For the first time, Bangladesh is preparing to borrow directly from investors around the world, aiming to raise up to $1 billion by December through a sovereign bond. It is a real milestone, but it comes at a price: the bond would likely cost about 8% a year in interest, roughly four times what the country pays the World Bank for its cheapest loans.

For Finance Minister Amir Khosru Mahmud Chowdhury, the bond is part of a bigger shift. At World Investor Week in Dhaka on 4 October, he announced that the government had ended its IMF loan programme because it found the conditions unacceptable. Bangladesh, he said, would no longer run its economy on money from the IMF, and would instead raise funds through bond and stock markets at home and abroad. The country needs around $50 billion a year, far more than development lenders can provide.

The argument has real force: development lenders attach politically painful conditions, and their money arrives slowly. The government also says it will be careful not to overpay.

The minister also deserves credit for taking Bangladesh's case directly to Wall Street. In late September he and Prime Minister Tarique Rahman met BlackRock, PIMCO, TPG, Macquarie, GoldenTree, and MetLife at a JP Morgan breakfast in New York, and JP Morgan has since been approved in principle as lead manager. Opening that door is the hard first step; keeping investors' confidence will depend on what follows at home.

"Compared with the World Bank's cheapest loans, the bond would cost roughly $60 million more a year, or about $300 million over five years, for every $1 billion borrowed"

The market may see things differently. Many investors treat an IMF programme as a seal of approval: proof that someone independent is checking the books. Without it, they are likely to ask for higher interest. Ending the programme may also affect some World Bank and ADB budget support tied to IMF reviews. And $1 billion covers only a small part of the $50 billion a year the minister says the country needs.

A bond is simply a loan that can be bought and sold. The government borrows from investors and promises to pay interest every year and repay the full amount on a fixed date.

If Bangladesh sells a five-year bond for $1 billion at 8%, it receives $1 billion today, pays $80 million in interest each year, and repays the whole $1 billion at the end of year five.

Until now, Bangladesh has borrowed abroad mainly from development lenders such as the World Bank, ADB, and Jica, whose cheap, long-term money comes tied to conditions and projects. Bond money comes from private investors, can be used more freely, and is priced by the market.

The interest rate has two parts.

Part one: the starting price of money. Investors measure every loan against US Treasury bonds, issued by the world's safest borrower. Five-year Treasuries now pay about 5%, up sharply from about 4.4% in August, which makes everyone's borrowing more expensive.

Part two: the extra charge for risk. Investors then add a premium for lending to Bangladesh instead of the US, much as a bank charges a new customer with a few warning signs more than one with a long, clean credit history.

Bangladesh looks like that new customer, for three reasons:

It has never issued a sovereign bond. There is no track record for investors to judge.
Its credit rating is low. The major agencies grade Bangladesh B+ or B2, below investment grade, and two warned this year that it could fall further.
It has warning signs at home. Its banks hold large bad loans, and ending the IMF programme removes a seal of approval many investors look for.
Together, these add roughly 3 percentage points. On top of the US rate of about 5%, Bangladesh is likely to pay about 8% a year, give or take half a point, and more likely at the higher end without an IMF programme.

Here is what it costs each year to borrow $1 billion from each source:

Lender

Interest rate

Yearly interest on $1 billion

When the money must be repaid

World Bank, cheapest window (IDA)

2.13%

about $21 million

Over 25 years, starting after 5 years

World Bank, standard window (IBRD)

about 4.5% to 5% (estimate)

about $48 million

Over many years, in instalments

Global bond (5-year bond)

about 8% (estimate)

about $80 million

All at once, at the end of 5 years

Compared with the World Bank's cheapest loans, the bond would cost roughly $60 million more a year, or about $300 million over five years, for every $1 billion borrowed.

The repayment schedule matters as much as the rate. A World Bank loan is paid off slowly over decades, like a home loan; a bond falls due in full on one day. If that day arrives when reserves are low or markets are nervous, refinancing can become very difficult. Bangladesh's foreign debt repayments are already at a record high and are expected to keep rising until about 2029.

Two loans approved on 7 October show these prices. For fuel and gas imports, the government is borrowing $3.1 billion from the International Islamic Trade Finance Corporation at about 5.4%, but only for six months at a time. The Asian Development Bank is lending $200 million for rural power lines around Dhaka at about 4.3% over 25 years. Even after leaving the IMF, Bangladesh still depends on such lenders.

Bangladesh could also borrow in Chinese yuan through a Panda bond in China, or in Japanese yen through a Samurai bond. With interest rates much lower in China and Japan, these look far cheaper at first glance.

A committee is already studying a Panda bond, and the central bank governor has backed a small first issue of about $50 million. Pakistan, rated lower than Bangladesh, borrowed about $250 million in yuan for three years at just 2.5% in May 2026, and the issue was five times oversubscribed.

There are two catches.

First, the low rate usually needs a guarantor. Pakistan's bond was backed by the ADB and the Asian Infrastructure Investment Bank. In Japan, investors generally lend to countries like Bangladesh only with a guarantee from a state bank such as JBIC, as with Côte d'Ivoire and Mexico. Without a guarantee, much of the saving disappears.

Second, currency risk. If the yuan or yen rises against the taka and the dollar, the debt becomes more expensive to repay. A currency swap can protect against this, but it costs money and pushes the real cost back up to roughly 5.5% to 6.5% in dollar terms (estimate).

Option

Headline rate

Needs a guarantor?

Real cost after currency protection (estimate)

US dollar bond

about 8%

No

about 8%

Panda bond (yuan)

about 2.5% to 3%

Usually, yes

about 5.5% to 6.5%

Samurai bond (yen)

about 2.7% to 3.3%

Yes, in practice

about 5.5% to 6.5%

So, Panda and Samurai bonds can genuinely lower costs, mainly because of the guarantee rather than the currency.

If the World Bank is so much cheaper, why issue a bond? Because it buys things the World Bank cannot provide.

A price tag for Bangladesh. A traded government bond sets a reference price, helping Bangladeshi banks and companies borrow abroad.
New lenders. Global pension funds, insurers and investment firms could lend to Bangladesh for the first time.
Preparing for life after cheap loans. Bangladesh is due to leave the UN's list of Least Developed Countries in November 2026, though it has asked for a delay until 2029 and a decision is pending. Either way, cheap development loans will shrink over time, and it is better to learn market borrowing while things are calm than in a crisis.
Discipline. A bond's price moves every day. If reforms stall, borrowing costs rise in public view.
What the bond should not be is a replacement for World Bank and ADB money. A low-rated country cannot swap about $4 billion a year of cheap, long-term loans for expensive, short-term market debt. Sri Lanka leaned heavily on market borrowing and defaulted in 2022.

The bond is worth doing if it is done carefully. Five rules would help keep the cost down:

Replace the IMF's seal of approval with its own. Investors will want other proof of good management: a published debt and reform plan, regular and honest economic data, and clear progress on the banks.
Start small. $500 million to $750 million is enough to set a price without taking on too much expensive debt.
Use the money wisely. Pay off more expensive debts or strengthen reserves, rather than fund day-to-day spending.
Seek guarantees for Panda and Samurai bonds. Small, guaranteed yuan and yen bonds can lower the average cost of borrowing.
Keep fixing the basics. The cheapest way to borrow is to become a safer borrower: collect more tax, clean up the banks and restore growth.
Done this way, Bangladesh's first global bond can open a door. Done in a hurry, it becomes an expensive way to borrow money the country could have had for less.

Should Bangladesh deliberately weaken the taka to make exports more competitive? No. Policymakers should not defend an exchange rate that no longer reflects economic realities. The objective should be a market-responsive taka that supports stability without aggravating inflation or undermining confidence.

The argument for depreciation appears straightforward. A weaker taka raises the local-currency value of dollars earned by exporters and can make Bangladeshi goods cheaper for overseas buyers. Export competitiveness depends on production costs, productivity, quality and delivery reliability, not simply on the number of taka received for a dollar.

Consider a garment exporter earning $100. At Tk 85 per dollar, the receipt is Tk 8,500; at Tk 120, it becomes Tk 12,000. But profit does not rise by the same proportion. Imported cotton, yarn, chemicals, fuel and machinery also cost more in taka. Overseas buyers may negotiate lower dollar prices, capturing part of the exchange-rate benefit. The net gain depends on local value addition, imported input costs, wages and bargaining power.

Bangladesh’s experience since 2022 underlines the point. The taka depreciated amid pressure on foreign exchange reserves. Yet depreciation alone could not guarantee export growth. Global demand, freight and energy prices, access to imported inputs and buyers’ pricing decisions influenced performance. A cheaper currency can provide breathing space, but it cannot replace productivity or reliable logistics.

Nor does the dollar rate tell the story. Bangladesh trades with China, India, the European Union, Japan and the United Kingdom. The nominal effective exchange rate (NEER) measures the taka against a weighted basket of trading-partner currencies. The real effective exchange rate (REER) adjusts this measure for relative prices and inflation, offering a better indication of price competitiveness.

If Bangladesh’s prices and production costs rise faster than those of competitors, depreciation’s advantage can erode. Conversely, nominal appreciation need not damage competitiveness as much if domestic costs rise more slowly. Maintaining an artificially strong currency carries risks. When the exchange rate is held below a sustainable level despite market pressure, foreign currency can become scarce, import payments may be disrupted and reserves come under strain.

But allowing the taka to weaken without restraint would be costly. Bangladesh relies on imported fuel, food commodities, raw materials and capital goods. Depreciation can raise domestic prices, erode household purchasing power and increase manufacturers’ costs. It can also make repayments more expensive for businesses with foreign-currency liabilities. With inflation elevated, policymakers cannot treat depreciation as a painless export subsidy.

The Bangladesh Bank’s move to a crawling-peg arrangement in May 2024, followed by greater freedom for banks to negotiate foreign-exchange rates, marked a shift towards a more market-responsive system. The priority should be consistent implementation, transparent price discovery and adequate liquidity, not defending an arbitrary rate.

Exchange-rate policy must work alongside credible monetary and fiscal policies. A weaker taka cannot correct poor export diversification, high logistics costs, energy disruptions or low productivity. Better ports, predictable access to imported inputs, stronger skills and reliable infrastructure can improve competitiveness without imposing the full burden on consumers. The question is not whether the taka should lose value against the dollar. It is whether the exchange rate can adjust to changing conditions without disorderly volatility. Authorities should address market dysfunction while allowing prices to reflect underlying conditions, rather than resisting every depreciation or appreciation.

Bangladesh needs neither a deliberately weak taka nor an artificially strong one. It needs a responsive currency, supported by sound macroeconomic management and structural reform. Export strength will depend less on how many taka buy a dollar than on how efficiently Bangladesh produces, delivers and competes.

The writer is an economic analyst

The International Monetary Fund (IMF) has delivered a sobering economic forecast for Bangladesh, showing neither leniency nor ungrounded optimism.

While the government continues to project robust economic expansion, expecting growth to accelerate to 8.5% by FY31 and turn Bangladesh into a $1 trillion economy by 2034 (doubling its current size), the IMF's latest outlook presents a stark contrast. The IMF projects that Bangladesh's growth will slow to merely 3% by FY31. Worse still, growth over the preceding three years is expected to remain below 3%, less than half the government's target, leaving Bangladesh with the lowest growth rate in South Asia through FY31.

