Six non-bank financial institutions (NBFIs) out of 35 are set to be liquidated finally due to poor financial health, after the Bangladesh Bank (BB) board approved the move yesterday.

The six NBFIs are FAS Finance, Premier Leasing, Fareast Finance, Aviva Finance, People’s Leasing, and International Leasing.

Initially, the regulator had planned to liquidate nine NBFIs. However, after two days of hearings, three companies -- Prime Finance, GSP Finance, and Bangladesh Industrial Finance Company (BIFC) -- were given three to six months to improve their finances.

Arief Hossain Khan, executive director and spokesperson of Bangladesh Bank, confirmed the development to The Daily Star.

Last November, the BB board approved the liquidation of troubled NBFIs under the Bank Resolution Ordinance 2025
The decision was made at a BB board meeting chaired by Governor Ahsan H Mansur.

A senior central bank official, speaking on condition of anonymity, told The Daily Star that the central bank has already declared six NBFIs non-viable, while the remaining three have been given three to six months to improve their financial condition.

“If the three institutions fail to recover or show meaningful progress, they will be added to the liquidation list,” the official added.

Last week, BB held hearings with the nine NBFIs -- FAS Finance, Bangladesh Industrial Finance Company, Premier Leasing, Fareast Finance, GSP Finance, Prime Finance, Aviva Finance, People’s Leasing, and International Leasing -- to determine if they had grounds to oppose liquidation.

Last November, the BB board approved the liquidation of troubled NBFIs under the Bank Resolution Ordinance 2025, the country’s first comprehensive framework for resolving failing banks and NBFIs.

The ordinance outlines procedures for merging, restructuring, or closing distressed institutions and sets the hierarchy for repaying creditors once assets are sold.

Together, the nine NBFIs account for 52 percent -- Tk 25,089 crore -- of the sector’s total defaulted loans as of the end of 2024, reflecting years of unchecked lending irregularities and capital erosion.

BB Governor Ahsan H Mansur recently said that individual depositors of the nine troubled NBFIs may recover their principal amounts before Ramadan in February.

A senior BB official added that the central bank will write to the Ministry of Finance to request a Tk 3,000 crore bailout package, as the number of NBFIs facing liquidation has now decreased.

Earlier, the BB governor had said the Ministry of Finance had verbally approved Tk 5,000 crore for the liquidation of the nine NBFIs.

According to central bank data, the nine institutions hold Tk 15,370 crore in deposits, of which Tk 3,525 crore belongs to individual depositors and Tk 11,845 crore to banks and corporate clients.

As of September 2025, the country’s 35 NBFIs had Tk 29,408.66 crore in non-performing loans, equal to 37.11 percent of their total outstanding loans of Tk 79,251.11 crore, according to BB data.

A year earlier, in September 2024, the sector’s non-performing loan ratio was 35.52 percent.

The Bangladesh Bank has decided to keep its policy repo rate unchanged at 10% for the second half of the current fiscal year 2026-27 in a bid to contain inflation, defying calls from the business community to lower lending rates.

The central bank's board approved the Monetary Policy Statement (MPS) for January-June yesterday, with a formal announcement scheduled for tomorrow, officials said.

The policy repo rate – the rate at which the Bangladesh Bank lends to commercial banks – will remain at 10% as inflation has yet to fall to the targeted 6.5% set for FY26 in the previous policy. Although inflation declined slightly above 8% in December, it remains well above the central bank's comfort level.

In its earlier MPS, the Bangladesh Bank pledged to maintain a tight monetary stance until inflation fell below 7%.

The private sector credit growth target will be kept unchanged at 8% against actual growth of 6.2%. On the other hand, public sector credit growth is likely to increase to 19% from the previous ceiling of 18%.

Although a tight monetary policy has been in place since last year, both lending and deposit rates have edged up slightly amid sluggish private sector demand following the political transition in August 2024.

Over the past six months, the average lending rate has hovered around 12%, while deposit rates have remained above 6%, according to central bank data.

Bangladesh Bank Governor Ahsan H Mansur acknowledges the concerns of businesses seeking lower interest rates but stresses that the timing is not yet right for a policy shift.

"I fully understand the sentiments of the business community – I also want to reduce interest rates. But at this stage, we cannot do so from a policy perspective," he told The Business Standard.

He said, "Inflation has fallen from 12.5% to 8.5% – that is progress, but not enough. Our target is to bring inflation down to 3-4% within two years. Once we reach that point, the policy rate will naturally come down."

The governor added that managing inflation expectations would require time. "People now assume that prices will rise by 10%. Breaking this mindset takes time. We have managed to neutralise exchange rate pressures to a large extent, but domestic pressures are not yet fully under control."

Forex market gains

In May 2025, the central bank moved towards a more flexible exchange rate regime aimed at enhancing stability. Since August 2024, it has not sold a single dollar in the market; instead, it has purchased $3.7 billion, marking a sharp turnaround from previous years.

Governor Mansur said the current account was now broadly balanced, while the financial account – which had long been in deficit – had recorded a substantial surplus.

"Our overall balance was positive last year and remains strongly positive this year," he said. "As a result, our reserves are gradually increasing."

The governor noted that during his tenure, the International Monetary Fund had disbursed around $700 million, while the Bangladesh Bank had purchased more than double that amount from the market.

"When the IMF said it would not release funds before the formation of a new government, we told them there was no problem – we were not in crisis and did not urgently need the funds," he said.

The Bangladesh Bank aims to raise reserves to $35-36 billion by June this year, based on its own calculation method, with further increases expected alongside growth in imports and exports.

The country's gross foreign exchange reserves stood at over $28 billion on 22 January, according to IMF methodology, up from $26.7 billion in June. The exchange rate has remained stable at Tk122-123 per US dollar over the past year.

The governor also described the reversal of capital outflows as a key achievement, noting that foreign investors who had previously withdrawn funds were now returning with fresh investments.

The Bangladesh Bank has taken a final decision to liquidate six non-bank financial institutions (NBFIs) that have been struggling with irregularities, corruption and mismanagement, while granting an additional three months to three other institutions to improve their financial position.

The decision was taken at a board meeting of the central bank today (27 January).

The three institutions given time are Bangladesh Industrial Finance Company, GSP Finance Company and Prime Finance and Investment Limited.

An official present at the meeting said these three firms would not be placed under the liquidation process for now.

They have informed Bangladesh Bank that they will try to mobilise funds over the next three months. If they are able to recover a significant amount of defaulted loans during this period, they will be kept out of liquidation.

Administrators will be appointed by the Bangladesh Bank to three financial institutions. A senior official said that there has been strong demand from these three institutions for funds to be injected into them.

Individual depositors of 9 NBFIs to get full principal, no interest, after liquidation

According to the central bank's review, BIFC has 97.30% defaulted loans, with losses of Tk1,480 crore, while GSP Finance has 59% defaulted loans, with losses of Tk339 crore. Prime Finance has 78% of its loans in default, with losses amounting to Tk351 crore.

The institutions were found to be in an "unviable" condition based on three indicators: failure to return depositors' money, extremely high defaulted loans, and capital shortfalls.

As per the central bank's review, the six NBFIs that are being liquidated are in a dire financial state, with most of their loan portfolios turning bad and massive losses piling up.

FAS Finance is the worst affected, with 99.93% of its total loans defaulted and accumulated losses of Tk1,719 crore. Fareast Finance has 98% of its loans in default and has incurred losses of Tk1,017 crore.

At International Leasing, defaulted loans stand at Tk3,975 crore, accounting for 96% of its portfolio, most of which is considered unrecoverable, while its losses have reached Tk4,219 crore.

People's Leasing has seen 95% of its loans turn bad, with losses amounting to Tk4,628 crore.

Aviva Finance's defaulted loans account for 83% of its portfolio, and the company has recorded losses of Tk3,803 crore. Premier Leasing, though comparatively better off, still has 75% of its loans in default and has suffered losses of Tk941 crore.

