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Bangladesh’s private sector external debt dropped 4 per cent year-on-year to $19.78 billion at the end of June, as weak investment appetite and sluggish credit demand held back fresh inflows.

The contraction was milder than in the previous quarter, with debt slipping less than 1 per cent from March, according to central bank data. Insiders said repayments outpaced new disbursements, while companies delayed expansion amid political and economic uncertainty.

Private sector credit growth slowed to 6.49 per cent in June—among the lowest in recent months—highlighting what economists describe as a prolonged investment slowdown in the world’s second-largest garment exporter.

Chinese lenders remained the top source of private borrowing, accounting for 34 per cent of the stock. The Netherlands held nearly 14 per cent, the UK more than 11 per cent, while the US and Hong Kong supplied just over 8 and nearly 6 per cent respectively.

Sector-wise, power, gas and petroleum debt fell 2.7 per cent to $5 billion, while manufacturing loans rose 5.8 per cent to $2.82 billion. Borrowing for construction also climbed 5.4 per cent to $719 million. Trade and commerce-related loans slipped 3.3 per cent to $906 million.

Short-term instruments continued to dominate, making up 51 per cent of total liabilities, while medium- to long-term debt accounted for 49 per cent. Trade credit, a key short-term component, dipped 1.8 per cent from the March quarter.

Executives said repayment schedules were met, but fresh loans slowed. “Our investment has been on hold, and that’s why borrowing looks weaker. Repayments have gone out as scheduled, but fresh loans have not come in at the same pace,” said Aameir Alihussain, managing director of BSRM.

Bangladeshi firms have long tapped offshore borrowing because of lower costs compared with domestic loans, particularly for importing machinery and raw materials. Despite the current pullback, industry insiders expect a modest rebound if manufacturing demand strengthens and financing costs ease.