The root cause: A crisis of governance

What is driving this severe deceleration? The answer lies in two words: governance crisis.

While this diagnosis is far from new, the depth of the crisis is clearly mapped out in the World Bank's Worldwide Governance Indicators (WGI). Good governance is not an accidental byproduct of development; it is the essential foundation of any economy. It functions as the invisible infrastructure that converts potential into sustainable prosperity.

Why is governance so important for an economy to grow?

As the World Bank highlights in its WGI report, governance, defined as the traditions and institutions by which authority in a country is exercised, plays a central role in shaping development outcomes. A substantial body of research demonstrates that inclusive, accountable institutions drive higher growth, foster stronger public services, and expand opportunity. When governance fails, these development gains inevitably collapse.

Bangladesh's current economic stagnation testifies to a system struggling to perform its most fundamental duties. The IMF's grim projection is a direct reflection of this governance breakdown.

Measuring the institutional decay

Let's have a quick look at how Bangladesh has performed in the World Bank's governance indicators which provide annual composite indicators summarising six dimensions of governance: voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption.

Take it one by one. Among the six indicators, Bangladesh slightly improved in political stability and government effectiveness. But the overall score is not inspiring. In political stability, Bangladesh scored 49.11 out of 100 in 2025 from 42.03 in 2015. Government effectiveness too slightly improved to 43.24 in 2025 from 41.19 in the last one decade. Its score slightly declined in the other four indicators. The overall scores in voice and accountability, political stability and regularity quality remained in between 39 to 49 out of 100. Among South Asian countries, Bangladesh is ahead of only Afghanistan and Pakistan in most of the indicators. The countries having an effective governance system score above 90. [See the infographic]

The cumulative effect of the poor score in the above five indicators has made controlling corruption a herculean task with Bangladesh always scoring lowest. In 2015, it scored only 26.33 out of 100, which increased to 28.20 after a decade. Bangladesh's failure to curb corruption is also reflected every year on the Corruption Perception Index published by Transparency International, in which Bangladesh is also bracketed among the world's most corrupt countries underscoring how systemic graft drains public resources, erodes institutional capacity, and weakens the state's economic foundation.

At the heart of unbridled corruption is a compromised judicial framework. The World Justice Project's Rule of Law Index which evaluates police, courts, and correction systems, ranks Bangladesh near the bottom. Over the past decade, Bangladesh's score has hovered between 0.30 and 0.34 (out of 1.00), lagging well behind the global average (0.47–0.50) and the regional South Asian average (0.36–0.39). With courts overwhelmed by millions of pending cases, maintaining law and order remains improbable, leaving corruption to flourish unabated.

The above scores portray a fragile state of Bangladesh's governance. Vulnerability and maladministration in the banking sector, fiscal deficits, revenue shortfalls, debt traps, poor tax-GDP ratio, persistent high inflation, market syndicate and extortion, stagnant foreign direct investment, private sector constraints, regulatory red tape are among the fallouts of the governance crisis. Ultimately it is ordinary citizens and local businesses who bear the financial brunt of these failures.

Extractive institutions and the reform paradox

Reaching the ambitious target of a $1 trillion economy by 2034 requires sweeping, fundamental structural shifts. Yet, successive reform attempts have routinely lost momentum. Current policy adjustments lack the depth needed to rebuild decaying institutions.

Institutional economists advocate for actively building and reforming institutions. The necessity of institutions for economic growth is loud and clear. They believe that markets cannot function efficiently in a vacuum. Institutions set the "rules of the game" that dictate whether an economy will flourish or stagnate. Four prominent economists-- Douglass North, Daron Acemoglu, James Robinson and Simon Johnson who won Nobel for their groundbreaking institutional analysis argue that institutions are the fundamental cause of long-term economic growth, far outweighing factors like geography or culture.

The World Bank's governance report speaks for inclusive institutions for growth. Unfortunately, in Bangladesh, political and economic institutions turned into extractive institutions, concentrating political and economic power within a small, unconstrained group of elites. That elite group exploits the system to extract wealth from the general population for their own benefit.

Reversing this trajectory requires unyielding, uncompromising reform to transition toward inclusive institutions.

Band-aids on a deep wound

In practice, meaningful reform remains elusive. Dr Zahid Hussain, former Lead Economist at the World Bank's Dhaka office, notes that while some efforts have been made, progress remains severely constrained.

"In banking, some work has gone into standing up the consolidated bank, and that is the one big step toward resolving distressed institutions. But most of the central bank's circulars — on rescheduling, on emergency liquidity — are not reforms; they are band-aids that cover the bleeding," he observes.

He says governance helps explain why Bangladesh is performing worse than comparable countries despite the various crises unfolding around the world. After all, those countries are operating in the same global environment. They are facing many of the same external shocks, yet their economic performance is better than ours.

Emphasising political reforms the economist says the economy's structure stands on the political structure; if the political equilibrium does not change, shifting the economic one is very hard—both in how fast the economy grows and in who enjoys the gains.

"And look at where the politics has gone. Search the term "political settlement" on Google Trends and you will see it spike after August 2024 and then fade to almost nothing. All that intense talk of a new political settlement has gone quiet—not because we achieved one, but because we did not, and perhaps we have given up hope for it."

In the FY27 budget speech last June, the finance minister outlined ten core priorities—placing the issue of building transparent, efficient, and accountable institutions and administration dead last at number ten.

Metaphorically speaking, Bangladesh governance system needs organ transplant to remove structural malaise acting as deadliest pathogen crippling institutions. But what if reform measures are acting as band-aids as noted by economist Zahid Hussain? Will it cure the failing system which is urgently needed overhaul?

When a nation fails to disrupt the vicious cycle of extractive institutions, the inevitable outcome is clearly foretold in Acemoglu and Robinson's seminal work: Why Nations Fail.

The International Monetary Fund (IMF) this week cut its growth forecast for Bangladesh to 3.2 percent for the current fiscal year, close to its 3.4 percent projection for global growth in 2027. If realised, it would be the lowest GDP growth Bangladesh has recorded in 37 years.
The World Bank had earlier cut its forecast for fiscal year 2026-27 to 3.4 percent, and the Asian Development Bank (ADB) in September projected 4 percent growth. Both are well below the government target of 6.5 percent for FY27.

All three agencies expect inflation to stay high after four years of elevated prices. The IMF projects average inflation of 10.9 percent for the current fiscal year.

Economists said the downgrades should be taken seriously. They pointed to weak investment, persistent inflation, energy shortages and weaknesses in the banking sector.
They said high interest rates and rising production costs are holding back growth, while high non-performing loans hurt businesses and low revenue limits how much the government can spend on public investment.

Fahmida Khatun, distinguished fellow at the Centre for Policy Dialogue (CPD), a local think tank, said the estimates “point to a prolonged slowdown and a fragile recovery”.

Ashikur Rahman, principal economist at the Policy Research Institute of Bangladesh (PRI), said the revisions did not surprise him.
In the current situation, growth in FY27 will be low. Recovery will depend on how quickly energy supply improves, investment returns and inflation eases. The government should restore confidence with predictable policies and faster business approvals.
Fahmida Khatun Distinguished fellow at CPD
He put growth for FY27 at around 3-4 percent and average inflation at roughly 9-11 percent, calling them “judgement-based estimates”.
Ashikur saw little basis for expecting the 6.5 percent target to be met without a substantial improvement in investment and productive capacity.

Selim Raihan, executive director at the South Asian Network on Economic Modeling (SANEM), said the government’s growth target “now looks increasingly detached from economic realities”.

He expects growth of 3.5-4 percent and average inflation of about 9-10 percent, with upside risks from energy prices, exchange rates and domestic costs.

Kazi Iqbal, research director at the Bangladesh Institute of Development Studies (BIDS), said the economy is under stress and inflation is weighing more heavily on the poor.He said spending more under the Annual Development Programme (ADP) is the only short-term way to lift growth.

The weakness in growth is not the result of one temporary shock. Private investment has remained stagnant, private-sector credit growth is exceptionally weak, and high interest rates have raised the cost of doing business.
Selim Raihan Executive director of SANEM
‘RESTORE CONFIDENCE’

CPD Distinguished Fellow Fahmida said recovery in FY27 will depend on how quickly energy supply improves, investment returns and inflation comes under control.

She said, “The government should restore confidence with predictable policies and faster, simpler business approvals.”

The economist added that the government should strengthen banks through transparent loan classification and recovery or resolution of insolvent lenders, while preserving sound borrowers’ access to credit.

“Reliable energy requires better planning, domestic exploration, efficiency and transmission investment. Public funds should support well-prepared projects with clear returns,” said Fahmida.

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According to her, revenue reforms can fund productive investment and targeted aid for low-income households.

“These measures will not produce an immediate rebound. But without progress, lower investment, weak job creation, and high inflation may continue to reinforce one another,” she commented.

‘FREE UP CREDIT FOR BUSINESS’

Selim said the broad message of the forecasts is that Bangladesh is experiencing unusually weak growth, made worse by persistently high inflation. If realised, the IMF projection of 10.9 percent inflation would mean another year of serious erosion in household purchasing power.

“Bangladesh is therefore facing an uncomfortable combination: businesses are struggling with weak demand, high financing and energy costs, while households continue to face rising living costs,” he said.

“The weakness in growth is not the result of one temporary shock. Private investment has remained stagnant, private-sector credit growth is exceptionally weak, and high interest rates have raised the cost of doing business,” he said.

“The energy shortage has become a binding constraint for many industries, while uncertainty over gas and electricity supply makes firms reluctant to undertake new investment.”

Selim, also an economics professor at Dhaka University, said weak banks have further damaged lending, while low revenue is forcing the government to borrow heavily from banks, potentially squeezing private-sector credit.

“Political uncertainty, concerns over law and order, and policy unpredictability are also affecting business confidence.”

We are confronting more than a temporary slowdown: Banking distress, energy shortages and weak fiscal capacity are constraining investment, while high inflation continues to erode household purchasing power. The WB assessment reinforces this diagnosis.
Ashikur Rahman Principal economist of PRI
“These problems reinforce each other. Weak investment reduces growth and employment; weaker growth constrains revenue; low revenue increases government borrowing; and greater government borrowing can further restrict financing for private investment.”

Selim said the slowdown should not be treated as a cyclical downturn, because it reflects structural and institutional weaknesses built up over many years.

According to him, reviving growth will take more than new credit schemes or investment incentives.

The immediate task, he said, is to win back the confidence of private investors. Businesses need predictable energy supply, greater certainty over taxes and tariffs, better access to finance, improved law and order, and assurance that economic policies will not change abruptly.

He said domestic gas exploration should be accelerated, energy imports diversified and taxes and duties on fuel imports reviewed, so that energy prices can be kept at a tolerable level without creating unsustainable subsidies.

“Revenue reform is equally urgent, but additional revenue should come from broadening the tax base, reducing unjustified exemptions and improving tax administration rather than repeatedly increasing the burden on compliant taxpayers,” added the economist.

‘SEEK SUPPORT OF DEVELOPMENT PARTNER’

PRI Principal Economist Ashikur said his team saw this coming. “Our team warned of the stagflationary risks facing Bangladesh eleven months ago.”

