Private sector foreign debt in Bangladesh increased by $275 million over three months, reaching $20.57 billion at the end of June, despite businesses being hesitant to take on medium- and long-term dollar loans due to exchange rate risks. Bangladesh Bank data shows that while medium- and long-term debt decreased by $82 million, short-term debt rose by $358 million during the April-June period. Over the past nine months, private sector foreign debt declined by $706 million. Short-term debt, which had been decreasing for nearly 18 months, grew in the June quarter due to increased demand for dollar loans and back-to-back letters of credit. The exchange rate’s instability, including a Tk7 devaluation in May and a Tk3 increase in August, has discouraged businesses from seeking long-term loans. The taka has lost around 35% of its value in the past two years, causing higher repayment costs for dollar-denominated loans. The central bank noted that while foreign debt payments previously reached $700-800 million per month, the recent debt increase is seen as a positive development, signaling easing pressure on reserves. As of September 4, the country’s foreign exchange reserves stood at $20.56 billion, down from $25.62 billion a year earlier.
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