Bangladesh currently has 35 non-bank financial institutions. Of these, the central bank has identified 20 as distressed. The total loan portfolio of these 20 institutions stands at Tk25,808 crore, of which Tk21,462 crore, or 83.16%, is classified as defaulted. In contrast, the value of their collateral is only Tk6,899 crore.

By comparison, the remaining 15 relatively sound institutions have a non-performing loan ratio of just 7.31%. Last year, they made a combined profit of Tk1,465 crore and currently hold a capital surplus of Tk6,189 crore.

The 20 troubled institutions hold deposits worth Tk22,127 crore, including around Tk4,971 crore in net individual customer deposits. Bangladesh Bank believes this amount may be needed initially to support the liquidation and restructuring process.

The central bank has also assured that employees working at institutions that go into liquidation will receive all benefits as per service rules.

Bangladesh is not fully prepared to face the economic and institutional challenges that will follow its graduation from the least developed country (LDC) category later this year, business leaders and bankers said yesterday, warning that it could expose the economy to serious risks.

Speaking at a roundtable on the implications of LDC graduation for the banking sector, they cautioned that Bangladesh will gradually lose preferential market access, concessional financing and policy flexibilities, while facing intensified global competition, pressure on exports and rising living costs.

These changes will place new pressures on the economy, particularly on the financial system, ICCB President Mahbubur Rahman said at the event organised by International Chamber of Commerce-Bangladesh (ICCB).

Noting that the graduation should be seen as a structural shift rather than a symbolic milestone, he added, “In the post-LDC era, a strong, credible, and autonomous central bank will be the anchor of financial stability and confidence.”

AK Azad, vice-president of ICCB, said there were real post-graduation impacts on exports and other sectors. “We clearly presented these to the interim government, but they did not agree.”

He urged the next government to take up the issue with urgency, as understanding and addressing the realities of LDC graduation would take time.

Simeen Rahman, chief executive officer of Transcom Group, said graduation would reshape Bangladesh’s policy space and competitiveness, particularly in sectors directly affecting people’s lives.

Emphasising the pharmaceutical industry, she said coordinated policy, regulatory efficiency, financial support and adequate transition time were crucial to preserving domestic strength and export potential. Local production of active pharmaceutical ingredients (APIs), she added, was a key preparatory step.

“If we place people’s health, industrial strength and financial stability at the centre of this transition, Bangladesh will graduate not only with pride but with confidence,” she said.

Former BKMEA president Fazlul Hoque said while graduation was welcome, the private sector remained deeply uneasy about preparedness. “The reality is that we are not well prepared. That is why we have been advocating for an extension,” he said.

However, he warned that even a two- or three-year extension would be meaningless without concrete action.

“We already had eight years to prepare… There were many meetings and seminars, but little real progress. If we waste the next few months, even with an extension, we will simply repeat the same discussions,” he said.

Muhammad A (Rumee) Ali, chairman of the ICCB Banking Commission, said despite extensive discussion of graduation’s sectoral impacts, the banking industry had lacked urgency and proactive policy dialogue.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said LDC graduation marked a new phase of development that demands maturity, discipline and vision.

“The banking sector must not remain a passive observer; it must act as an active architect of a more resilient, inclusive and globally competitive Bangladesh,” he said.

Meanwhile, offering a contrasting view, Bangladesh Bank Governor Ahsan H Mansur urged stakeholders not to frame graduation narrowly as a matter of tariff or trade privileges.

“It is part of a larger economic transformation,” he said, adding that Bangladesh must decide whether it wants to remain among fragile economies or aspire to stand alongside emerging and developed nations.

“Graduation is inevitable. The policies we need for graduation are the same policies we need for development – growth, human development, a strong currency and a resilient financial system,” he said.

Diversification, better logistics, improved ports, roads, communications, ICT, education and healthcare were all integral to both development and graduation, he added.

“Unfortunately, we have downsized the debate to protecting market access. That is not the core issue. Graduation and development go hand in hand,” he said.

Mansur also defended recent reforms, including contracts with global port operators, acknowledging that resistance was inevitable but necessary to ensure continuity. “The government decided to sign the contracts to preserve continuity for the future.”

He also criticised sections of the business community for supporting policies such as interest-rate caps that weakened the financial system.

“They never protested when bureaucrats siphoned money abroad. Where was the business community then? They were happy,” he said.

“We need vibrant associations, not puppet ones -- associations that speak the truth without hesitation. Otherwise, democracy becomes little more than voting every few years while business continues as usual,” he added.

Bangladesh is not yet fully prepared to absorb the aftershocks from least-developed country (LDC) graduation with key sectors like banking and finance and manufacturing staring at significant challenges looming large.Finance software

Economists, business leaders and experts came up with such forewarning at a roundtable discussion Tuesday, as the cutoff time for UN certification for the country's status change keeps nearing now.

They said following the graduation set for November 2026, such sectors would face difficulties adjusting the loss of preferential treatment and increased competitive pressure on the global market.

They have cautioned that without swift reforms along with adequate preparation, the transition could strain the financial system and undermine economic stability.

The speakers, mostly bankers, representatives of financial institutions and corporate executives, were speaking at the roundtable titled 'Implications of LDC Graduation for the Banking Industry: Bangladesh Perspective', organised by the International Chamber of Commerce Bangladesh (ICCB) at a city hotel.

.President the ICCB Mahbubur Rahman moderated discussions and shared the concerns raised at the meet.

Bangladesh Bank Governor Dr Ahsan H. Mansur attended it as chief guest while Dr Shah Md Ahsan Habib of Bangladesh Institute of Bank Management presented the keynote.

The speakers said the policymakers must now focus on enhancing competitiveness, strengthening institutional capacity and diversifying its export basket to navigate the post-LDC environment successfully.

While speaking as chief guest, the central bank governor said Bangladesh's development trajectory and its graduation from LDC status were closely linked and should be viewed as complementary processes.

"Bangladesh's development and LDC graduation go hand in hand," said Dr Mansur, urging the relevant stakeholders to look ahead and focus on long-term structural reforms and ensure sustainability.

He stressed the need for raising efficiency across the economy, improving logistics, strengthening road and port infrastructures, and investing more in education and healthcare.

Development partners, he mentions, have already been treating Bangladesh as a developing country since 2015.

The governor also underscores the importance of restoring macroeconomic stability, particularly by curbing inflation and lowering the rate of interest.

Bangladesh has historically experienced inflation in the range of 6.0-7.0 per cent, the central bank's chief executive said, but stressed that it must be brought down to 2.0-3.0 per cent to support sustainable growth.

"Inflation expectations have now become a key barrier…Local policy focus should centre on reducing inflation and borrowing costs," he told the audience.

Dr Mansur said Bangladesh could improve efficiency by as much as 30 per cent through better policy coordination and reforms.

The interim government, he mentions, has already passed several reforms, including promulgating the Bank Resolution Ordinance 2025, though some measures remain pending and are necessary to further stabilise and strengthen the financial sector.

Managing Director and CEO of Mutual Trust Bank PLC Syed Mahbubur Rahman, Managing Director and CEO of Prime Bank PLC Hassan O. Rashid, Managing Director of Plummy Fashions Limited Md. Fazlul Hoque, Deputy Managing Director of Picard Bangladesh Amrita Makin Islam, and Managing Director of Eskayef Pharmaceuticals Ltd. Simeen Rahman were panel discussants.

Besides, Chairman of Bangladesh Association of Banks (BAB) Abdul Hai Sarker, World Bank country Director Jean Pesme, ICCB Vice-President A K Azad, Chairman of Bengal Commercial Bank PLC Md. Jashim Uddin, Vice President of ICCB and Chief Executive Officer of Standard Chartered Bank Naser Ezaz Bijoy, ICC Bangladesh Secretary-General Ataur Rahman, and representatives from the World Bank, the UN, UNDP and IFC were also among others present.