“My assessment is that we are confronting more than a temporary slowdown: banking distress, energy shortages and weak fiscal capacity are constraining investment and production, while persistent inflation continues to erode household purchasing power. The World Bank’s latest assessment reinforces this diagnosis.”

He said weak banks are impairing credit and investor confidence, while energy shortages and high production costs deter investment and inflation squeezes consumption.

Ashikur said global uncertainty is making matters worse but is not the sole cause. The inflation outlook is particularly uncertain because of energy costs and supply pressures, and further external shocks would weaken growth while raising prices.

High interest rates and low investment, both public and private, are likely to bring economic growth down. But it is hard to tell the extent. Inflation is weighing more on the poor. The only way to push the growth rate is to boost public investment in the short run.
Kazi Iqbal Research director of BIDS
The central difficulty, he said, is that the banking sector needs financial support on a scale the state is not currently equipped to provide.

“Restoring bank capital, protecting small depositors and restructuring distressed institutions require resources, yet the government already faces severe competing demands on a narrow revenue base. In my assessment, financing the banking-sector clean-up entirely from domestic public resources would risk undermining other essential spending.”

He said emergency lending can help manage immediate funding pressures but cannot replace capital lost through bad loans. “Prolonged central-bank support to weak banks risks adding to inflation and exchange-rate instability. We must therefore distinguish between keeping banks temporarily liquid and restoring their long-term financial viability.”

Bangladesh needs stronger, coordinated support from the IMF, World Bank, ADB and bilateral partners, he said.

“The government should seek concessional budget and balance-of-payments financing, alongside technical assistance for bank restructuring.”

“Such support should create room to repair the financial sector while preserving essential public investment and targeted assistance to vulnerable households, not finance an unconditional bailout of bank owners,” added Ashikur.

He said, “Without strong development-partner support and decisive fiscal and financial-sector reforms, I do not see a credible route out of the stagflationary trap. External financing can give us the resources and time to manage the adjustment; reforms must ensure that we do not return to the same crisis.”

‘SPEED UP PUBLIC SPENDING’

BIDS Research Director Iqbal said high interest rates and low investment, both public and private, are likely to bring economic growth down. But it is hard to tell the extent.

“The only way to push the growth rate is to boost public investment in the short run,” he said, adding that ADP implementation is the key.

Bangladesh’s economy has found some breathing space in its foreign currency flows, but the relief has yet to reach the factories, businesses and investment decisions that drive growth.

Instead, three key indicators are flashing warning signs: imports of industrial machinery are falling, private-sector credit growth remains below 5 per cent, and government development spending has slowed to a crawl.

Together, they paint a picture of an economy struggling to turn greater external stability into productive activity.

Business leaders blame high borrowing costs, energy shortages, concerns over law and order, and uncertainty over whether new investments will generate adequate returns.

Economists warn that if the slowdown persists, it could constrain industrial output, job creation and the growth of people’s purchasing power.

After a year and a half of turbulence under the interim government, the arrival of a new political administration in February had raised hopes of a more favourable investment climate.

Nearly eight months into its tenure, however, those expectations have yet to translate into a meaningful revival.

Machinery Imports Tell a Troubling Story

Bangladesh imported $506.9 million worth of capital machinery in July and August, the first two months of the 2026-27 fiscal year, according to Bangladesh Bank data.

That was down 32.5 per cent from $750.7 million in the same period a year earlier.

The decline came even as overall merchandise imports increased. Import expenditure rose by around 12.1 per cent year-on-year to $12.2 billion during the two months.

The contrast suggests that businesses are spending more on imports overall but pulling back on machinery needed to establish, expand or modernise factories.

Imports of other industrial capital goods also fell, dropping 12.5 per cent to $1.1 billion from $1.25 billion a year earlier. Combined spending on industrial capital goods was $1.6 billion, down about 20 per cent from nearly $2.01 billion.

For the full 2025-26 fiscal year, capital machinery imports reached $3.21 billion, up 4.93 per cent from $3.06 billion the previous year.

But the longer-term picture remains uneven. Imports peaked at $5.15 billion in 2018-19 before falling and fluctuating in subsequent years.

The figures matter because machinery purchases often signal whether businesses are preparing to increase production capacity or build new facilities. Their retreat points to weakening appetite for fresh investment.

Businesses Struggle to See a Return

For entrepreneurs, the central question is no longer simply whether they can invest, but whether they can expect a return in an uncertain business environment.

Anwar-Ul-Alam Chowdhury Parvez, president of the Bangladesh Chamber and a former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the conditions for new investment remained deeply unfavourable.

“How can there be new investment? Who will invest? Who can guarantee that an investment will bring returns? For many, even keeping their existing businesses afloat has become difficult,” he told bdnews24.com.

Problems continue to accumulate, he said, despite the arrival of a new government.

“One problem after another keeps cropping up. A new government has come in, and we thought everything would now run smoothly. Sadly, the situation has not improved. Many are disappointed.

“Law and order have not improved. Taken together, an investment-friendly environment has yet to return to the country, and interest rates are high. I do not know when a normal, favourable environment will return.”

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), also described a punishing climate for business.

“Business and investment are currently going through an extremely adverse situation. Entrepreneurs are fighting to survive in the market. Then came the energy crisis. These are major blows to business.

“Who would dare think of expanding a business in such circumstances? They say lending has grown by nearly 5 per cent, but I do not know how that growth came about or who the borrowers are. Will they be able to repay their loans? I have serious doubts about that.”

Private Credit Remains below 5 per cent

Private-sector credit growth, another key indicator of investment appetite, stood at 4.75 per cent at the end of August, up slightly from 4.62 per cent in July, Bangladesh Bank data show.

It had fallen to 4.47 per cent in June, the lowest level recorded at the time, after standing at 4.98 per cent in May. Despite small monthly fluctuations, growth has remained below 5 per cent.

Weak credit growth can indicate limited demand for loans to finance new investment or business expansion. But lending also depends on banks’ capacity to provide credit, the quality of borrowers and demand across the wider economy.

In May, Bangladesh Bank Governor Mostaqur Rahman announced a special Tk 600 billion lending package to revive closed and struggling factories and stimulate economic activity.

Initiatives have been taken to implement the scheme across several sectors, but the anticipated acceleration in lending has yet to materialise.

The central bank had expected private-sector credit growth to approach 5.5 per cent by June 2026. It later set a target of 6.8 per cent by December under its next six-month monetary policy.

Shamsul Arefin, managing director of NCC Bank, said global uncertainty was also weighing on demand.

“The global economy is still facing a degree of uncertainty because of geopolitical tensions. Its effects are being felt in our economy, too. Credit growth is unlikely to be very strong at a time like this.”

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said the outlook could improve as the elected government settles into office. But demand remains decisive.

“There are many reasons for a decline in lending. The biggest is whether there is demand in the economy,” he said.

“Entrepreneurs will borrow only when they are confident they can use the money in a secure environment. They have to pay interest as soon as they borrow. Now that a political government has come to power and some time has passed, demand may begin to rise.”

Public Development Spending Slows

The government’s own investment drive is also lagging. In July and August, ministries and divisions spent Tk 57.1 billion under the Annual Development Programme (ADP), equivalent to just 1.85 per cent of the total allocation, according to the Implementation Monitoring and Evaluation Division (IMED).

Implementation stood at 2.39 per cent in the same period a year earlier, when spending reached Tk 57.15 billion. In the first two months of 2024-25, the rate was 2.57 per cent, with expenditure of Tk 71.43 billion.

The slowdown in public development spending adds to the weakness in private investment, limiting another potential source of economic momentum.

World Bank Cuts Growth Forecast

The investment malaise has prompted concern over Bangladesh’s growth prospects. In its latest report on the country, published on Oct 6, the World Bank forecast GDP growth of 3.4 per cent for the 2026-27 fiscal year, down from its April projection of 4.6 per cent.Buy Maps

The lender cited energy-sector constraints, weaknesses in the financial system, revenue shortfalls and global uncertainty as factors weighing on investment and economic activity.

Investment has weakened, export growth has slowed, and high inflation has eroded purchasing power while increasing business costs.

The World Bank expects growth to recover to 3.9 per cent in 2027-28, but says improved energy supplies and faster reforms will be necessary. If its current forecast holds, growth would be lower than the 3.45 per cent recorded during the first year of the COVID-19 pandemic.

Currency Pressure Eases, but Costs Remain High

Bangladesh’s foreign currency strain intensified after Russia’s military advancement into Ukraine in February 2022 drove up global food and energy prices, increasing import costs. The country introduced import restrictions to contain pressure on the dollar.

Remittance and export earnings later improved foreign currency inflows, easing some of that pressure. But stronger inflows have not produced a corresponding revival in private investment.

Inflation continues to complicate the outlook. Overall inflation rose to 8.34 per cent in September 2026, from 8.26 per cent in August, according to the Bangladesh Bureau of Statistics (BBS).

Food inflation increased to 7.22 per cent, while non-food inflation edged down to 9.30 per cent.

Businesses remain concerned about gas and electricity supplies, alongside high interest rates, energy costs and broader production expenses. These pressures make long-term investment decisions harder to justify.

Challenge of Turning the Economy around

The combined signals from machinery imports, private credit and public spending point to a persistent weakness in investment. When businesses build factories or expand existing facilities, they can increase production capacity and create jobs. A prolonged investment slump threatens to slow both.

Zahid Hussain, a former lead economist at the World Bank’s Dhaka office, said the lender’s latest assessment reflected familiar problems in Bangladesh’s economy. The government’s response would now be crucial.

Agreeing with the forecast of 3.4 per cent growth this fiscal year, he said: “There does not seem to be much prospect of the economy turning around. Although growth is forecast to reach 3.9 per cent in the next fiscal year, there is no guarantee that it will be achieved.”

He also considered the report’s findings on rising poverty, shrinking investment, exports, private-sector lending, women’s participation in the labour market and declining industrial output to be realistic.

One pressing concern is the potential inflationary impact of higher energy prices and recent public-sector pay rises.

“Based on past experience, I have calculated that the recent increase in electricity prices could add 1 to 2 per cent to food inflation, while the rise in diesel prices could increase non-food inflation by 1 to 1.5 per cent,” he said.

Zahid argued that monetary policy remained the principal tool for controlling inflation and said the central bank should not cut its policy rate further.

He also cautioned that refinancing schemes intended to revive factories must target viable industrial businesses rather than large loan defaulters.

“If the money goes to major defaulters instead of genuine industrial enterprises, it will not contribute to productivity; on the contrary, it could increase inflation.”

He said Bangladesh must protect its reserves while maintaining a flexible exchange rate, and address weaknesses in the financial sector, secure reliable energy supplies and ensure policy continuity to encourage investment and employment.

“The international crisis is not over. There are still many risks,” he said.

For now, the easing of dollar pressure offers only limited comfort. Until businesses see a more predictable environment in which to borrow, produce and earn returns, the recovery in foreign currency flows may do little to revive the investment Bangladesh needs.

Bangladesh's finance and planning minister has signalled a shift towards international capital markets to reduce reliance on financing from the World Bank, IMF, and Asian Development Bank. He has spoken of cancelling the existing IMF programme the government inherited and issuing sovereign bonds. An Alternative Financing Committee is examining the options.

