A stronger US dollar is usually grody news for emerging market economies with heavy dollar-denominated debt. And Bangladesh is no exception.
In this country, the corporate sector has borrowed heavily in foreign currencies from external sources at lower interest rates. A stronger dollar has now made their foreign debt expensive, hitting them really hard as they struggle to tide over the Covid-induced economic slowdown.
Those entrepreneurs who took hassle-free loans from abroad some five years ago -- when the interest rate on bank loans in Bangladesh was more than 12% -- are now facing the wrath of the appreciating dollar, having forced to count 10% more on money they borrowed at just 3-4% interest.
The approved debt from external sources for Bangladesh’s private sector stood at USD 14,003.95 million as of June 2021, of which USD 9,601.27 million had been repaid along with USD 677.37 million interest.
In the January to March quarter of the last financial year, the approved external debt for the private sector was USD 617.95 million, while it declined to USD 230.81 million in the last quarter of 2020-21 fiscal, as per Bangladesh Bank (BB) statistics.
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