The ICCB President, Mr. Mahbubur Rahman, said with graduation, scheduled to take place in November this year, Bangladesh would gradually lose LDC-specific benefits such as preferential market access, concessional financing, and certain policy flexibilities.

"These changes will place new pressures on the economy-and in particular, on our financial system," he told the meet.Finance software

"Bangladesh's graduation, therefore, is not merely a celebratory moment--it represents a structural shift. In this transition, the role of the central bank becomes even more consequential," he added.

From a banking perspective, LDC graduation will reshape the operating environment in three fundamental ways.

From ICC Bangladesh's perspective, the post-LDC era calls for a qualitative transformation of the banking sector, guided by sound regulation and credible supervision.

The ICCB Vice President and Managing Director of Ha-Meem Group of Industries, AK Azad, vented concern about monetary policy.

"Only tightening monetary policy will not reduce inflation in the country, because it is related to many other issues, including revenue," he said.

As a result of tightening monetary policy, 1.2 million people have already lost their jobs and another 1.2 million may lose their jobs in the next six months, he added.

He also mentions that the private sector has taken only 6.0 per cent of loans from banks, while the government has taken 27 per cent which may reach 32 percent in the future.

He thinks it is not possible to manage the economy through monetary policy alone without increasing investment and employment.

He laments that although attempts were made to explain the impact of LDC graduation to the current government, they did not agree, and said, 'These problems must be brought before them immediately after the formation of the new government.'

Group Chief Executive Officer of the country's leading conglomerate - Transcom Group - Ms. Simeen Rahman said LDC graduation is not merely a change in economic classification, it represents a structural shift that will reshape policy, space, and competitiveness, particularly in sectors that directly affect people's lives.

Ms. Rahman, also managing director of Eskayef Pharmaceuticals Ltd, said pharmaceutical is one of such sectors that play a unique and critical role bridging public-health priorities and industrial capability of a country.

She underscores the need for local production of API as one of the preparatory measures.

Muhammad A. (Rumee) Ali said there had been a lot of discussions on the impact of graduation on different sectors of the economy but he did not see much discussion or pre-emptive policy suggestions on this imminent risk with any level of urgency or concerns by the banking industry.

Managing director and CEO of private commercials bank Mutual Trust Bank PLC Syed Mahbubur Rahman said the graduation process reflects decades of progress in poverty reduction, human development, and economic resilience.

"But, let us be clear, we are graduating into a world that is far more complex, competitive, and unforgiving than the one we entered as an LDC."

And it is being done at a time when the country's banking sector is under immense strain as well as the economy.

He further said Bangladesh's LDC graduation is not the end of its development journey rather it is the beginning of a new chapter-one that demands maturity, discipline, and vision.

"The banking sector must not be a passive observer in this transition. It must be an active architect of a more resilient, inclusive, and globally competitive Bangladesh," he said.

Managing director and CEO of Prime Bank PLC Hassan O. Rashid said the impact on bank will also leave impact on the capital market as there are a number of listed banks.

Underscoring the need for independence of the central bank he said: "I think this is extremely important because to tackle the headwind, we need a stable economic policy, monetary policy, stable exchange rate, inflation and interest rate."

Former president of Bangladesh Knitwear Manufacturing and Exporters Association Fazlul Hoque thinks the country is not well prepared to embrace the graduation right now.

As a private-sector representative, he says, they are not feeling very comfortable at this juncture to have the graduation in November to 2026.

For the good health of banking sector, he underscores the need for an independent and free central bank to regulate the country's banking sector.

Deputy Managing Director of Picard Bangladesh Ms. Amrita Makin Islam underscored the need for export diversification from RMG that constitutes almost 80 per cent of total export receipt.

She also points out Bangladeshi exporters, compared to the peer countries, face additional burden like extended lead time in export and poor backward linkage that need serious attention.

Former President of Dhaka Chamber of Commerce and Industry (DCCI) Rizwan Rahman, CEO and Managing Director of Renata PLC Syed S. Kaiser Kabir, and BGMEA Director Faisal Samad also spoke, among others, in the open-floor discussion session.

The United States may announce a reduction in the reciprocal tariffs imposed on Bangladesh by the end of this week or early next week, Lutfey Siddiqi, special envoy on international affairs to the chief adviser, said yesterday.

Speaking at a press conference at the Foreign Service Academy, where he briefed the media on Bangladesh’s engagements and outcomes at the World Economic Forum (WEF) in Davos, Siddiqi said Washington is sincere about lowering tariffs on Bangladesh, and an announcement is expected soon.

He, however, said it is still unclear to what extent the current 20 percent tariff will be reduced.

The special envoy said he discussed the issue with US Treasury Secretary and member of President Donald Trump’s cabinet, Scott Bessent, on the sidelines of the Davos conference.

“Many elements of the US non-tariff policies align with the reform agenda of Bangladesh’s interim government. Besides, the trade deficit of around $6 billion with the US has come down significantly. Considering these factors, the United States is showing sincerity in reducing trade barriers on Bangladesh. A better decision will come soon,” he said.

On Bangladesh-EU trade relations, Siddiqi said discussions were held with EU Commissioners Roxana Mînzatu and Jozef Síkela on a possible free trade agreement (FTA). “We have clearly conveyed that Bangladesh wants an FTA with the EU, and they have shown interest. But their process is slow.”

He said the EU is currently pursuing FTAs with India and may move towards Vietnam next, which could pose challenges for Bangladesh. “Still, there is no reason to panic. We must continue discussions. I will leave detailed notes on this for the next government.”

Siddiqi also pointed out that securing GSP Plus facilities in the EU market after Bangladesh’s graduation from LDC status will be challenging, and warned that excessive export concentration on a single product could risk losing GSP Plus benefits, noting that Bangladesh’s garment exports heavily dominate the EU market, which could create future vulnerabilities.

Referring to talks with World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala, Siddiqi said future trade policy issues were discussed, where the WTO chief advised Bangladesh to gradually move beyond multilateral trade reliance and focus more on bilateral trade agreements.

In this context, the special envoy to the chief adviser said productive discussions were held with Japan on an economic partnership agreement (EPA).

Japanese Minister of Economy, Trade and Industry Akazawa Ryosei informed him that a formal agreement with Bangladesh could be signed within the next one or two weeks.

Bangladesh will also enjoy duty-free transit facilities in Japan for three years after LDC graduation, he said.

“Talks on FTAs are ongoing with South Korea, while negotiations with Singapore are almost at the final stage. In the future global trade environment, surviving without FTAs or EPAs will be difficult,” Siddiqi said.

He said discussions with Thai Foreign Minister Sihasak Phuangketkeow covered potential Thai investment in Bangladesh’s food processing sector and the use of Thai ports to boost bilateral trade.

On the Rohingya repatriation issue, Siddiqi said the matter was discussed with UN Special Envoy on Myanmar Julie Bishop in Davos. “As days pass, global geopolitics surrounding Myanmar are becoming more complicated. Bangladesh must remain focused on its rightful demands.”

Highlighting talks with International Organization for Migration Director General Amy Pope, the special envoy said discussions focused on legal migration from Bangladesh.

“There is a perception internationally that Bangladesh is not serious about illegal migration and is content as long as people go abroad. We are trying to change that perception.”

He mentioned that 600 holders of fake passports were sent back from Singapore last month. “Previously, no action was taken against them. This time, with support from the CID, each individual will be brought under the law.”

Stressing the need for changing Bangladesh’s diplomatic approach, Siddiqi said symbolic gestures such as signing MoUs, handshakes, and photo opportunities are no longer sufficient; Bangladesh must make itself more relevant globally.

Corridor diplomacy and issue-based negotiations must be prioritised to clearly present Bangladesh’s positions to the world, he said.