Diversifying financing sources is a sensible objective. Access to international capital markets can provide greater flexibility, broaden the investor base, and establish a sovereign borrowing track record. But commercial creditors impose their own discipline. They demand compensation for sovereign risk, scrutinise fiscal and external vulnerabilities, and can withhold new financing precisely when a country needs it most.

Ironically, accessing international bond markets on affordable terms may depend on guarantees from the very multilateral institutions Bangladesh seeks to move beyond. The central question is how much commercial borrowing can realistically provide, at what cost and maturity, and under what conditions.

The financing arithmetic
Options include renminbi-denominated Panda bonds issued in mainland China, offshore renminbi-denominated Dim Sum bonds, yen-denominated Samurai bonds issued in Japan, Islamic Sukuk, and international Eurobonds. Commercial sovereign bonds commonly carry maturities of three to 10 years, although longer tenors are possible. For a speculative-grade borrower, securing longer maturities at affordable rates is difficult.

Lower interest rates in Japan and China make yen- and renminbi-denominated bonds appear cheaper than dollar-denominated Sukuk and Eurobonds. But Bangladesh's credit rating would attract a substantial risk premium, while currency hedging costs could offset the apparent interest-rate savings.

The relevant measure is the all-in borrowing cost, including interest, issue expenses, guarantee fees, and currency hedging costs. Without hedging, foreign-currency bonds expose Bangladesh to exchange-rate movements that could substantially increase debt-servicing obligations.

Recent issuances illustrate the variation in borrowing costs. Indonesia's Panda and Dim Sum bonds in 2025-26 carried coupons of roughly 2-3%. Pakistan, a closer credit comparator, issued dollar Eurobonds in 2026 at around 7.5-8%. These differences reflect creditworthiness, currencies, maturities and financing structures, rather than directly comparable all-in borrowing costs.

Bangladesh's own experience offers a useful benchmark. In 2019, AAA-rated IFC issued a three-year taka-denominated Bangla Bond in London at around 6%, while PRAN, the ultimate borrower, paid about 9.5%. Although PRAN faced no direct exchange-rate risk, its borrowing cost was substantial. Bangladesh would face higher borrowing costs than AAA-rated IFC, reflecting its weaker credit standing.

Commercial bonds offer greater policy autonomy. They do not generally require specific reforms in utility pricing, state-owned enterprises or fiscal management. Governments also have more freedom over how they spend the proceeds, except when bonds are issued for specified purposes, and establish an international pricing benchmark for Bangladeshi corporations.

Multilateral financing offers a different cost structure. IDA blend credits carry interest rates of around 2%, with maturities of about 25 years, including five-year grace periods. ADB's concessional loans offer broadly similar terms, although its regular lending is market-linked. Lower rates and longer repayment periods substantially reduce debt-servicing and refinancing pressures.

But they entail negotiations, documentation and oversight. World Bank and ADB project loans impose procurement and safeguard requirements, while policy-based financing involves agreed reforms. IMF programmes carry macroeconomic targets and structural benchmarks. These requirements consume administrative resources and limit policy discretion.

The limits of market access
Can international bond markets make a meaningful contribution to Bangladesh's financing needs? External loan disbursements declined from about $9.5 billion in FY2023-24 to $7.5 billion in FY2025-26. Even against this reduced flow, how much could Bangladesh realistically raise through sovereign bonds, and at what cost?

The Bangla Bond experience illustrates the difficulty of sustaining market access. Despite a successful launch, it did not develop into a regular programme of international taka-denominated bond issuance. Initial investor interest does not necessarily translate into a dependable source of financing.

Annual Panda bond issuance was approximately $25-30 billion in 2024-25, although the market expanded rapidly in 2026. At the earlier market size, raising $2-3 billion would have represented roughly a tenth of annual issuance. Securing such financing would be a substantial undertaking for a new sovereign borrower, particularly in a market dominated by established, highly rated issuers.

Securing guarantees at this scale is far from straightforward. The World Bank Group issued more than $25 billion in guarantees in FY26, covering a range of investments and financing arrangements rather than sovereign bonds alone. Pakistan's inaugural Panda bond in 2026, backed by ADB and AIIB guarantees, raised about $260 million. These illustrate both the potential of guarantees and the difficulty of mobilising several billion dollars annually through guaranteed sovereign bonds. Paradoxically, commercial borrowing may require continued reliance on multilateral institutions.

Multilateral guarantees cannot substitute indefinitely for stronger creditworthiness. Investors and rating agencies assess fiscal performance, debt sustainability, external vulnerabilities, and the credibility of economic policies, drawing partly on IMF assessments. Ending an IMF programme without a convincing alternative policy framework could undermine investor confidence. Ultimately, affordable market access depends on stronger tax revenues, a healthier banking sector, better management of state-owned enterprises, and adequate foreign-exchange reserves.

Sovereign bonds come with refinancing risks. The principal often falls due in a single large payment. Governments may expect to repay maturing bonds by issuing new ones, but that option can disappear when investor confidence weakens. Sri Lanka, Ghana and Zambia illustrate how fiscal and external vulnerabilities, compounded by restricted market access, can culminate in debt distress and default. Their circumstances differed, but the lesson is common: borrowing from international markets is easier than ensuring continued access when debts mature.

Multilateral development loans are generally better suited to long-gestation infrastructure projects. Their extended repayment schedules allow more time for economic benefits to materialise. Financing such projects with shorter-maturity bonds creates repayment obligations well before those benefits emerge.

The policy trade-off
Sovereign bonds offer greater flexibility and fewer policy conditions, but at the price of higher borrowing costs and greater refinancing risks. Whether that trade-off is worthwhile depends on the terms Bangladesh can secure.

The Alternative Financing Committee should assess investor appetite and borrowing costs before considering a modest initial issue. A small offering could help establish a presence in international bond markets without taking on excessive commitments. Developing a reliable benchmark requires regular issuance, transparent disclosure, and an active investor base.

That comes from financial strength. Bangladesh still needs stronger public finances, a healthier banking system, reliable energy supply and credible macroeconomic policies. The measure of success is not how much Bangladesh can borrow from global bond markets, but whether doing so improves the country's long-term financing position.

Bangladesh’s energy planning has created an uncomfortable contradiction. A country struggling to afford its current LNG (liquefied natural gas) imports is planning to more than double its import capacity within the next two years. The question is not whether Bangladesh needs LNG, but whether it can afford such a massive expansion.

Is the government creating another LNG trap, similar to the one in the power sector? People are already bearing the costs of capacity payments, loan interest and fuel imports, while high energy prices are pushing up the cost of living. Yet households and industries continue to face unreliable energy supplies.

With mounting debt and growing subsidy requirements for state-owned Petrobangla and the Power Development Board (PDB), the government must carefully assess the economic costs and benefits of expanding LNG infrastructure before committing public resources to another long-term financial burden.

One-third of the national budget could go towards LNG imports

Bangladesh currently operates two floating LNG terminals with a combined capacity of 1,100 million cubic feet per day (mmcfd). The government plans to add three more by 2029, raising the total capacity to 2,700 mmcfd to address gas shortages and ensure supplies to industries.

The rationale is understandable. Domestic gas reserves are declining, industries are facing shortages, and gas-fired power plants cannot operate at full capacity. But the ability to import gas does not necessarily mean the country can afford it.

Following the Iran war, Bangladesh had to purchase LNG from the spot market at around $29-30 per million British thermal units (MMBtu), reflecting the volatility seen after Russia’s invasion of Ukraine in 2022. These crises demonstrate how geopolitical tensions can disrupt global energy markets and make future prices extremely difficult to predict.

If Bangladesh operates LNG import infrastructure with a combined capacity of 2,700 mmcfd, the annual import bill could reach around $29 billion at an average price of $28 per MMBtu. At $30, the bill could approach $30 billion.

Although Bloomberg’s Global LNG Market Outlook 2030, published in September 2025, projected average global prices below $10 per MMBtu in 2026 and potentially below $5 by 2030, such forecasts cannot account for every geopolitical crisis or supply disruption. Indeed, the report was published before the Iran war and the closure of the Strait of Hormuz.

Bangladesh’s national budget for FY2026-27 stands at Tk 9.38 trillion. In a future wartime scenario at $28 per MMBtu, importing LNG equivalent to the planned capacity could cost more than Tk 350,000 crore annually at the current exchange rate—over one-third of the national budget. Any further depreciation of the taka would increase the burden.

Limited foreign currency earnings, massive spending

According to Bangladesh Bank, the country earns around $80 billion in foreign currency annually. Earnings stood at $83.5 billion in FY2025-26. An annual LNG import bill of $30 billion would therefore place enormous pressure on foreign exchange reserves.

Bangladesh must also spend billions of dollars importing food, fertiliser, edible oil, industrial raw materials, machinery, pharmaceutical ingredients and other forms of energy. The country already spends around $12 billion annually on oil, gas and coal imports, while its trade deficit exceeded $27 billion in FY2025-26.

The country’s foreign currency earnings remain heavily dependent on readymade garment exports and remittances, both of which are vulnerable to global economic uncertainty. Although increased energy supplies could support industrial growth and exports, high energy costs could undermine the competitiveness of local industries.

Many factories are already struggling with rising production costs and cannot afford significantly higher gas prices if subsidies are withdrawn. Without diversifying its export base and moving towards higher-value products, Bangladesh cannot assume that expensive LNG imports will generate enough additional foreign currency to cover their costs.

Lower prices will not eliminate the problem

LNG prices will not remain at $28-30 per MMBtu indefinitely. However, even if prices fall to $10, importing LNG equivalent to 2,700 mmcfd would still cost Bangladesh more than $10 billion annually.

For an economy with a narrow export base, this would remain a substantial burden, competing with essential imports, debt repayments and investment in other sectors. LNG at $28 per MMBtu would be prohibitively expensive, but even at $10, it would not be cheap.

The hidden costs of LNG infrastructure

The financial burden does not end with purchasing LNG. Individual terminals can cost between Tk 5,000 crore and Tk 11,000 crore to construct, depending on their capacity.

Bangladesh’s first LNG terminal, built by US-based Excelerate Energy in 2016-17, cost around $180 million, or Tk 2,214 crore at the time. Petrobangla currently pays Tk 2.9 crore a day in capacity charges for the terminal, amounting to approximately Tk 1,064 crore annually. Over its 15-year contract, these payments will total around Tk 16,000 crore.

Using this terminal as a reference, three additional terminals could cost at least Tk 10,000 crore each on average. Their capacity payments could reach around Tk 50,000 crore. Including the costs associated with all five terminals, the total could rise to approximately Tk 75,000 crore, or $7 billion.

There are also concerns about the proposed rental charge for a third LNG terminal, approved for a Chinese company. The proposed daily charge of $342,000, equivalent to Tk 4.2 crore, is around 40 percent higher than the rates for existing terminals. If approved without changes, it would further increase capacity-payment obligations.

The risk of stranded assets

Bangladesh could complete these terminals but later struggle to import sufficient LNG because of high prices, foreign currency shortages or global market volatility. Yet rental payments, loans and interest obligations would continue regardless of how much gas the terminals handle.

