Published: 12:08 AM, 17 September 2026
Poor Growth Rate Drives Private Sector Towards Fiascos!
Despite various regulatory steps to boost investment, formal credit growth for the private sector remains almost stagnant, indicating a prolonged slowdown in the private sector-led economy. To bring back economic vibrancy in the $500 billion plus economy after months of economic sluggishness, Bangladesh Bank (BB) takes a number of measures, including a stimulus package involving Tk 600 billion to revitalize the economy with reopening the stalled manufacturing bases across the country, but the stimulating regulatory moves have not been attracted the confidence of the private sector players yet as it is reflected in the recent data of the central bank.
According to BB, the private-sector credit growth reached 4.62 percent by the end of July last -- the second lowest monthly count in the history of Bangladesh. The previous lowest growth recorded in the previous month (June) of 4.47 percent. In fact, growth in private-sector credits has dropped below 5.0 per cent for the last five months -4.72 per cent, 4.75 per cent and 4.98 per cent in March, April and May this year respectively.
Even in the half-yearly monetary policy statement (MPS) for July-December period, the central bank made a private sector credit growth projection to 6.80 percent by December but the actual scenario was much lower than that of the projection. Such reluctance in investment credits is attributed to banks becoming more cautious amid higher non-performing loans (NPL) regime and private borrowers losing their credit appetite due to multiple anti-business factors, including energy crisis, prevailing global economic uncertainty due to geopolitical tensions, exchange-rate shocks, and higher inflation which is deemed not investment-friendly.
Seeking anonymity, a BB official said, the regulator as part of its plan to promote growth and employment provided policy support to the struggling borrowers, allowing them to get regularized with a two-year-long moratorium just paying 2.0 percent of the outstanding loans as down payment. Later on he said, the central bank eased the down payment rules in February last as many of such borrowers were facing difficulties to pay 2.0 percent down payment. Under revised instructions, half of the stipulated amount must be paid at the time of approval, with the remaining 50 per cent due within six months of the effective date. "Despite these facilities, the credit growth for the private sector has not got momentum yet," he said. But the central banker was optimistic over spikes in the credit demand in the coming days as the banking regulator announced a stimulus package amounting to Tk 600 billion in May last to boost investment.
Simultaneously, the BB official said the central bank also reduced policy rate by 50 basis points to 9.50 per cent on July 30 last to spur private sector investment. President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Mohammad Hatem said entrepreneurs have been battling hard to survive on the market under these prevailing extreme business and investment climates. Terming the ongoing energy crisis a severe blow to the businesses, the business leader said many factories have been struggling to continue productions in the industrial belts. "Under such circumstances, who dares to think of business expansion? I don't know how the growth (4.62 per cent) has happened and who are the borrowers? Will they be able to repay the loans? I have enough doubt," he added.
According to BB data, the import growth for capital machinery and industrial raw materials became negative of 3.57 percent and 5.78 percent by the end of July. Managing Director of NCC Bank PLC M Shamsul Arefin observed that geopolitical tensions have made the global economy highly uncertain, with spillover effects on the domestic economy and local entrepreneurs. In addition, the persistent energy crisis in industries is further aggravating the situation by disrupting industrial production.
Dr. Md. Touhidul Alam Khan, FCMA, Managing Director and CEO of NRBC Bank said increasing inflation, declining household incomes and weak export demand have significantly reduced market appetite. At the same time, persistent gas shortages are forcing factories to operate well below capacity. As a result, the opening of Letters of Credit (LCs) for trade has nearly come to a standstill. He further noted that credit supply has also tightened as banks have become increasingly risk-averse. With non-performing loans surging to more than 32 per cent of total outstanding loans, banks are reluctant to extend fresh credit for fear of further defaults. Instead, financial institutions are channeling funds into relatively risk-free government Treasury bills and bonds rather than lending to the private sector. This has effectively deprived businesses of much-needed financing, underscoring the importance of recent central bank interventions to restore economic stability, he also added.
Chairman of Policy Exchange Bangladesh Dr. M Masrur Reaz said there are multidimensional factors like number of detrimental events - Covid-19 pandemic, Russia-Ukraine war, volatile political transition after 2024 mass-uprising, failure in regulatory policy enforcements and ongoing tension in the Middle East. Apart from these, he said, the high inflation dampens market demand. It significantly reduced the industrial output. And the ongoing energy crisis due to the local policy failure for more than 15 years worsens the situation further. The economist also said the country's development expenditure and public investment in the last two fiscals (FY'25 and FY'26) was the lowest in recent years, which is another reason as these development works are executed by the private sector entrepreneurs.