Donald Trump’s new brand of imperialism doesn’t sit well with the dollar. The greenback dropped against other major currencies as the US president talked about taking control of Greenland, and continued falling even after he backed down. The issue is less that geopolitical animosity can unseat the dollar as the world’s dominant currency, and more that it can erode a key benefit: financial surveillance and sanctions power.

Taken since the end of 2024, the dollar has fallen roughly 13 percent against the euro. Though often attributed to the “Liberation Day” tariffs Trump announced in April of last year, the slide began two months earlier, not long after US Vice President JD Vance signalled a retreat from Washington’s commitment to defend Europe. It suggests the market sees a link between a more US-centric foreign policy and the greenback’s global dominance: namely, if the world’s police force retreats, perhaps international use of its currency does too. A more extreme version of the same idea, which was raised by a controversial Deutsche Bank research note during the Greenland crisis, is that Europe would dump some of its $14 trillion of US financial assets.

Replacing the dollar on a grand scale seems far-fetched, though. Even if the US were matched in GDP by China or the euro zone, its financial openness, legal protections and issuance of Treasuries as a single safe asset — unlike Europe’s fragmented sovereign bond market — would still leave the dollar without challengers. Despite some recent moves by foreign central banks to diversify, 57 percent of global official reserves are in dollars. Liabilities matter even more: 49 percent of cross‑border loans and 46 percent of international bonds use the greenback. The dollar appears in 89 percent of foreign‑exchange trades and, for the average country, on 62 percent of export invoices.

Most of these figures, which come from the Bank for International Settlements and the International Monetary Fund, have been stable since at least 1999. It gives Washington a powerful lever: because payments ultimately pass through correspondent bank accounts in New York, the US Treasury has been able to monitor flows and block transactions of North Korean entities, Venezuelan institutions and Hezbollah‑linked networks. It has also frozen assets and imposed sanctions, as against Iran in 2012 and Russia in 2022. And, because allied nations face similar exposures in their banks, they are effectively forced to cooperate. US authorities in 2014 slapped France’s BNP Paribas with a $9 billion penalty linked to violating American sanctions on Sudan, Cuba and Iran.

This echoes the work of German economist Georg Friedrich Knapp, who in 1905 argued that a state’s ability to extract taxes and fines is what gives its currency domestic value. Through sanctions, the US applies a version of this internationally, with the world’s most advanced military ensuring its ability to collect.

Defence capabilities and currency power have a close relationship. The presence of dollars and euros in other nations’ global currency reserves roughly matches US and European governments’ share of military spending since 1971, according to the SIPRI Military Expenditure Database. One explicit example of the link was the 1974 US-Saudi accord, which set the terms of economic co-operation between the two sides. It involved American military support in exchange for the Gulf state investing in Uncle Sam’s debt.

Yet for many countries, particularly in Europe, the US is no longer a reliable provider of military security. In other words, the international version of Knapp’s theory may now start working in reverse. An unpredictable and unreliable American defence guarantee gives governments in Europe and elsewhere less of an incentive, on the margin, to use greenbacks. As Canadian Prime Minister Mark Carney said in a speech at the World Economic Forum last week, great powers using “financial infrastructure as coercion” sparks a search for autonomy.

What does this mean for the United States? The risk isn’t really a loss of financial benefits, which are surprisingly elusive beyond the profit American banks get from intermediating foreign transactions. Often cited is the US’s ability to borrow cheaply from abroad, but this may just be skewed by the tax‑avoidance strategies of multinationals.

Or take the Federal Reserve’s role as global lender of last resort. True, it shielded the US during the 2008 and 2020 crises, but it also forced the central bank to help provide dollars to foreign nations or face a domestic blowback.

Equally, the supposed negative effects of dollar dominance are overstated too. Take the so-called “exorbitant burden” created by international demand for the greenback, which according to Fed ratesetter Stephen Miran and Peking University professor Michael Pettis makes US exports uncompetitive. The 1970s, early 1990s and mid‑2000s show that a global dollar can coexist with a weak exchange rate.

Dollar dominance is a reflection of US military, financial and economic strength. None of this is entirely imperilled by Trump’s antagonising of his NATO allies. The truth is subtler. Elliot Hentov of State Street Investment Management notes that transactions can migrate to more localised networks without causing a big dent on international dollar assets and liabilities.

China is already doing this, settling bilateral trade in yuan and local currencies while keeping a big US Treasury stash. India has begun using special rupee “vostro accounts”, to pay for imports such as Russian oil. Europe half-heartedly attempted something similar between 2019 and 2023 with INSTEX, a special purpose vehicle to facilitate trade with Iran without triggering US sanctions. As Germany, Britain and France take more responsibility for their own security, there may be better efforts along those lines. By ruling only through fear, King Dollar may lose some of what turned its might into power.

The leaders of India and the European Union will announce the "mother of all deals" on Tuesday, when they meet in New Delhi to formalise a huge trade pact reached after two decades of negotiations.

EU chiefs and Prime Minister Narendra Modi hope the pact, which Modi said was concluded on Monday, will help shield against challenges from the world's two leading economies, the United States and China.

"People in the world are discussing this as a mother of all deals," Modi said Tuesday in the capital New Delhi ahead of a meeting with European Commission President Ursula von der Leyen and European Council President Antonio Costa.

"This deal will bring many opportunities for India's 1.4 billion and many millions of people of the EU," Modi said, adding the agreement "represents about 25 percent of global GDP, and one-third of global trade".

The EU leaders, who were guests of honour at India's Republic Day parade on Monday, will meet Modi later Tuesday morning.

The EU has eyed India -- the world's most populous nation -- as an important market for the future.

New Delhi sees the European bloc as an important source of much-needed technology and investment to rapidly upscale its infrastructure and create millions of new jobs.

Bilateral trade in goods reached 120 billion euros ($139 billion) in 2024, an increase of nearly 90 percent over the past decade, according to EU figures, with a further 60 billion euros ($69 billion) in trade in services.

Under the agreement, India is expected to ease market access for key European products, including cars and wine, in return for easier exports of textiles and pharmaceuticals, among other things.

"The EU stands to gain the highest level of access ever granted to a trade partner in the traditionally protected Indian market," von der Leyen said on Sunday, adding that she expected exports to India to double.

"We will gain a significant competitive advantage in key industrial and agri-good sectors."

For India, it would boost sectors including textiles, gems and jewellery, and leather goods, as well as the service sector, Modi said.

For the EU, it is expected to slash tariffs on automobiles, wine and food exports to India.

Talks went down to the wire on Monday, focusing on a few sticking points, including the impact of the EU's carbon border tax on steel, according to sources familiar with the discussions.

The accord comes as both Brussels and New Delhi have sought to open up new markets in the face of US tariffs and Chinese export controls.

India and the EU were also expected to conclude an accord to facilitate movement for seasonal workers, students, researchers and highly skilled professionals, and a security and defence pact.

"India and Europe have made a clear choice. The choice of strategic partnership, dialogue and openness," von der Leyen wrote on social media. "We are showing a fractured world that another way is possible."

India is on track to become its fourth-largest economy this year, according to International Monetary Fund projections.

New Delhi, which has relied on Moscow for key military hardware for decades, has tried to cut its dependence on Russia in recent years by diversifying imports and pushing its own domestic manufacturing base.

Europe is doing the same with regard to the United States.

Chinese company Huazhu Accessories Co Ltd signed an agreement with the Bangladesh Export Processing Zones Authority (Bepza) to set up an accessories manufacturing factory at the Bepza Economic Zone in Mirsharai, Chattogram.

According to the agreement, signed on Monday at the Bepza Complex in Dhaka, the company will invest $16.34 million, creating employment opportunities for 1,395 Bangladeshi nationals.

The factory will produce a wide range of items, including bra cups, bra wire, hook and eye, webbing tape, elastic, drawstrings, sliders, snap buttons, logos, hardware for bags and luggage, and ribbons, with a projected annual output of 40 lakh kilogrammes.