The power sector offers a clear warning. Many power plants remain idle, but Bangladesh pays more than Tk 25,000 crore annually on average in capacity charges. In 2025 alone, these payments exceeded Tk 42,000 crore.

Bangladesh’s public debt exceeded Tk 22 lakh crore in early 2026 and is increasing by around Tk 1.5 lakh crore annually. Rising interest payments are adding further pressure. Expensive energy imports and infrastructure financed through borrowing could create a cycle in which efforts to secure energy undermine broader economic security.

The government is simultaneously planning three new LNG terminals, expanding domestic gas exploration through 150 wells and pursuing a target of 10,000 MW of solar power by 2030. If domestic gas exploration and renewable energy programmes succeed, expensive LNG infrastructure could be underused or become stranded assets.

A report by Zurich-based SolAbility, Global LNG Market Outlook 2026–2035, notes that several countries, including Pakistan, Vietnam and the Philippines, are cancelling LNG projects as they expand renewable energy. One key reason is the high cost of LNG-based electricity, estimated at $80–120 per megawatt-hour (MWh), compared with just $30–40 per MWh for solar power combined with battery storage.

Before approving additional terminals, the government should publish transparent economic assessments based on LNG prices of $10, $20 and $30 per MMBtu. These should detail annual foreign currency requirements, funding sources and capacity charges, including payments for underutilised infrastructure.

The government must also compare LNG investments with domestic gas exploration, rehabilitation of ageing gas wells, improvements in transmission infrastructure, industrial energy efficiency, renewable electricity and grid modernisation.

Has the energy strategy really changed?

In 2023, the previous government finalised the Integrated Energy and Power Master Plan (IEPMP) with Japanese assistance. The plan opened the way for LNG imports of up to 5,000 mmcfd by 2040 and proposed $179 billion in energy infrastructure investments, including LNG terminals.

Some experts have raised concerns about the influence of Japan’s commercial interests, given its position as a major LNG re-exporter and its investments in LNG trading infrastructure and gas-fired power plants across Asia.

Although the IEPMP lost relevance following the departure of the Awami League government, questions remain about how much Bangladesh’s fundamental energy strategy has changed. The current administration also appears interested in pursuing several similar initiatives.

Bangladesh does need LNG in the short term as domestic gas production declines and industries face shortages. But LNG cannot be a permanent solution to the country’s energy crisis.

If Bangladesh is struggling to secure 1,100 mmcfd today, how will it manage to secure 2,700 mmcfd within the next two years—and, more importantly, how will it afford the bill?

The writer works for an international development organisation and is an independent energy journalist.

For the first time, the Bangladesh Bank has introduced a quarterly Monetary Policy Statement (MPS). This is a positive step as the move to review the monetary policy stance every three months instead of every six months comes at a time when inflation, investment, credit flows, and global conditions are changing rapidly.

In its first quarterly statement, the central bank has kept the policy interest rate unchanged at 9.5% for the October–December 2026 period. The aim of this change is to make monetary policy more timely and responsive by taking new information and emerging risks into account.The first quarterly statement says the main objective of the initiative is to regularly review domestic and global economic conditions and, when necessary, adjust the monetary policy stance in a timely manner.
The decision is important in the sense that, according to the Bangladesh Bureau of Statistics (BBS), inflation declined somewhat, standing at 8.32% in July and 8.26% in August, but supply-side and cost-related risks remain.High fuel and fertiliser prices, the conflict in the Middle East, and the potential impact of a new wage structure could push inflation up again. At the same time, weak industrial production, slower private-sector credit growth, and a slowdown in investment are putting pressure on economic activity.
Bangladesh Bank expects that regular reviews will help strike a balance between maintaining price stability and supporting economic activity. The Monetary Policy Committee plans to closely monitor domestic and global economic and financial developments and adjust its policy stance when necessary.

The statement also mentions incentive and refinancing programmes to support growth and help contain inflation. However, it does not specify how much the quarterly reviews are expected to reduce or increase inflation or credit growth.

In reality, the outcome will depend on the availability of reliable data, timely policy decisions and complementary measures, including reforms in the banking sector.

The central bank expects private-sector credit growth to pick up in the October–December quarter as liquidity conditions improve. However, it acknowledged that interest rates alone will not be enough to revive economic growth.

To ensure that credit reaches productive sectors, it is essential to address weaknesses in the banking sector, reduce credit risks and tackle constraints related to power, energy and infrastructure.
Against this backdrop, recent trends in Bangladesh's economy show that while inflation has eased somewhat, it is still far from a comfortable level. Weaknesses also persist in lending and investment.Alongside monetary policy, banking-sector reforms and coordinated government action on supply-side and fiscal policies will be essential to contain inflation, restore investor confidence and boost the flow of credit.One advantage of reviewing monetary policy every three months is that the central bank will not have to wait too long to respond to changes in the economy. But changes in the policy interest rate take time to feed through to lending and investment. Despite a modest cut in the policy rate, private-sector credit growth stood at just 4.75% in August, significantly lower than in previous years.

The quarterly monetary policy statement would be more useful for businesses and investors if it clearly explained the data underpinning each policy decision and the risks that could prompt a change in the policy stance. Greater clarity on these issues would help private-sector decision-makers plan with more confidence.Improving the quality of economic forecasts is also important. Alongside publishing a specific inflation forecast, Bangladesh Bank could explain how changes in fuel prices, the exchange rate, food supply or government spending could affect the outlook.If there is a gap between an earlier forecast and the actual outcome, the reasons should be explained in the following statement. This would help markets and businesses distinguish between changes driven by new information and those that signal a shift in the monetary policy stance.Removing the barriers to credit flow is equally important. High levels of non-performing loans and weak governance in banks, borrower risks and a lack of investor confidence could prevent credit from reaching productive businesses even if the policy rate is lowered.

Bangladesh Bank itself has highlighted the need to restructure banks, restore their capital, strengthen governance and improve credit discipline.

Finally, monetary policy needs to be coordinated with the government's fiscal and supply-side policies. Raising interest rates can help curb overall demand, but it cannot directly stop price increases caused by shortages of food or fuel.

Other measures are equally important, including removing bottlenecks in food imports and distribution, closely monitoring supply conditions, ensuring adequate fuel supplies and providing targeted support to low-income households.Fiscal and monetary policies also need to work in tandem to ensure that government borrowing and the budget deficit do not undermine the objectives of monetary policy.The quarterly monetary policy statement has shortened the policy review cycle, giving the central bank more scope to respond quickly to changes in the economy. Its effectiveness, however, will depend on the timeliness of data, the credibility of forecasts and the transparency of policy decisions.With regular reviews, the approach should ideally make it easier to see how new information shapes policy decisions and the reasoning behind them. Alongside monetary policy, banking-sector reforms and coordinated government action on supply-side and fiscal policies will be essential to contain inflation, restore investor confidence and boost the flow of credit. The author is a Distinguished Fellow at the Centre for Policy Dialogue (CPD).

Bangladesh Bank’s first-ever quarterly Monetary Policy Statement is an important institutional change. Moving from half-yearly to quarterly reviews should make monetary policy more responsive to rapidly changing domestic and global conditions. But greater frequency will matter little unless policy becomes more effective in addressing Bangladesh’s difficult combination of persistent inflation, weak investment and financial-sector stress.

The decision to keep the repo rate unchanged at 9.5 percent is understandable. Headline inflation declined to 8.26 percent in August, but non-food inflation remained stubbornly high at 9.32 percent. Higher fuel prices and the possible implementation of the new pay scale create additional inflationary risks. Another rate cut at this stage could therefore have been premature.

The larger concern is monetary transmission. Private-sector credit growth was only 4.75 percent in August despite substantial liquidity in the banking system. Bangladesh Bank acknowledges that policy-rate changes are transmitted relatively quickly to market rates but not effectively to private credit and the real economy. This raises a fundamental question: how much can interest-rate policy achieve when the banking channel itself is severely impaired?

Here, banking reform deserved much greater prominence in the MPS. The statement recognises the problem: non-performing loans have reached 32.78 percent, capital erosion is significant, and liquidity is unevenly distributed across banks. Yet banking reform appears largely as one among several supporting conditions rather than as a central component of monetary-policy effectiveness. That understates the seriousness of the problem. Bangladesh’s banking sector accounts for around 90 percent of financial-sector assets, while weak governance, regulatory capture and related-party lending remain major vulnerabilities.

The policy challenge therefore extends beyond keeping rates high or cutting them. Bad loans must be recognised and resolved, weak banks must be restructured, connected lending must be disciplined, and bank supervision must be made credible. Fiscal policy must also reduce excessive dependence on bank borrowing, while exchange-rate flexibility and supply-side measures should complement monetary policy.

Quarterly reviews are a useful reform. But institutional frequency cannot substitute for institutional effectiveness. Unless banking reform becomes central to the monetary-policy framework, Bangladesh Bank risks adjusting the price of credit while the machinery that allocates credit remains fundamentally impaired.

The writer is a professor of economics at Dhaka University and the executive director of SANEM.

A further Tk 20 per litre increase in fuel prices has landed at a difficult time for most households in Bangladesh. It comes five months after the last major adjustment in April, followed by a smaller rise in June. Fuel prices have risen across much of the world following the conflict that began with US and Israeli strikes on Iran and subsequent tensions around the Strait of Hormuz. For Bangladesh, the impact is compounded by persistent domestic inflation.

For more than four years, Bangladesh has struggled to bring inflation down from rates close to 10 percent, against a longer-term average of around 5-6 percent. Before the Hormuz crisis, Bangladesh maintained relatively low domestic fuel prices compared with many other countries. Now the situation is such that while inflation stays elevated, the government is having to make substantial price adjustments given its acute fiscal space constraint, with the tax-GDP ratio falling below 8 percent.

Higher fuel costs would ripple through almost every economic activity, raising the cost of producing goods, transporting them to market and providing essential services

In fact, among the developing countries with which Bangladesh is commonly compared, its fuel price increase since the Hormuz conflict has been one of the largest, at around 38 percent, compared with less than 10 percent in India, 19 percent in China and 27 percent in Viet Nam. Indonesia has experienced a gasoline price rise nearly as large as Bangladesh’s, but inflation in Indonesia is much lower, at around 3.3 percent.

The dual blow of prolonged high inflation and steep fuel price increases falls on consumers, particularly poor and vulnerable households. It comes amid recent assessments suggesting that poverty in Bangladesh is likely to have risen substantially since the last official household survey in 2022.

Higher fuel costs would ripple through almost every economic activity, raising the cost of producing goods, transporting them to market and providing essential services. Poor households, small farmers, and enterprises with limited working capital have the least capacity to absorb the additional pressures, whether through higher prices, narrower margins or reduced consumption.

One may well ask how many more shocks households can bear when their real purchasing power has been declining for years. Yet, for several years now, the response to prolonged inflation has too often been delayed and half-hearted, without sufficient attention to the scale of the problem.

During the interim government’s tenure, efforts to control inflation relied heavily on demand management. Bangladesh Bank raised its policy rate and maintained a tight monetary stance, but liquidity support for troubled banks and rising government borrowing, particularly borrowing directly from the central bank, complicated that effort. Supply-side measures received less sustained attention.

