Bangladesh’s short-term foreign loans down 7.42% in year

Loan repayments outpace new inflows for fifth straight month, raising concern among economists

Bangladesh’s short-term foreign debt declined by 7.42 percent year-on-year, driven by higher repayments than new borrowing amid ongoing political and economic uncertainties.

Latest data from Bangladesh Bank on Thursday shows outstanding short-term loans stood at $10.22 billion at the end of May, down from $11.04 billion a year earlier.

Short-term foreign loans are external funds with a maturity of less than one year, typically utilised to finance imports, purchase services, or meet other immediate business needs.

Data shows that in May, private sector borrowers secured $1.85 billion in short-term foreign loans, while repayments, including principal and interest, amounted to $1.98 billion.

This marks the fifth consecutive month where repayments have surpassed fresh inflows, signalling a net reduction in external short-term debt.

In April, loan inflows were $1.83 billion against repayments of $1.69 billion, leaving an outstanding balance of $10.25 billion.

Over the first five months of 2025, total short-term foreign loan inflows reached $6.99 billion, while repayments stood at $7.08 billion.

Majedul Haque, director of research at the Centre for East Asian Foundation and an economist, told bdnews24.com that the absence of an elected government for an extended period has contributed to the reduced inflow of foreign loans.

He expects loan inflows to increase once a new government is in place.

Majedul also pointed to international credit rating agencies downgrading Bangladesh’s creditworthiness in recent years as a contributing factor.

“Investors are also closely watching the stability of foreign currency reserves and the exchange rate, which adds to the challenges,” he said.

The outstanding short-term foreign debt fell below $10 billion for the first time in four years in January 2025, closing the month at $9.8 billion.

This follows a previous low of $9.2 billion in December 2020 during the height of the COVID-19 pandemic.

In comparison, outstanding short-term debt stood at $11.25 billion in January 2024 and was $10.03 billion and $10.13 billion in February and March 2025, respectively -- down from $11.07 billion and $11.04 billion in the same months last year.