The agreement was signed by Md Tanvir Hossain, executive director (investment promotion) of Bepza, and Yang Yanmei, managing director of Huazhu Accessories Co Ltd.

Mohammad Moazzem Hossain, executive chairman of Bepza, welcomed the investor and reaffirmed the authority’s commitment to facilitating industrial setup, providing prompt services, and ensuring a business-friendly environment.

Other Bepza officials present at the event included Abdullah Al Mamun, member (engineering); ANM Faizul Haque, member (finance); Md Khurshid Alam, executive director (enterprise services); Samir Biswas, executive director (administration); and ASM Anwar Parvez, executive director (public relations), along with representatives from Huazhu Accessories Co Ltd.

Imagine a factory owner forced to start repaying bank loans before the factory produces a single product. Inevitably, financial stress and eventual default would almost be assured.

That, in effect, is what is happening to the Bangladesh government. The key difference is that, unlike private borrowers, governments do not default; instead, the repayment burden is passed on to taxpayers.

A recent review by the Economic Relations Division (ERD) shows that grace periods of four to six years have already expired for 29 World Bank–financed projects, even though Bangladesh has failed to utilise $1.93 billion of the borrowed funds. As a result, loan repayments are beginning before many projects are completed, pushing up debt-servicing costs and adding to fiscal pressure.

What a grace period is and why it matters

In international lending, a grace period refers to the initial, specified timeframe after a loan agreement is signed during which the borrower is not required to repay the principal amount. While principal repayment is deferred, interest may still accrue or be payable, giving borrowers time to start projects, generate returns and put financing structures in place.

Such grace periods are designed as a cushion, particularly for developing countries, allowing projects to become operational and deliver benefits before the burden of repayment begins. When that cushion erodes, repayments start early, often before projects are capable of generating economic or fiscal returns.

Structural mismatch at the core

ERD officials say the problem stems from a structural mismatch between the World Bank's financing framework and Bangladesh's project approval process.

Under World Bank rules, grace periods begin immediately after board approval. In Bangladesh, however, it often takes up to two years after board approval to complete feasibility studies, prepare development project proposals, secure inter-ministerial clearances and obtain final approval from the Executive Committee of the National Economic Council (Ecnec). Loan agreements are signed only after Ecnec approval.

As a result, a substantial portion of the grace period is consumed before projects even become operational.

ERD officials admit that negotiations with the World Bank frequently begin without adequate preparatory work. Once negotiations conclude, board approval follows relatively quickly, while domestic procedures move slowly.

"Our projects are like premature babies — they often need treatment, from extending completion timelines to escalating costs," a senior ERD official told The Business Standard. "We have decided we will not take loans without full readiness."

$1.9bn stuck after grace periods expire

According to the ERD report, several large projects still have substantial undisbursed loan amounts even though their grace periods have already expired.

These include the Western Economic Corridor and Regional Enhancement Programme (Phase I) with $444.64 million undisbursed; the Dhaka Sanitation Improvement Project ($144.18 million); Operation for Supporting Rural Bridges ($152.39 million); Livestock and Dairy Development ($141 million); the Regional Waterway Transport Project ($91 million); Enhancing Digital Government and Economy ($63 million); and Enhancement and Strengthening of Power Transmission ($54.66 million).

While disbursement deadlines can be extended, ERD officials noted that grace periods are never extended, permanently shortening the concessional window and eroding the benefits of low-cost financing.

Strategy shift — but only recently

A senior ERD official, speaking on condition of anonymity, said Bangladesh had previously entered loan negotiations without sufficient preparation, partly due to pressure from the World Bank.

That approach is now changing, the official said. Even when the World Bank signals that delays could result in financing being redirected to other countries, ERD is no longer accommodating such pressure. Instead, preparatory work is now being completed before negotiations begin, leading to delays in several planned loans in the current fiscal year.

While this may reduce World Bank lending in the short term, it lowers the risk of losing grace-period benefits, the official added.

Bay Container Terminal: five years on paper, four in practice

The $650 million Bay Container Terminal project highlights how grace periods shrink in practice.

The loan agreement was signed in April 2025 with a five-year grace period. However, under the World Bank's repayment schedule, the first principal instalment is due on 15 February 2029, effectively reducing the usable grace period to about four years.

ERD officials said implementation has begun but remains slow, with disbursements falling short of expectations, further increasing the risk of grace-period erosion.

In a statement sent to The Business Standard on 21 December, World Bank Operations Manager Gayle Martin said, "The World Bank Group's IDA provides financing on highly concessional terms. This means that IDA credits have a near-zero interest charge. Repayments start after a 5- to 10-year grace period, and are paid over 30 to 40 years. The grace period starts from the date of approval of the financing."

Approved but unsigned projects add to the risk

ERD officials also flagged risks from projects approved by the World Bank board but still awaiting loan agreements. These include the Strengthening Institutions for Transparency and Accountability (SITA) Project, approved on 12 June 2025 for $250 million, and the Bangladesh Clean Air Project, approved on 18 June last year for $290 million.

The Bangladesh Private Investment and Digital Entrepreneurship Project shows how the pattern repeats. The World Bank approved $500 million for the project on 19 June 2020, while the loan agreement was signed on 13 April 2021, leaving the project with a four-year grace period.

According to ERD data, Bangladesh lost $440.15 million in grace-period benefits. Nearly a year elapsed before the agreement was signed, followed by further delays during implementation.

Project officials cited slow tender processes, delays in appointing procurement consultants and compliance with World Bank regulations — challenges they said could have been avoided with better preparation.

Why grace periods matter

ERD officials said grace periods are designed to allow projects to be completed and benefits realised before principal repayments begin. When grace periods shrink, repayments start early, raising debt-servicing costs, increasing budgetary pressure and straining foreign exchange reserves.

Many infrastructure and social sector projects do not generate immediate revenue. Shortened grace periods weaken key financial indicators such as Internal Rate of Return (IRR) and Net Present Value (NPV), while repayments must still be made in foreign currency amid global economic uncertainty.

Expert warning

M Masrur Reaz, chairman of Policy Exchange Bangladesh, said multilateral loans are considered concessional mainly because of low interest rates, long tenures and grace periods.

"When grace periods are missed, a major part of that advantage disappears even if interest rates remain low," he said. "Early repayments increase pressure on reserves, squeeze development spending and weaken long-term debt sustainability."

He added that structural reforms are needed, including stronger project preparation, better inter-agency coordination and closer alignment between board approval, loan signing and grace-period timelines.

The interim government’s proposed new pay scale for public servants could intensify inflationary pressures and strain the banking system, Bangladesh Bank (BB) Governor Ahsan H Mansur said yesterday.

“The salary hike will require borrowing more from the banking system. Is that going to help reduce inflation? No,” the governor said at an event on the implications of the LDC graduation for the banking system, organised by the International Chamber of Commerce-Bangladesh (ICCB) in Dhaka.

The government is planning a general salary increase, which will double the wage bill.

Speaking about the central bank’s efforts to tame inflation, Mansur said bringing down inflation is achievable, but will take time.

Bangladesh, he noted, has already reduced inflation from around 12.5 percent to about 8.3 percent. “Inflation has to come down. But we must give it time. We must be patient.”

However, he cautioned that the real challenge lies in breaking inflation expectations, which have been long-established.

“Historically, Bangladesh has never had low inflation,” he said, noting that inflation has typically hovered around 6 percent to 8 percent.

Claims of sustained high growth alongside low inflation, he added, were often more artificial than real.

“This is why interest rates cannot be low,” he said, adding that rates can only fall sustainably if non-performing loans are reduced sharply through accountability, good governance, and effective supervision.

“If we can reduce bad loans and lower expectations, why can’t we bring inflation down?” he asked.