After the February 2026 election, the new government recognised the importance of bringing inflation down. Its first budget, however, set an ambitious growth target and substantially higher spending. This was accompanied by a large stimulus package for struggling industries, significant provision for restructuring weak banks and, subsequently, approval of a new public-sector pay scale for phased implementation. Bangladesh Bank also reduced its policy rate by 50 basis points. Each measure responds to a real problem, but together they raise the question of whether the drive to revive growth is adequately reconciled with lowering inflation.

Spending out of the crisis is risky when inflation remains high and firms cannot readily expand production. Energy shortages and reliance on imported fuel constrain the supply response, while additional demand could put fresh pressure on prices and the foreign exchange reserves Bangladesh Bank is seeking to rebuild. This makes the supply constraints central to the inflation debate.

One principal element of the supply side deserves closer examination. Merchandise imports fell from a peak of $79 billion in FY22 to $68 billion in FY25. According to Bangladesh Bank’s provisional estimates, imports recovered substantially to $75 billion in FY26, though they remained below the FY22 level. Import compression may have contributed to supply shortages. The policy question is whether formal or informal barriers to importing essential goods and production inputs are unnecessarily restricting supply.

This question warrants a systematic comparison of prices for selected essentials in Bangladesh, international markets and, particularly, neighbouring countries, allowing for differences in exchange rates, quality, transport costs and taxes. Where substantial gaps persist, there is a need to examine whether tariffs, import permissions, access to foreign exchange or delays in opening letters of credit are restricting supply.

This is also an opportune moment to consider prudent tariff rationalisation, with particular attention to the widespread use of supplementary and regulatory duties. These duties can impede imports even where domestic producers are unable to increase supply sufficiently. Easing such constraints and facilitating imports could relieve price pressures.

The pressure to rebuild foreign exchange reserves makes import policy sensitive. Reserve accumulation remains essential, but the budget’s projection of $41 billion in gross reserves by the end of FY27 should be weighed against the costs of restricting imports. The objective should be to rebuild reserves without unnecessarily constraining the supply of essential goods and production inputs.

There is a fiscal dimension too. With weak revenue mobilisation, ambitious spending plans can mean greater government borrowing. Support for troubled banks, industrial stimulus and public-sector pay increases may each have a case, but their scale, timing and financing matter when bringing down inflation is already proving difficult. Price stability needs to carry greater weight in these decisions.

Stabilising the taka helps contain import costs and inflationary pressures. During high inflation, taka depreciation would only add fuel to the fire. However, if inflation remains high while the nominal exchange rate barely moves, the taka may appreciate in real terms, undermining export competitiveness.

For instance, as against Bangladesh’s average rate of 9-10 percent during FY23–FY26, India’s inflation fell from 6.7 percent to around 4 per cent; Viet Nam was able to contain it within 3-4 percent while China saw near-zero inflation. These differences must have put pressure on Bangladesh’s export competitiveness and contributed to its recent difficulty in expanding exports. Holding the nominal exchange rate steady cannot substitute for bringing inflation under control.

Finally, goods must move reliably from farms, ports and factories to markets. Extortion along transport routes, delays and other logistical obstacles add to costs and disrupt supply. Tackling them requires sustained enforcement, alongside better freight and market infrastructure. Without a more effective domestic supply chain, even adequate imports or harvests may fail to ease prices where consumers buy their essentials.

The fuel price increase has exposed a wider policy challenge. There is a critical need to protect vulnerable households now while addressing the import, fiscal and distribution constraints that have allowed high inflation to persist. Households cannot keep absorbing external shocks through a steady loss of real purchasing power. Nor can it be overemphasised that failure to rein in inflation is likely to have serious consequences for macroeconomic stability and external competitiveness.

The socioeconomic costs of persistent inflation are too high for price stability to be weakened by conflicting policy choices; tackling it requires sustained commitment and prudent, practical measures across the economy.

The author is an economist who serves as chairman of Research and Policy Integration for Development (RAPID). He can be reached at m.razzaque@rapidbd.org

The latest fuel price hike will add to the cost of doing business and put further pressure on export-oriented industries already struggling with declining competitiveness, according to Shams Mahmud, the president of the Bangladesh-Thai Chamber of Commerce and Industry.

Talking to The Business Standard last night (20 September), he said, "As it is, all forms of business activities, including manufacturing, logistics, agro, service sector, and FMCG [fast-moving consumer goods], are going through stress in these turbulent times.

"International energy markets have recently been affected by the strikes in Saudi Arabia by Houthi rebels. Just today [Sunday], Saudi Arabia said next month's shipment of oil to Europe will be withheld."

"So we can anticipate future price increases. The government has taken the right decision as a policy to create a buffer for any price shock, especially about sourcing and subsidy," he said.

"But unfortunately, this will add a burden to the business ecosystem of Bangladesh, with inflationary pressure on the internal economy reducing disposable income. For export-oriented industries, which are already in a vulnerable state with decreasing competitiveness, it will add to the already increasing cost of doing business," said the businessman.

Also, the International Monetary Fund has been pressuring the government for a reduction of subsidies, and it may also have had an influence on the decision, as both parties will sit in Bangkok next month to work out the next loan from the global lender, he added.

The government last night increased the retail prices of diesel, octane, petrol, and kerosene by Tk20 per litre. The revised rates took effect today (21 September).

With the new price adjustment, this is the second time the BNP government has hiked fuel prices after assuming power in February this year. The last price hike was back in April.

The per-litre prices of diesel, octane, petrol, and kerosene have been raised to Tk135, Tk165, Tk160, and Tk155, respectively.

The latest fuel price hike will increase transportation, agriculture, and industrial costs, putting further pressure on inflation and disproportionately affecting poor and lower-middle-income households, according to Dr Fahmida Khatun, distinguished fellow at the Centre for Policy Dialogue (CPD).

"The latest price increase seems to be another adjustment to a continuing external energy-price shock. Nevertheless, increasing all major petroleum prices by the same absolute amount at once is a substantial policy intervention, especially when inflation and household financial pressure are already high," she told The Business Standard last night (20 September) in her immediate reaction.

"The increase will have wide-ranging consequences. Individuals will face higher expenses for transportation. Even households that do not purchase fuel directly will be affected as transportation costs raise the prices of food and other essentials.

"Poor and lower-middle-income families will suffer disproportionately because most of their income is spent on daily necessities," she added.

The government last night increased the retail prices of diesel, octane, petrol, and kerosene by Tk20 per litre. The revised rates took effect today (21 September).

With the new price adjustment, this is the second time the BNP government has hiked fuel prices after assuming power in February this year. The last price hike was back in April.

The per-litre prices of diesel, octane, petrol, and kerosene have been raised to Tk135, Tk165, Tk160, and Tk155, respectively.

Fahmida continued, "Diesel-dependent agriculture will face higher irrigation, mechanisation and transportation costs. This could potentially raise food prices, but reduce farmers' returns."

Around 70% of the country's irrigation pumps are operated using diesel. A research paper published by researchers from Bangladesh Agricultural University (BAU) and the Bangladesh Rice Research Institute (BRRI) found that irrigation is one of the major components of the total input or production costs for Boro rice, accounting for 20-25% of the total expenditure.

Fahmida also said, "Industries will incur higher logistics and generator costs, which will weaken profitability and export competitiveness. Small businesses will be especially vulnerable.

"At the macroeconomic level, the increase may intensify inflation, reduce household consumption and weaken growth."

Since the government had no other option but to increase energy prices, it should monitor how this increased price is imposed on the common people by market players, the economist stressed.

"The government should publish the price calculation transparently, prevent excessive fare increases and market manipulation. The government should also provide targeted support to low-income households, small farmers and public transport users," she added.

The tea stall in Mohammadpur opens before the light does. A kettle hisses. Oil spits in a pan. The first customer is a rickshaw puller who has already counted the coins in his pocket twice. He orders what he always does: two buns and a glass of tea.

The tea costs Tk10. The buns are supposed to cost Tk10 each. But when he breaks one open, he notices what the sticker will not tell him. The bun is smaller. Not by much. But enough.

This is not a story about scarcity. It is a story about arithmetic performed in silence, at the bottom of a supply chain that stretches from the Black Sea to a cold storage in Rangpur, and ends at a tea stall where the numbers never quite add up for the person who can least afford the difference.

The bakery association had announced it would raise prices by up to 20% starting 12 September. A sack of refined flour had jumped from Tk3,000 to Tk5,600. A drum of cooking oil rose from Tk25,000 to Tk36,000. Sugar hit Tk120 to 125 per kilogram, up roughly Tk10 in a week. Bakery owners said production costs had climbed 20% to 30% over six months, driven by raw materials, energy, and transport.

On 15 September, the commerce ministry called a meeting. A committee was formed, led by the chairman of the Bangladesh Trade and Tariff Commission, and given seven days to study the problem. The bakers agreed to put the hike on hold "for the time being." The headline said prices were stable.

What the headline did not say is what the bakers had already planned for the cheapest items. For the Tk10 bun, there would be no price increase. Instead, the bun would shrink. A 40 gram bun could lose about 5 grams. A 400 gram loaf could drop to 320 or 350 grams if the price stayed the same. The association called it a "modest adjustment." The customer, if he is paying attention, might call it something else.

The rickshaw puller knows the bun is smaller. He does not need a committee to tell him. He buys two buns instead of one, because one no longer fills the gap between breakfast and the first fare of the morning. His lunch just cost Tk20 instead of Tk10. The government held the price. The market held the scale. He held the difference.

This is not a case of scarcity. It is a structural condition of a country that imports more than 80% of its wheat. Domestic production meets less than 10% of demand. Bangladesh imported a record 7.25 million tonnes of wheat in the 2025-26 fiscal year, the highest in its history.

Meanwhile, the area under wheat cultivation fell from 4.44 lakh hectares in 2015-16 to 2.8 lakh hectares in 2024-25, the lowest in at least a decade. Farmers are switching to maize and vegetables because wheat simply does not pay. When the global market moves, Bangladesh feels it. When the dollar strengthens, Bangladesh feels it. When a ship is delayed at a foreign port, the tea stall in Mohammadpur feels it.

This is not a case of scarcity. It is a structural condition of a country that imports more than 80% of its wheat. Domestic production meets less than 10% of demand. Bangladesh imported a record 7.25 million tonnes of wheat in the 2025-26 fiscal year, the highest in its history.

The data tells a story of pressure that has not eased. Overall inflation in August was 8.26%, down slightly from July. Food inflation was 7.02%. Rural inflation, where the poorest households live, was 8.31%, higher than the national average. The committee's report will not change these numbers. The report is not designed to change them. It is designed to buy time.

The government bought seven days. In seven days, the headlines will move on. The committee will submit its findings. The price hike may be gradually implemented or restructured into another form of shrinkflation. The problem will remain: a nation that cannot feed its bakeries without ships from abroad, and a working poor that measures its day in buns that keep getting smaller.

The rickshaw puller in Mohammadpur has finished his tea. He has two buns in his hand, each one slightly lighter than it was last week. He does not know about the committee. He does not know about the Trade and Tariff Commission, or the seven day deadline, or the press release from the commerce ministry. He knows what his hands know. He knows the bun is smaller. He knows he is still hungry.

The government held the price. The market held its breath. And the man with the rickshaw held the difference, one gram at a time.

