Balance of short-term foreign loans drops by 8%

Traders lack trust in new investments, which is pushing down short-term loans, says economist Zahid Hussain

Sluggish business, trade and investment have left an impact on short-term foreign loans in Bangladesh. Traders and entrepreneurs have begun to pay key amounts and interests of foreign debt taken early, out of fear in a spike in dollar prices. As a result, the balance of foreign debt dropped.

The short-term foreign debt balance dropped by $890 million year-on-year, or 7.99 percent in April, according to the updated data by Bangladesh Bank published on Wednesday.

The short-term foreign debt balance stood at $10.25 billion at the end of April this year. The figure was $11.14 billion in April 2024.

Shahadat Hossain, managing director of Anne Apparels, who took short-term loans for a period of less than a year, told bdnews24.com that recently, the company is more focused on paying off their arrears instead of taking new loans. Overall business and trade in the country is facing a kind of stagnation. Therefore, the import of capital equipment has decreased. Businessmen are taking fewer loans. Everyone is repaying their previous loans with the dollars they currently have.

Short-term foreign loans are those taken from foreign sources for a period of less than a year. Generally, these loans are taken to pay for imported goods, for purchasing services or meeting other short-term financial needs.

The latest data from Bangladesh Bank in April shows the private sector entrepreneurs took out short-term foreign loans worth $1.83 billion. At least $1.69 billion was paid in interest and key amounts during that period.

A total of $1.66 billion in loans were received in March and $1.70 billion was repaid.

The short-term foreign debt balance dropped below $10 billion for the first time in four years in January this year. It stood at $9.8 billion by the end of January. Previously, it had fallen to $9.20 billion at the end of December 2020, during the COVID pandemic.

The balance was $11.25 billion in January 2024.

In February and March 2025, the foreign loan balance was $10.03 billion and $10.13 billion, respectively. It stood at $11.07 billion and $11.04 billion in February and March, 2024.

An analysis of current data shows that amount of repayment of short-term foreign loans was more than the amount of loan taken in the first four months of the year. From January to April, short-term foreign loans worth $6.99 billion were taken out. During this time, $7.08 billion was repaid.

Economist Zahid Hussain, former chief of the World Bank’s Dhaka office, believes that the lack of confidence among businessmen in new investments is the reason for the decrease in short-term foreign loans. Businessmen are paying their bills quickly due to the increase in the dollar rate. This has reduced the balance.

In his opinion, foreign investors have developed a distrust for Bangladesh due to the current political and economic situation, which has impacted the loan sector.

A senior official of Bangladesh Bank said that even after the dollar rate was left to be controlled by the market, it has remained quite stable. This was a positive aspect and if this continues, foreign loans and investment would increase, they added.