He said inflation expectations are visible across the labour market, where workers routinely expect annual wage increases. In many factories, wages rise by 10 percent, 15 percent, or even 20 percent each year - not necessarily because productivity has increased, but because higher inflation is assumed.

“These expectations are deeply ingrained. We have to break that cycle,” he said. “Unless expectations change, inflation will not come down to 3 or 4 percent. And that will take time.”

The Dhaka Stock Exchange (DSE) today (27 January) decided to downgrade Desh Garments to the Z category from B category, after the company failed to disburse approved dividends to their shareholders.

In FY25, the company recommended a 3% cash dividend to their general shareholders other than sponsors and directors of the company.

According to the DSE, after declaring dividend in its board meeting and obtaining approval from general shareholders at the annual general meeting (AGM), the company failed to disburse the dividend to their shareholders within the stipulated timeframe.

As per listing regulations, listed companies must disburse declared or approved dividends within 30 days of approval at their AGM.

Due to the failure to disburse dividends on time, the DSE downgraded this company to the Z category.

A company falls into the Z category if the firm fails to hold an AGM, fail to declare any dividend based on annual performance, have not been in operation continuously for more than six months, or accumulate losses that exceed its paid-up capital after adjusting revenue reserve.

Yesterday, the share price of the company increased 1.97% to Tk113.80 on the Dhaka stock exchange.

A company official said, seeking anonymity that this issue will be resolved within a week. However, the official did not share how much has been disbursed to their shareholders within the stipulated timeframe.

In the July-September quarter, the company made revenue of Tk21.68 crore, which was Tk16.11 crore in the same period of the previous year.

In this quarter, the company made a profit of Tk3.62 lakh and its earnings per share stood at Tk0.04.

Its net asset value per share stood at Tk157.03 at the end of September 2025.

Anwar Galvanizing Limited continues to bleed in its core business amid weak construction demand and supply chain disruptions. Yet, strong gains from capital market investments have helped the listed company swing back to profit in the first half of the current fiscal year.

According to its half-yearly financial report, the company posted a profit of Tk9.11 crore with earnings per share (EPS) of Tk3.02. In the same period of the previous fiscal year, it recorded a loss of Tk5.45 crore and per-share loss of Tk1.81.

In a disclosure to the stock exchanges, the company said its profit turnaround was mainly driven by a sharp rise in non-operating income, which increased by Tk21.19 crore in the first half. Non-operating income in the second quarter alone rose by Tk8.89 crore, largely from stock market investments.

However, the company acknowledged that its operational performance remained under pressure. A downturn in demand in the construction sector, prolonged political unrest and disrupted supply chains adversely affected its gross profit margin during the reporting period.

Revenue in the half-year rose slightly to Tk30.38 crore from Tk28.89 crore a year earlier. After deducting operating expenses, the company incurred an operational loss of Tk8.34 crore.

On Tuesday, shares of Anwar Galvanizing closed at Tk92.30 each on the stock exchanges.

The trustee meeting of CAPM IBBL Islamic Mutual Fund was held on 27 January 2026, during which the trustees approved the accounts and unaudited financial statements of the fund for the second quarter ended 31 December 2025.

According to the approved unaudited report, the total net asset value (NAV) of CAPM IBBL Islamic Mutual Fund stood at Tk76.25 crore on a cost price basis, while the NAV based on market price amounted to Tk51.56 crore at the close of operations on 31 December 2025.

The NAV per unit of the fund was reported at Tk11.41 on a cost price basis and Tk7.71 on a market price basis, compared to the face value of Tk10 per unit.

The difference between the cost-based and market-based NAV reflects the impact of prevailing market conditions on the valuation of the fund's underlying investments during the period under review.

For the second quarter, the fund posted a net loss of Tk3.19 crore. As a result, the loss per unit stood at Tk0.48.

Gold rose on Tuesday as geopolitical uncertainty underpinned safe-haven demand, while silver surged 8 percent to hover near all-time highs.

Spot gold climbed 1.6 percent to $5,092.70 per ounce, as of 0710 GMT, after scaling a record $5,110.50 on Monday. It broke through the $5,100 mark for the first time in the previous session.

US gold futures for February delivery edged 0.1 percent higher to $5,088.40 per ounce.

“Trump’s disruptive policy approach this year is playing into the hands of precious metals as a defensive play. The threats of higher tariffs to Canada and South Korea are doing enough to keep gold a safe-haven choice,” said Tim Waterer, KCM Trade’s chief market analyst.

Escalating trade tensions on Monday, US President Donald Trump said he would raise tariffs on South Korean auto, lumber, and pharmaceutical imports to 25 percent, while criticising Seoul for failing to enact a trade deal with Washington.

This was after he threatened tariffs on Canada in the backdrop of a thawing relationship with China, following Canadian PM Mark Carney’s visit to the country earlier this month.

“(Gold’s rally) points to a material geopolitical, or uncertainty premium now embedded in gold prices, driven less by cyclical factors and more by the persistent uncertainty around geopolitics,” Christopher Wong, a strategist at OCBC said in a note.

A looming US government shutdown and Trump’s erratic policymaking pressured the greenback, making the dollar-priced gold cheaper for overseas consumers.

The Federal Reserve is expected to hold interest rates steady at its meeting beginning later in the day, amid the challenges posed by the Trump administration to US central bank independence. F

Spot silver jumped 6.1 percent to $110.19 an ounce, after hitting a record high of $117.69 on Monday. It has already surged more than 50 percent so far this year.

From a technical perspective, silver now appears expensive relative to gold, with the gold-to-silver ratio currently at a 14-year low, analysts at BMI, a unit of Fitch Solutions, said in a note.

With speculative buying leading the latest rally, BMI said, they now expect prices to ease in the coming months as supply tightness eases and industrial demand for silver starts to peak with a slowing Mainland Chinese economy.

Venezuela's interim president Delcy Rodriguez on Monday forecast a $1.4 billion bonanza from planned reforms to the oil sector aimed at drawing in foreign investors following the ouster of Nicolas Maduro.

Rodriguez projected oil investments would rise 55 percent over 2025 after a bill ending decades of tight state control on the energy sector is adopted by parliament.

"Last year, investment came to nearly $900 million and for this year, $1.4 billion in investments have been signed," claimed Rodriguez, who succeeded Maduro after his January 3 overthrow by US special forces.

Rodriguez was addressing a business audience as part of public consultations on plans to throw open the oil sector to private investment.

"We must go from the country with the planet's biggest (proven) reserves of oil to a giant in production terms," Rodriguez argued.

The interim leader is under pressure from President Donald Trump to give US oil companies access to Venezuela's rich crude deposits.

Trump backed her to take over from her former boss Maduro as long as she complies with his agenda.

Years of mismanagement and corruption drove Venezuela's output down from a peak of over 3 million barrels epr day (bpd) in the early 2000s to a historic low of 350,000 barrels daily in 2020.

It has since rebounded to around 1.2 million bpd.

The hydrocarbons bill currently before the National Assembly stipulates that private companies located in Venezuela would be able to extract oil without having to enter a joint venture with the state oil company PDVSA, which insisted on a majority stake.

Legislators endorsed it during a first reading last week and are expected to adopt it in the coming days.

Lack of investor confidence remains the biggest obstacle to developing Bangladesh's corporate bond market, and restoring trust requires strict regulatory action against issuers who fail to honour coupon payments, Bangladesh Bank Governor Ahsan H Mansur said yesterday.

Without restoring investor trust, any attempt to deepen the bond market would be futile, he said at a seminar titled "Bond Market Development in Bangladesh: Challenges and Recommendations", jointly organised by Bangladesh Bank and Bangladesh Securities and Exchange Commission (BSEC) in Dhaka.

The governor pointed out that weak enforcement of existing rules has badly damaged confidence, particularly in cases where issuers have failed to pay bond coupons without facing consequences.

In developed markets, he said, even a single missed coupon payment is treated as a serious default that triggers regulatory action and reputational damage. "But in our country, there is hardly any consequence if a company fails to pay bond coupons. No one seems to care."