Zakir Kibria is a Bangladeshi writer, policy analyst and entrepreneur based in Kathmandu, Nepal. His email address is zakir.kibria@gmail.com

Merging weak banks with other lenders alone will not resolve the ongoing crisis in the banking sector, said Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank.

The full extent of this sector's financial distress has yet to emerge, as non-performing loans, capital shortages, provisioning requirements, liquidity pressures and governance weaknesses need to be addressed simultaneously, he said.

"Giving fresh capital or merging a bank does not automatically make a weak bank sustainable," he said at a discussion, "Financial Condition of the Banking Sector", jointly organised by the Capital Market Journalists Forum and CFA Society Bangladesh in Dhaka today (19 September).

Mahbubur, former chairman of the Association of Bankers, Bangladesh (ABB), said the volume of non-performing loans in the banking sector was around Tk28,000 crore in 2008 but has now exceeded Tk600,000 crore, accounting for more than 32% of total loans.

Many rescheduled loans could also become classified again in the future, he warned.

According to a CFA Society Bangladesh analysis based on Bangladesh Bank data, the banking sector's NPL ratio stood at 32.8% in June 2026. As of December 2025, the top five banks accounted for 51.87% of total NPLs, while the top 10 accounted for 73.63%.

Mahbubur said implementing International Financial Reporting Standard (IFRS) 9 could provide a clearer picture of banks' credit risks and provisioning requirements, potentially putting additional pressure on the capital positions of some banks.

"There is no such thing as giving Tk50,000 crore today and fixing a bank tomorrow," he said.

On the government's initiative to merge five weak banks, he said a merger between a strong bank and a weak or specialised bank could create operational synergies, but merging one weak bank with another weak bank may not deliver the expected benefits.

After a merger, overlapping branches, employees and management structures need to be reduced to lower operating costs and improve efficiency, he said, adding that simply changing ownership or the name of a bank while retaining the existing structure would not deliver the real benefits of consolidation.

The CFA Society analysis showed that deposits grew 10.74% in June 2026, while private-sector credit increased only 4.47%. Meanwhile, banks' investments increased 30.3%. In 2025, investment in government securities reached 14.1% of total banking-sector assets.

Mahbubur said the rise in investment in government securities while loans and advances were declining at many banks could generate income in the short term, but could not replace banks' core business.

"The core business of a bank is to lend and take deposits. Therefore, a decline in net interest income is a bad sign for banks and the banking industry as a whole," he said.

The sector's net operating profit increased 116% to Tk32,108 crore in 2025, but provisioning against bad loans rose to Tk249,600 crore.

The sector's overall capital adequacy ratio also fell to negative 2.64% at the end of 2025, against the regulatory minimum of 10%. However, 42 banks met the requirement, representing 60.51% of total sector assets.

Mahbubur said banks need to increase low-cost deposits, particularly CASA, and use technology to reduce operating costs. Rather than indiscriminate layoffs, banks should improve productivity through technology and efficiency.

He said stronger governance, accurate assessment of banks' financial condition, adequate provisioning and compliance with international accounting standards are essential for restoring stability.

"To make the banking sector sustainable, we need more than mergers. We need targeted restructuring where necessary and structural reforms across the sector," he said.

Bangladesh’s exporters are losing ground to regional competitors as rising energy, financing and logistics costs squeeze profit margins and make it increasingly difficult to match the prices and delivery times offered by countries such as Vietnam, China and India.

The pressure is becoming harder to absorb because exporters have little scope to pass higher costs on to overseas buyers, raising the risk of lost orders and shrinking market share.

Bangladesh’s merchandise exports declined by nearly 5 percent in 2025, falling to $47.74 billion compared with the previous year, according to official data.

By comparison, Vietnam’s exports grew 16.8 percent in 2025 and China’s 5.5 percent, while global merchandise exports increased 7.2 percent, data from the World Trade Organization and UN Trade and Development (UNCTAD) showed.

Even a small difference in price can determine where an order goes, industry leaders say. The continuing conflict in the Middle East and the Trump administration’s additional 10 percent tariff are now adding to the pressure on exporters, making it harder for them to compete.

Buyers may shift orders when Bangladesh’s free-on-board (FOB) price – the price before shipping and insurance – is just 1-2 percent higher than that of a competitor, said Asif Ibrahim, vice-chairman of New Age Group.

For a $4 garment, a 1-2 percent difference amounts to only 4-8 cents per piece.

But on a one-million-piece order, that could mean a difference of $40,000-$80,000, explained Asif, who is also a former director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

“Bangladesh has already lost orders to Vietnam, India, Pakistan, Sri Lanka and Indonesia, particularly when buyers prioritise price and delivery reliability,” Ibrahim said.

He said industry estimates suggest production costs have risen by around 30-40 percent over the past several years, driven by higher gas and electricity prices, wages, interest rates and exchange-rate depreciation.

But buyers have generally not increased the FOB prices proportionately.

ENERGY, LOGISTIC COSTS RISE

Energy has emerged as one of the biggest constraints. Bangladesh’s electricity tariff increased nearly 19 percent, from Tk 8.95 per unit in February 2024 to Tk 10.63 in June 2026.

In April 2025, gas tariffs for new industrial connections rose 33.3 percent to Tk 40 per unit, while captive power gas prices increased 36.6 percent to Tk 42.

“Even a 2–3 percent reduction in manufacturing costs would be transformative. On $40 billion in RMG exports, 2 percent represents about $800 million in competitiveness,” Ibrahim said.

Meanwhile, logistics costs are adding to the pressure.

Chattogram Port’s October 2025 tariff revision raised service charges by an average 41 percent, while charges for a 20-foot container increased 37 percent to Tk 16,243 from Tk 11,849, according to Fazlee Shamim Ehsan, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

Private inland container depots also increased export-container handling charges by roughly 36-44 percent, he said.

“Exporters often have limited scope to pass these additional costs on to overseas buyers,” Fazlee said.

He said longer logistics lead times, partly linked to the lack of a deep-sea port, are further weakening Bangladesh’s position, while poor branding, bureaucracy, skills shortages and slow automation are compounding the problem.

Riad Mahmud, managing director of Shoeniverse Footwear, said higher interest rates and disruptions in energy supply had significantly increased operating costs and put pressure on cash flow.

He said many banks are either not providing sufficient working capital or are taking too long to process financing, despite government calls for support.

“If the government’s incentives are not implemented in time, high costs will erode our export competitiveness. We risk losing orders and market share to competing countries, and those markets may be difficult to regain,” Riad said.

PROFIT MARGIN FALLING

For some exporters, the squeeze is already hitting profitability.

RN Paul, managing director of RFL, said rising electricity, gas, port and freight costs had increased production expenses, while the company had little room to raise prices because it competes directly with suppliers from China and Vietnam.

“We have no scope to increase prices because we have to compete with China and Vietnam. Our prices have remained static,” he said.

RFL has installed solar power and improved labour productivity to contain costs, but Paul said these measures have not been enough to offset the increase.

The company’s profit margin may have fallen from around 3 percent to 1 percent, he estimated.

As a result, RFL is avoiding some export orders that could result in losses, a shift Paul said would slow market growth.

The competitiveness problem extends beyond individual exporters and could affect investment, employment and economic growth, said Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue.

“The ongoing Middle East crisis, the enforcement of an additional 10 percent tariff under the Trump administration, and other trade-related measures have emerged as serious challenges to exporters’ competitiveness. These factors are significantly increasing the cost of doing business,” he said.

He warned that losing buyers could have long-term consequences because relationships built over years can be difficult to restore once orders move to competing countries.

“Export competitiveness is linked to employment and GDP growth, as well as the inclusiveness of growth. SMEs suffer more from these pressures,” Mustafizur said.

While Bangladesh has made remarkable strides in expanding access to financial services, ensuring that individuals and businesses can fully participate in and benefit from the formal financial system will define the next chapter of the country’s development journey.

According to a June 2026 report by the Bangladesh Bank, domestic credit card usage increased by 43.24 percent between June 2025 and June 2026, illustrating how rapidly payment behaviour is evolving among existing users. This is a meaningful signal of momentum. Yet financial inclusion is about more than increasing transaction activity among those already inside the formal system. The question today is how widely people and businesses across Bangladesh can participate in that system and use it to transact, save, grow businesses and build economic resilience. In that sense, financial inclusion is not only a social objective; it is an economic growth imperative, one that shapes how resilient households and enterprises are in the face of shocks, and how effectively capital reaches the people who can put it to productive use.

Much of that opportunity lies in reducing reliance on cash. Bangladesh Bank’s latest annual report shows that cash accounted for 67.2 percent of total transaction value in 2025, while digital payment channels represented 32.8 percent. Meanwhile, transaction volume through cards increased by 91 percent between July 2021 and June 2026, underscoring the longer-term shift towards card-based payments even as cash retains a substantial share of everyday commerce.

If the last decade was about building Bangladesh’s digital payments ecosystem, the next should be about ensuring every Bangladeshi can participate fully in it and access financial freedom.

Closing that gap will not happen overnight, but it is a clear and achievable opportunity. Making cards, POS devices, and QR acceptance infrastructure more affordable can help extend this progress across the mass market and encourage wider merchant acceptance, particularly among small retailers and businesses for whom the upfront cost of digital acceptance remains a real barrier. At the same time, well-designed, time-bound incentives for small merchants and consumers, particularly first-time and occasional users, can help turn digital payments into a habit rather than an alternative, nudging behaviour at the margin where it matters most.

Ensuring that inclusion reaches everyone, especially women, must be a national priority. Payroll digitisation has already demonstrated its transformative potential among Bangladesh’s four million ready-made garment workers, most of whom are women, for whom receiving wages digitally becomes far more than a change in payment method. It becomes a gateway to savings, a credit scoring history and greater financial security, benefits that ripple outwards into households and communities. Extending similar solutions to freelancers and SME workers, groups often left at the margins of formal finance, can bring these same benefits to even more people as Bangladesh’s economy continues to diversify.

Government-led programmes are playing their part too. Initiatives such as the Family Card and Farmer’s Card, which channel social safety net disbursements through open-loop digital systems, are similarly helping reach citizens who may not otherwise enter the formal financial system, demonstrating that public and private infrastructure can reinforce one another when designed to work together.

None of this requires reinventing the wheel. It requires keeping financial inclusion, rather than transaction volume alone, at the centre of policy and industry priorities, and sustaining the collaboration between regulators, financial institutions and technology partners that has brought the country this far. Mastercard remains committed to supporting this journey by strengthening the connected infrastructure that enables banks, fintechs, businesses and government programmes to operate together seamlessly. If the last decade was about building Bangladesh’s digital payments ecosystem, the next should be about ensuring every Bangladeshi can participate fully in it and access financial freedom.

Since the political changeover in August 2024, Bangladesh has experienced significant political and social changes. Under the interim government, uncertainty remained over policy direction and the predictability of administrative procedures. It was certainly not an easy business environment for foreign companies.

Yet Japanese companies continued their operations. More importantly, some even announced new investments or business expansions during this period. One reason may be that Japanese companies do not assess Bangladesh solely on the basis of short-term political developments. They are looking beyond the immediate political risks: the country’s large population, rising income levels, competitiveness as a production base and the expansion of its domestic market. In other words, they are looking at what Bangladesh could become over the next 10 or 20 years.
Bangladesh is gradually becoming more than a low-cost production base for Japanese companies. It is also a country where they see potential for future sales and business growth.

