Bangladesh’s private sector is quietly pulling back from the foreign debt markets, trimming short-term external borrowings in July while total external debt obligations continue to decline.
This retreat reflects how companies are recalibrating their balance sheets in the face of weak domestic demand, political uncertainty, rising global interest rates, and tighter credit lines abroad.
Short-term private external debt slipped to $10.01 billion in July, down from $10.06 billion in June. While the change seems modest — just a half-percent drop — it follows a two-year stretch of sharp deleveraging that has shaved billions off the peak levels seen in 2022.
The decline was led by a contraction in buyer’s credit, which fell below $5 billion, even as reliance on short-term loans edged higher to $2.35 billion. Companies appear less willing to depend on import-related trade credit, opting instead for more flexible loan arrangements.
Despite the dip in stock, repayment obligations are climbing. Debt service payments — covering both principal and interest — reached $1.95 billion in July, up from $1.85 billion in June.
The increase highlights a tension: while overall exposure is shrinking, the near-term cost of financing is moving in the opposite direction.
The private sector’s total external debt, which includes both short- and long-term obligations, has also been easing. After hitting $36.7 billion in 2022, it fell to $23.2 billion in 2024 and has remained subdued in 2025.
Repayment patterns reinforce the narrative of corporate deleveraging, with businesses prioritizing repayment over new borrowing.
Country exposure is shifting as well. Singapore remains the largest creditor, though its share has slipped to $1.68 billion in July from nearly $1.9 billion in May. The United Arab Emirates is on the rise, with outstanding claims swelling to $1.16 billion. European lenders, particularly the UK and Germany, have seen gradual declines, while exposure from other Asian partners such as China and Hong Kong has remained relatively stable.
Executives and analysts point to political uncertainty and weak domestic demand as the main reasons behind the slowdown.
The City Bank Managing Director Mashrur Arefin told TIMES of Bangladesh, “Since business and trade have not expanded, foreign debt in the private sector has declined.”
“Unless political stability returns, investment in the country will not increase in any way,” economist M S Siddique said.