He added, "Such regulatory laxity discourages investors from participating in the market. Restoring trust would require not only stricter rules but also effective supervision and enforcement to protect investors."

He noted that three macroeconomic factors are critical for bond market development: stability, lower interest rates and controlled inflation. "Without progress on these fronts, the bond market cannot grow."

BSEC and DSE sources said several issuers, including Sea Pearl Beach Resort, Regent Textile and a number of banks, have failed to make timely coupon payments, yet punitive action has been limited.

Questions have also been raised over compliance issues surrounding certain bond issuances, such as the Beximco Green Sukuk, further weakening investor confidence.

At the seminar, Mansur formally unveiled a concept note on bond market development prepared by a high-level committee formed following the chief adviser's directive. The concept note outlines the current challenges facing the bond market and proposes a phased reform roadmap extending to 2030.

Excessive reliance on bank loans

The governor said the central bank may consider discouraging excessive reliance on bank loans. If a company or business group seeks loans beyond the single borrower exposure limit, banks could suggest raising funds through bonds or equity instead, he added.

However, he cautioned that such measures should be implemented carefully and only alongside reforms that make the bond market more accessible and attractive. He also highlighted several pull factors to attract issuers, including tax incentives, shorter issuance timelines and lower costs.

Govt should introduce funded pension schemes

According to Mansur, the government and the business community must take the lead in developing the bond market, but the first step is to make it more protective and user-friendly so that both issuers and investors feel confident participating.

To broaden investor participation, Mnsur said the government should introduce funded pension schemes instead of non-funded ones, as pension funds can act as stable, long-term investors in bonds.

He also suggested forming a central coordination committee, supported by several sub-committees, to improve cooperation among regulators and ensure effective implementation of reforms.

Another proposal put forward by Mansur was allowing national savings certificates to be traded in the secondary market. He argued that if savings certificates become tradable, the overall bond market size could double, while giving savers greater liquidity and flexibility.

Bank loans still favoured: BSEC chairman

BSEC Chairman Khondoker Rashed Maqsood said bank loans remain easier to obtain than capital market financing in Bangladesh, which explains why companies continue to rely heavily on banks.

He said non-performing loans have risen partly due to mismatches between loan tenures and funding sources. The concept note, he said, recommends encouraging both the government and corporates to tap the capital market more actively.

After gathering feedback from stakeholders, BSEC plans to finalise new regulations to support bond market development, he added.

Govt working to attract foreign investors: Finance secretary

Finance Secretary Khairuzzaman Mozumder said that although the longstanding issue of double taxation on bonds has been resolved, new challenges have emerged in secondary trading due to frequent changes in ownership.

He described these as largely software-related problems that cannot be addressed manually at every stage, stressing the need for coordination between the National Board of Revenue and BSEC.

He also said the government is working to attract foreign investors to local currency bonds and has formed a committee to introduce secondary trading of savings certificates.

Private sector caution against restrictions

Uzma Chowdhury, corporate finance director of Pran-RFL Group, said that restricting bank loans could harm businesses if alternative financing channels are not sufficiently developed.

She argued that many private sector firms are reluctant to go to the capital market because they are reluctant to share profits, disclosure requirements and restrictions, and that further constraints could discourage investment rather than promote bond issuance.

Mashrur Arefin, president of the Association of Bankers Bangladesh and managing director of City Bank, stressed the importance of allowing foreign investors to freely repatriate bond investments.

He said bond market development would remain limited unless the policy rate is reduced and valuation mechanisms in the secondary market are simplified for retail investors. Imposing caps on private sector borrowing without a functional bond market, he warned, would only increase pressure on businesses.

80% debt financing from banks: Concept note

According to the jointly prepared concept note, Bangladesh's financial system remains overwhelmingly bank-centric, with about 80% of debt financing coming from banks.

Around 70% of bank deposits mature within a year, creating maturity mismatches and liquidity risks. The corporate bond market remains underdeveloped due to the dominance of bank financing, high issuance costs, complex regulations, weak appetite for non-sovereign debt, poor enforcement and the crowding-out effect of high-yield government savings certificates.

As of June 2025, Bangladesh had only 16 listed corporate bonds, 14 of which were issued by banks mainly to meet regulatory capital requirements. The total corporate bond market size stood at Tk33.34 billion, accounting for just 0.06% of GDP, compared to 5.73% for government bonds. In contrast, peer countries such as Malaysia, South Korea and China have bond market-to-GDP ratios exceeding 100%.

The concept note recommends phased reforms, including streamlining issuance procedures, offering targeted tax incentives, expanding the investor base, strengthening legal frameworks and improving secondary market liquidity through coordinated regulatory action. These reforms are planned over the short term by December 2026, the mid-term by 2027 and the long term by 2030.

The national committee tasked with restructuring Bangladesh's tax system has submitted a reform agenda to Chief Adviser Muhammad Yunus, proposing major structural changes to boost revenue mobilisation and reduce the economy's heavy reliance on indirect taxation.

The report, prepared by an 11-member taskforce led by Policy Research Institute (PRI) Chairman Dr Zaidi Sattar, sets ambitious targets to raise the tax-to-GDP ratio to 12% by 2030 and 15-20% by 2035, from the current level of around 10%.

It also recommends rebalancing the tax mix by increasing the share of direct taxes to 50% from the existing 30%, signalling a shift towards a more equitable and growth-friendly tax regime.

Titled "Tax Policy for Development: A Reform Agenda for Restructuring the Tax System", the report submitted today (27 January) describes Bangladesh's tax system as unnecessarily complex, inefficient and overly dependent on indirect taxes.

It argues that incremental or piecemeal changes will not be enough to support long-term economic transformation, calling instead for fundamental and structural reforms.

The taskforce identified 55 policy issues, with seven flagged as immediate priorities.

Key recommendations include simplifying the tax system through greater digitalisation and automation, introducing artificial intelligence-based risk analysis, expanding risk-based audits and rationalising tax incentives.

The report also proposes a strategic shift away from trade-based taxation towards stronger domestic tax mobilisation.

On customs reforms, the report suggests modernising the tariff structure and applying equal effective protection for export-oriented and import-substituting industries. It also proposes moving away from port-based enforcement towards post-clearance audits and argues that a separate valuation database for cargo clearance is unnecessary.

In the area of value-added tax, the taskforce recommends a gradual transition from the current multi-rate VAT regime to a single-rate system, saying this would reduce complexity and lower compliance costs for businesses.

Receiving the report, Chief Adviser Yunus said the interim government had limited time but intended to initiate the implementation process.

Finance Adviser Dr Salehuddin Ahmed said the report would serve as a guideline for improving both revenue collection and governance.

Officials from the Internal Resources Division noted that the document clearly diagnoses existing weaknesses in the tax system and offers a roadmap for reform.

Revenue up Tk23,000cr

Meanwhile, the National Board of Revenue, in a detailed briefing sent to Chief Adviser Yunus last Sunday, said its reform initiatives have produced positive results in revenue collection, with government revenue increasing by Tk23,020 crore in the first six months of the current fiscal year compared to the same period a year earlier.

The revenue authority stated that total collections between July and December 2025 reached Tk1,85,229 crore, attributing the increase to structural reforms in revenue management, digitalisation, measures to curb tax evasion and taxpayer-friendly initiatives.

However, economists and former officials have questioned the claim, arguing that the higher growth rate largely reflects a low base in the previous fiscal year rather than the immediate impact of reforms.

According to experts, it was too early for reforms to have such an effect.

Dr Mohammad Abdur Razzaque, chairman of Research and Policy Integration for Development (RAPID), told The Business Standard, "Even if some reforms have been undertaken, their results would not come this quickly. It would take more time."

"The growth we are seeing is mainly due to low revenue collection last year. That low base is why the current growth rate appears higher," he said.