The 2025 JETRO Survey on Business Conditions of Japanese Companies Overseas provides some evidence. Of the Japanese companies surveyed in Bangladesh, 50 percent expected to be profitable in fiscal 2025, while 56.9 percent said they planned to expand their business over the next one to two years. At the same time, 94.4 percent identified political and social instability as an investment risk. These figures suggest an interesting contrast: Japanese companies are clearly aware of the risks, yet many continue to see opportunities for expansion.

The reason is not simply low labour costs. Bangladesh offers Japanese companies an established business base today, while its large population, rising incomes and expanding domestic demand offer the possibility of a much larger market tomorrow. In this sense, Bangladesh is gradually becoming more than a low-cost production base for Japanese companies. It is also a country where they see potential for future sales and business growth.

From this long-term investment perspective, the establishment of the Invest Bangladesh authority is an important development. On August 20, the government brought the Invest Bangladesh Act, 2026 into effect through a gazette notification, merging BIDA, BEZA and the PPP Authority into a new organisation. This is an important step towards consolidating investment promotion functions.

However, this merger does not mean that Bangladesh’s investment administration has become a unified system. Institutions such as BEPZA and Bangladesh Hi-Tech Park Authority (BHTPA), which also play important roles for investors, remain outside the new organisation. Moreover, the issues faced by investors do not end with investment promotion agencies. They may need to coordinate with various government agencies on matters ranging from work permits to tax, customs and foreign-exchange regulations.

This is why I believe the potential role of Invest Bangladesh goes beyond managing the three organisations brought together under the new authority. It could become a coordinating “control tower” that addresses cross-government issues from the investor’s perspective.

For example, information submitted by an investor could be shared across relevant agencies. Digital procedures could also create clear records of applications and decisions, reducing room for different interpretations by individual officials. The real objective should not simply be to create “one organisation”, but to create “one administration from the investor’s perspective”.

Japanese companies have continued to see Bangladesh’s long-term growth potential. If the new organisation can play this cross-government coordinating role and improve the investment experience for companies, it could further strengthen that long-term confidence.

The Invest Bangladesh authority has the potential to make Bangladesh’s investment administration simpler, more transparent and more predictable from the perspective of businesses. That is a development worth watching closely.

One morning in August 2025, a Turkish textile giant walked into BIDA, exploring Bangladesh for its first overseas factory. Until then, Egypt had been its default choice. After discussing Bangladesh’s market, workforce, incentives and industrial zones, the company was more interested. Then came a simple question: “Can you show us which plots are available?”

We paused. That sat with a different agency. The investor asked, “But you just heard our whole story. Do we really have to start again with someone else? How annoying.”

This experience reflects the confusion investors have faced for years -- fragmented roles, duplicated functions and multiple desks for the same investment journey. Investors have long asked for one focal point, one front office.

That is where Invest Bangladesh came from.

The idea was shaped by feedback from investors, business associations, think tanks and policy papers calling for the agencies to be unified. Bangladesh has also had multiple national-level investment promotion bodies with overlapping mandates. That is why the creation of Invest Bangladesh became one of the priorities under the government’s 180-day plan. Invest Bangladesh formally began its journey on August 20, 2026, bringing BIDA, BEZA and PPPA under one apex investment development agency.

The significance is the combination of capabilities.

Investment promotion and facilitation, policy coordination, economic zone development and PPP capability can now sit within one institutional framework. The agency can remain with an investor throughout the investment lifecycle, from opportunity identification and location selection to approvals, implementation, aftercare and expansion. The investor should be able to bring the project to one platform instead of first trying to understand the government organogram.

The Invest Bangladesh Act, ratified by the parliament, introduces capabilities that are easy to overlook. The new agency has a mandate to facilitate the transfer or privatisation of state-owned assets. Bangladesh has over a hundred government assets that are either non-operational or loss-making despite having valuable land, facilities or infrastructure. The new structure creates a pathway to bring these assets into commercial use.

“One-stop service” has been used so loosely in Bangladesh that, for an investor, it can sometimes feel like “many stops”. Multiple agencies operate their own platforms, while interoperability remains limited and manual service delivery continues alongside digital systems.

The new Act addresses this more directly: one central platform, mandatory integration of relevant services and, over time, a transition away from parallel manual processes. This is critical if digitisation is to reduce investor touchpoints rather than replicate them online.

The Act allows sector experts and specialists to enter the institution at different levels, including leadership roles. This can help Invest Bangladesh operate as the private-sector-facing arm of government, translating investor feedback into policy intervention.

This is not the first rodeo.

Our predecessor, BIDA, was created over a decade ago through the merger of two institutions. The intent was right, but execution exposed important gaps. The organisational structure took years to finalise, while legacy rules and ways of working continued under a common name.

A sustainable merger needs more than a new signboard. It needs a common purpose, integrated systems, aligned people and clear accountability. Those lessons must shape this transition.

But will it solve everything? The answer is no; it will not.

Invest Bangladesh is not a silver bullet. It is a back-office integration designed to make the investor experience simpler, faster and more coherent. The direction is clear: the investment ecosystem is moving towards simplification, and policymakers are beginning to walk the talk on reform. The next job is harder: making sure execution is flawless, and investors actually feel the difference.

The writer is the head of Business Development at Invest Bangladesh

It is very concerning that, despite having sufficient deposits in their bank accounts, depositors cannot withdraw funds because of liquidity crises and the inability of many banks and NBFIs to honour cheques or requests. Serious patients could not receive medical treatment, while emergency family needs, including higher education, could not be met. A few banks and NBFIs are still running well, but they can be counted on one hand. The issue came to the surface after August 5 of 2024, when owners fled or went into hiding, boards were restructured, top management changed and, in some cases, the central bank appointed administrators.

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Political will to ensure good governance is critical. Putting the right people in the right places is also important. Undue interference by the government and regulators should be avoided.

The question is why this happened when the central bank is responsible for monitoring and regulating the banking and financial systems, alongside the Ministry of Finance. The position on bad loans was kept suppressed, with the central bank exercising undue power over the quantum of provisions for bad and doubtful debts. It introduced tripartite meetings after statutory audits and dictated matters to external auditors, jeopardising their independence. Our experience over the past decade shows this weak governance. Tripartite meetings should only resolve disputes between clients and banks. In Bangladesh, this mechanism has been thoroughly misused.

Governance failures are apparently the key reason for this situation. Laws, rules and regulations were not adhered to; policies were not followed as they should have been; directors, especially chairmen, did not play their role as custodians, and independent directors failed to meet the expectations of depositors. Internal audit teams also failed to play their due role. Undue board influence, lack of professionalism and weak ethical standards also contributed. The failures of external auditors and senior management cannot be ignored.

My experience as a nominated director of a state-owned bank for about two years and an NBFI for more than five years was rewarding. The NBFI managed its asset quality very well. Even as an auditor for an NBFI, I had to discontinue my audit after one year of a three-year rotation because of a disagreement over the quantum of provisions for bad and doubtful debts. Neither the central bank nor the Ministry of Finance asked me about my discontinuation.

In the absence of a strong capital market, the main source of business finance is funding from banks and NBFIs. When banks and NBFIs are weak, and in some cases insolvent, business, trade, and industrialisation have no way but to suffer, while economic growth is severely affected.

Institutions are built over many years. When they fail to perform and financial systems break down, restoring them is difficult. Bangladesh is experiencing such a phase.

Political will to ensure good governance is critical. Putting the right people in the right places is also important. Undue interference by the government and regulators should be avoided. In cases of gross negligence or motivated decisions, wrongdoers should be subject to independent investigation by credible agencies. If proved guilty, they should be held accountable. Bad practices must not be repeated.

Ultimately, the situation must be addressed with due attention to timelines. Delays can be costly, and Bangladesh cannot afford them. Based on media reports, it is also alarming that the economy is likely to turn around only after four years. Although there is no visible basis for this statement, it is nevertheless hopeful that at least a ray of hope can be seen. Let us hope for the best.

As I walked through the streets of Ho Chi Minh City last week, my second trip there within a month, I couldn’t help but wish Dhaka could resemble it. It was a delightful experience to walk on cleaner pavements without constant uneven impediments and hawkers. I neither had to encounter reckless battery-run rickshaws nor put up with beggars nudging at my car windows. I never had to worry about security while taking a stroll on the streets of Ho Chi Minh City late at night. I could smell the aroma of world-famous Vietnamese coffee as I passed cafes that are almost omnipresent. I took “Grab” cars for rides, with comfortable, spacious and clean vehicles that reminded me of the run-down Uber cars in Dhaka. Both are old cities, yet Ho Chi Minh City is so much more liveable because of these small things.

Vietnam is rapidly progressing to a developed economy. Singapore did this decades ago. Vietnam is on the same path, with much bigger geographical and demographic advantages.

Vietnam is having a spectacular growth phase. In its latest assessment report, Standard Chartered has raised its forecast for Vietnam’s GDP growth in 2026 to 9.5 percent and 11 percent for 2027. It has also lowered its inflation forecasts to 4.4 percent for 2026 and 3.3 percent for 2027. Vietnam’s foreign direct investment was a staggering $38 billion during the first seven months of 2026. These are enviable economic indicators for any country. The government is encouraging banks to support its target of achieving double-digit GDP growth. The State Bank of Vietnam (SBV) has recently allowed banks to exclude public sector project loans from their overall credit limits and single borrower limits.

Yet economic indicators alone do not tell the full story until one experiences Vietnam first-hand. I could feel the vibe of a country collectively focused on its growth journey. I could see large infrastructure projects everywhere, even when I travelled outside Ho Chi Minh City. I saw people rushing to their destinations in cars and motorbikes. I found shopping malls with world-class brands full of visitors, locals and tourists. I visited grocery stores as locals stocked up their shopping carts with wholesome food and vegetables.

Vietnam has also become an attractive tourist destination. Some places reminded me of Kolkata, with colonial-era buildings and museums full of rich history. The food is served artistically in Michelin-starred restaurants, though my strict “halal only” cuisine policy left me with limited choices of vegetarian dishes, full of local herbs enriched with heavenly aroma. Most people in Vietnam, even at professional levels, do not speak or understand English. That is not an impediment to its growth journey, as it did not stop China or Korea. Vietnamese professionals have an insatiable hunger to learn best practices from global experts and implement them, especially in banking. Many expatriates are now working in Vietnamese banks and companies, sharing their experience and training local talent, who are very hard-working, bright and promising.

Vietnam is rapidly progressing from a developing to a developed economy. Singapore did this decades ago, and now Vietnam is on the same path, with much bigger geographical and demographic advantages. With a deep-rooted supply chain powered by SMEs and households, global tech giants such as Samsung, LG and Foxconn have chosen Vietnam as major manufacturing bases. As companies continue to hedge their China dependence and leverage their connectivity with other markets, Vietnam is leaping forward by building top-class infrastructure, delivering good governance and achieving world-class productivity in manufacturing and electronics.

There is a lot to learn from the Vietnam story as it unfolds rapidly in front of our eyes, and not too far from us.