External debt reached nearly $100 billion in June 2023, driven by rising demand for funds from both public and private sectors, according to central bank data. While still within the International Monetary Fund’s recommended threshold, this debt increase is causing concerns due to unfavorable economic developments.
External debt grew by 3.35% to $98.93 billion in June, up from $95.7 billion in March, marking a 6.48% increase since September of the previous year. Public sector borrowing from multilateral and bilateral sources increased by 4.27%, while the private sector saw a slight increase in foreign loans, primarily due to long-term debt. However, short-term external loans declined. The decrease in short-term debt, driven by economic difficulties rather than prosperity, has deepened the foreign exchange shortage.
The government holds 77.5% of the external debt, with the rest in the private sector. The decline in short-term external credit for the private sector is concerning and adds pressure to foreign exchange reserves, which have decreased significantly. Despite the favorable debt dynamics in the past, concerns arise as concessional loans decline, and interest rates increase, emphasizing the need for prudent debt management.
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