As per NBR data, revenue collection during the first half of FY2024-25 (July-December) did not increase; instead, it declined by about 1%.

A former senior NBR official, speaking on condition of anonymity, echoed that view, saying, "The revenue growth being observed is not due to new reforms."

He rather questioned whether any effective reform had been implemented over the past year.

Structural reforms, legal changes

In its briefing, the NBR highlighted the separation of revenue policy from revenue administration as a major milestone. It noted that the issuance of the Revenue Policy and Revenue Management (Amendment) Ordinance, 2025 had formally divided policy formulation from implementation.

The decision was approved at a meeting of the National Implementation Committee for Administrative Reforms (Nicar), chaired by the chief adviser, paving the way for long-awaited structural reforms within the NBR.

The revenue authority also said the government had moved to curb tax exemptions by introducing the Tax Expenditure Policy and Management Framework, which has been published in the official gazette.

Amendments to the Income Tax Act, the Customs Act and the VAT Act have withdrawn the NBR's authority to grant tax exemptions, it said, adding that any future exemptions will require parliamentary approval.

Digitalisation drive

The NBR said it has undertaken a major digitalisation programme under the World Bank-funded Strengthening Domestic Revenue Mobilisation Project, with an estimated cost of nearly Tk1,000 crore.

The project aims to modernise income tax, VAT and customs operations. Measures such as e-returns, online payments, e-refunds, VAT smart invoices and risk-based audits have reduced hassle for taxpayers, the authority said.

In customs, the launch of the Bangladesh Single Window has enabled certificates, licences and permits from 19 agencies to be issued online. Around 900,000 certificates have been issued so far, with most applications processed within one hour to one day, according to the NBR.

In the VAT sector, a special registration drive led to the issuance of 131,000 new VAT registrations in December 2025 alone, raising the total number of registered entities to 775,000.

The NBR said mandatory online submission of income tax returns has resulted in more than 34 lakh e-returns being filed so far.

An email-based one-time password system has also been introduced for expatriate Bangladeshis, making overseas filing easier. More than 5,000 expatriate taxpayers have already used the facility, it said.

The introduction of a risk-based audit system has made the audit selection process more transparent, the authority added.

Duty, tax relief measures

The government has also provided duty and tax relief in several areas, the NBR said.

These include excise duty exemptions on air tickets and related services for Hajj pilgrims, reduced customs duty and advance income tax on date imports ahead of Ramadan, and duty-tax relief on essential commodities.

Customs duty on mobile phone imports has been cut from 25% to 10%, resulting in an overall import duty reduction of up to 60%, according to the NBR.

The authority said the benefits of these measures were already visible in higher revenue collection, increased taxpayer confidence and a more business-friendly environment, and would help raise the revenue-to-GDP ratio over the medium and long term.

The National Board of Revenue (NBR) has said its reform initiatives have produced positive results in revenue collection, with government revenue increasing by Tk23,020 crore in the first six months of the current fiscal year compared to the same period last year.

In a detailed briefing sent to Chief Adviser Muhammad Yunus on Sunday (25 January), the revenue authority attributed this to structural reforms in revenue management, digitalisation, measures to curb tax evasion and taxpayer-friendly initiatives.

According to the NBR, total revenue collection from July to December 2025 stood at Tk1,85,229 crore, marking a notable rise from the corresponding period of the previous fiscal year.

One of the major milestones of the reform process, the NBR said, is the decision to separate revenue policy from revenue administration.

The briefing noted that the issuance of the Revenue Policy and Revenue Management (Amendment) Ordinance, 2025 formally separated policy formulation from implementation.

The decision's approval came at a meeting of the National Implementation Committee for Administrative Reforms (NICAR), chaired by the chief adviser, paving the way for long-awaited structural reforms within the NBR.

Major investment in digital revenue system

The NBR said that to fully digitise revenue management, a World Bank-funded project titled Strengthening Domestic Revenue Mobilisation Project (SDRMP) has been undertaken at a cost of nearly Tk1,000 crore. The project aims to modernise income tax, VAT and customs operations.

The introduction of e-returns, online payments, e-refunds, VAT smart invoices and risk-based audits has reduced taxpayer hassle, the NBR added.

Parliamentary approval mandatory for tax exemptions

To move away from tax exemptions, the government has formulated the Tax Expenditure Policy and Management Framework and published it in the official gazette, the NBR said.

Amendments to the Income Tax Act, Customs Act and VAT Act have withdrawn the NBR's authority to grant tax exemptions, it added, mentioning that from now on, no tax exemption can be granted without parliamentary approval.

Customs and VAT

With the launch of the Bangladesh Single Window (BSW), certificates, licences and permits from 19 agencies are now being issued online.

So far around 900,000 certificates have been issued digitally, with most applications processed within one hour to one day, the NBR said.

In the VAT sector, a special registration campaign led to the issuance of 1,31,000 new VAT registrations in December 2025 alone, raising the total number of VAT-registered entities to 775,000.

Response to e-returns in income tax

Mandatory online income tax return submission has resulted in more than 34 lakh e-returns being filed so far, the NBR said.

An email-based OTP system for expatriate Bangladeshis has made overseas filing easier, with over 5,000 expatriate taxpayers already using the facility, it added.

The NBR stated that the introduction of a risk-based audit system has also made the audit selection process more transparent.

Duty and tax relief for business and public interest

The government has granted excise duty exemptions on air tickets and related services for Hajj pilgrims, reduced customs duty and advance income tax on date imports ahead of Ramadan, and provided duty-tax relief on essential commodities.

Additionally, customs duty on mobile phone imports has been reduced from 25% to 10%, resulting in an overall import duty reduction of up to 60%.

According to the NBR, the benefits of these reforms are already being reflected in higher revenue collection, increased taxpayer confidence and a more business-friendly environment.

The briefing noted that in the medium and long term, these reforms will play a crucial role in increasing the revenue-to-GDP ratio.

A move by the National Board of Revenue to mandate full automation for exporters' raw material usage and activities from 1 January has apparently backfired, with businesses reporting severe software glitches, systemic delays, and a persistence of the very harassment the system was designed to eliminate.

While the NBR claims these issues are minor teething problems that will be resolved over time, exporters argue that the Customs Bond Management System was launched without adequate preparation. In some instances, approval processes that were supposed to be streamlined are now taking over a fortnight, causing many to miss LC deadlines.

Saleudh Zaman Khan, managing director of NZ Apparel, told TBS, "It is taking up to two weeks to secure a UP (utility permission). Consequently, LC deadlines are expiring, and we cannot supply local garment manufacturers on time, which ultimately hampers the country's final exports."

Exporters are allowed to import raw materials duty-free under the bonded warehouse facility. Even when raw materials are sourced locally, suppliers must obtain a UP from the Customs Bond Commissionerate to confirm that goods produced from imported inputs have been fully exported. The bond office verifies data from Bangladesh Bank and NBR units before issuing approval.

Previously, the process was manual, which businesses said left room for irregularities and harassment.

Industry insiders cite several problems with the bond automation, including the absence of Bangladesh Bank's dashboard integration, lack of coordination with the NBR's duty drawback office, unusually slow performance, missing bills of entry, and incomplete display of raw material data.

While Mohammad Hasmat Ali, commissioner of Customs Bond Commissionerate (Dhaka South), maintained that only "minor issues" are being addressed, a senior official from the Dhaka North office admitted that the problems are significant enough that staff are occasionally forced to revert to manual solutions.

Responding to questions at a press conference on Sunday, NBR Chairman Abdur Rahman Khan admitted there were initial complexities but said these would be corrected over time.

Some business leaders also suggested that resistance from a section of customs officials – particularly at junior levels – and certain commercial officers within exporting firms may be contributing to the difficulties. They alleged that automation has reduced opportunities for "undue advantages" for some under the manual system, creating reluctance to fully embrace the digital process.