sector.
Economists and analysts see this downward cycle as one reason for an inexorable volatility on the domestic market as the availability of the foreign currencies becomes costlier because of depreciation of the local currency against the greenback and repayment risks amid forex dearth.
According to statistics available with Bangladesh Bank (BB), the outstanding balance of short-term external credits taken by the private players stood at $15.83 billion in January 2023. Then, it dropped to $14.77 billion in February, $14.08 billion in March, and $13.87 billion in April. But it made a little increase in May when the amount was $14.08 billion.
The balance again went on a dive to reach $13.66 billion in June $13.36 billion in July, $12.84 billion in August and $12.43 billion in September, according to the latest available data.
However, the central bank's officials are taking the downturn in private sector's one-year-long overseas borrowing as a blessing in disguise as it would lessen pressure on the country's foreign-exchange reserves. Businesspeople and market analysts think otherwise--it won't be a good sign for normal economic activity.
Seeking anonymity, a BB official says it is a good sign for the country that its overseas liabilities keep declining that would lessen pressure on the forex reserves to some extent.
Asked whether the ongoing dollar dearth poses any problem as far as repayment of the debts is concerned, the central banker said things started improving as the earnings from remittance and export receivables are slowly increasing while import orders plummeted significantly.
Talking to the FE, Executive President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Mohammad Hatem said they were planning to put more money into business in early 2022 when the export growth of clothing industry found a rebound. Within couple of months, the Russia-Ukraine war broke out, disrupting the global macroeconomic orders.
As a spillover impact, it is affecting the macroeconomic situation of Bangladesh as well, and it makes the overall situation not conducive to investment, according to him.
The manufacturers have been struggling to operate their production units on a full scale because of gas and power outages. "Then, why people will invest under such situation? That's why it (overseas debt) is falling," the business leader said.
The chief financial officer (CFO) of a private commercial bank said global lenders might consider the risk of repayment before lending to private-sector players in the country where availability of the foreign currencies remains a concern.
"This could be a reason behind the falling trend in private-sector short- term overseas borrowing," the banker added.
Contacted for his view of the situation, chairman of local think-tank Policy Exchange of Bangladesh Dr M. Masrur Reaz said the ongoing import restrictions and energy disruptions slowed down the demand for working capital and trade financing from external sources.
On the other hand, the economist said, lack of confidence among some of the global lenders in view of Bangladesh's current macroeconomic situation might dampen the overseas credit flow.
"They (global lenders) are lending less, or not giving credits to Bangladeshi entrepreneurs."