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Bangladesh's private sector outstanding external debt fell 4.0 per cent year on year (Y-O-Y) to US$19.78 billion at the end of June, as subdued investment and slow credit demand weighed on fresh inflows.
The contraction was less pronounced compared with the previous quarter, edging down less than 1.0 per cent from March 2025.
People familiar with the development said that the decline reflected a combination of repayments outstripping new disbursements and companies delaying expansion plans in the face of weak demand and political uncertainty.
Private sector credit growth slowed to 6.49 per cent in June - one of the lowest readings in recent months - underscoring what economists describe as a prolonged investment malaise in world's second-largest garment exporter.
Chinese lenders continued to account for the lion's share of Bangladesh's private sector borrowing, supplying about 34 per cent of the total stock.
The Netherlands followed with nearly 14 per cent, while the UK provided more than 11 per cent. The world's biggest economy of US and Hong Kong accounted for just over 8.0 and nearly 6.0 per cent respectively, according to central bank data.
The composition of borrowing pointed to diverging trends across industries.
Loans to the power, gas and petroleum sector stood at US$5.0 billion in June, down 2.7 per cent on the year. Manufacturing debt, by contrast, rose 5.8 per cent to $2.82 billion, while construction borrowing climbed 5.4 per cent to $719 million. Loans linked to trade and commerce slipped 3.3 per cent to $906 million.
In the mean time, short-term instruments remained dominant, making up 51 per cent of private sector external liabilities. Medium- to long-term debt accounted for 49 per cent.
Trade credit - a key component of short-term borrowing - fell 1.8 per cent from the March quarter.
Executives said they had opted to sit on investment plans, citing both repayment pressures and uncertainty about domestic demand.
"Our investment has been on hold, and that's why borrowing looks weaker," said Aameir Alihussain, managing director of BSRM, the country's largest rod producer. "Repayments have gone out as scheduled, but fresh loans have not come in at the same pace."
Entrepreneurs have traditionally tapped offshore loans because of their lower cost compared with domestic borrowing, particularly when importing capital machinery and industrial inputs.
Despite the pullback, industry insiders expect a modest rebound if manufacturing demand continues to firm up and financing costs ease.
jasimharoon@yahoo.com