Private firms’ foreign loans rise again

Private sector's foreign loans started rising again as firms are showing interest in borrowing from the international market to benefit from the falling interest rate.

Data released by the Bangladesh Bank (BB) shows that the outstanding debt of the private sector rose to $19.87 billion at the end of March this year, registering a 2 percent spike in the previous three months owing to a rise in buyer's credit, a type of loan issued by an exporter to fund a purchase by an importer.

Buyer's credit obtained by local firms from their suppliers abroad stood at $5.39 billion at the end of March this year, up 3 percent from $5.22 billion in December 2024.

Ahmed Shaheen, additional managing director of Eastern Bank PLC, said Bangladesh's corporates had earlier been hesitant to take loans in foreign currencies amid rising interest rates globally.

Volatility in the exchange rate was another factor.

"Now, as interest rates are falling and the risk of large exchange rate shocks has declined, firms are showing eagerness to borrow. The gap in the interest rate between the domestic and international markets also offsets the perceived risk," he said.

"So, there are mixed reasons," he added.

The Secured Overnight Financing Rate (SOFR), used as a benchmark for various financial products, has been falling steadily.

The BB says long-term borrowing by private enterprises has grown since December 2024.

At the end of March this year, the private sector's outstanding long-term loan was $8.83 billion, up 3.5 percent from three months ago.

Accordingly, overall outstanding foreign loans taken by the private sector, including commercial banks, rose to $9.7 billion as of March this year, up nearly 5 percent from $9.29 billion three months ago.

During the period, the public sector's foreign loans rose too.

Overall, the outstanding debt of the public and private sectors grew to $104.76 billion in the three months to the end of March this year, from $103.73 billion before.