Bangladesh's ready-made garment exports to the United States fell by nearly 11% year-on-year in October as higher tariffs imposed by the Trump administration reduced consumer demand and disrupted buying patterns in the world's largest apparel market.

The impact of the Trump administration's reciprocal tariff measures is increasingly being felt across almost all apparel-exporting countries, primarily due to a contraction in US consumption driven by higher import duties.

According to the latest data released by the Office of Textiles and Apparel (Otexa), the downturn was not limited to Bangladesh, as apparel shipments from nearly all major exporting countries to the US fell.

Otexa data shows that overall US apparel imports dropped by around 19% in October, reflecting weakening demand amid rising prices. Exporters attribute the slowdown largely to higher tariffs, which have pushed up retail prices and discouraged consumer spending.

Under the new tariff regime introduced from August, Bangladeshi apparel products are now subject to an additional 20% duty, taking the total tariff burden to 36%. China and India face even higher tariff rates, resulting in a sharper decline in exports from those countries.

In October alone, US apparel imports from China plunged by 53%, while imports from India fell by nearly 29%, according to Otexa.

Demand dampens in US due to inflation

Shehab Udduza Chowdhury, vice-president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told TBS that higher tariffs have fuelled inflation in the US apparel market. "Because of higher prices, consumers who used to buy five garments may now be buying only three," he said.

Shehab added that frequent policy changes under the Trump administration have created uncertainty among US buyers and global brands, prompting them to reduce inventory levels and avoid holding long-term stock. "Many buyers also rushed to place orders before the new tariffs came into effect on 7 August, leading to a subsequent drop in shipments."

He continued, "This could ultimately create a crisis in the US apparel supply chain, which may trigger another round of price increases."

Otexa data indicates that US apparel imports recorded growth between January and July, but began to decline after the new tariffs were enforced in August. China, the largest exporter to the US, has been the worst affected by the shift.

Bangladesh is relatively less affected

Bangladeshi exporters note that, compared with China and India, the export performance of Bangladesh, Pakistan and Cambodia has been relatively less affected.

Overall, US apparel imports fell by about 1% during the first 10 months of the year, from January to October, amounting to $66.63 billion, down from more than $67 billion in the same period last year.

Despite the recent slowdown, Bangladesh's garment exports to the US still grew by more than 15% over the ten months, although this was lower than the nearly 22% growth recorded between January and July. By contrast, US apparel imports from China declined by 32% during the same period.

US job growth slowed more than expected in December amid business caution about hiring because of import tariffs and rising artificial intelligence investment, but the unemployment rate dipped to 4.4 per cent, supporting expectations the Federal Reserve would leave interest rates unchanged this month.

Nonfarm payrolls increased by 50,000 jobs last month after rising by a downwardly revised 56,000 in November, the Labor Department's Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast 60,000 jobs added after a previously reported 64,000 increase in November.

The closely watched employment report suggested the labor market remained stuck in what economists and policymakers have called a "no hire, no fire" mode. It also confirmed the economy was in a jobless expansion. Economic growth and worker productivity surged in the third quarter, in part attributed to the AI spending boom.

The labor market lost considerable momentum last year, largely blamed on President Donald Trump's aggressive trade and immigration policies, which economists and policymakers said reduced both demand for and supply of workers.

The sharp moderation in job growth, however, started in 2024. The BLS has estimated about 911,000 fewer jobs were created in the 12 months through March 2025 than previously reported. The agency will publish its payrolls benchmark revision next month with the January employment report.

The overcounting has been blamed on the birth-death model, which is used by the BLS to estimate how many jobs were gained or lost because of companies opening or closing in a given month. Last month, the BLS said it would, starting in January, change the birth-death model by incorporating current sample information each month.

Together with the December employment report, the BLS published annual revisions to the household survey data for the past five years. The unemployment rate is calculated from the household survey.

The annual population control adjustments, normally incorporated with the January employment report, will be delayed. November's unemployment rate was revised down to 4.5 per cent from the previously reported 4.6 per cent.

The median forecast in a Reuters poll of economists was for the jobless rate to have eased to 4.5 per cent in December. Some economists say low supply has prevented a sharp rise in the unemployment rate. They estimated that between 50,000 and 120,000 jobs need to be created each month to keep up with growth in the working-age population.

The US central bank cut its benchmark interest rate by a quarter of a percentage point to the 3.50 per cent-3.75 per cent range in December, but officials indicated they were likely to pause further reductions in borrowing costs for now to get a better sense of the economy's direction.

With factors like tariffs and AI preventing companies from hiring more workers, economists increasingly view the labor market's challenges as more structural than cyclical, which would make rate cuts less effective to stimulate job growth.

Bangladesh advances towards strengthening its mutually beneficial trade relationship with the United States, opening the door to greater market access and new opportunities for its vital textile and apparel sector.

A spokesperson for the interim government's Chief Adviser Office Saturday broke the news in Dhaka, following a follow-up trade negotiation with the United States in the US capital.

In response to a request from National Security Adviser Dr Khalilur Rahman, who is currently on a visit to Washington, DC, US Trade Representative Ambassador Jamieson Greer has agreed to raise with President Donald Trump the possibility of reducing Bangladesh's current 20-percent reciprocal tariffs to a rate commensurate with regional competitors'.

"Even more significantly, both sides have developed an innovative and forward-looking solution to support Bangladesh's export priorities," says the spokesman about the fresh tradeoff under a proposed preferential trade scheme.

Under a proposed preferential scheme discussed yesterday (Friday) by Dr Rahman and Ambassador Greer, Bangladesh would receive tariff-free access to the US market for textile and apparel exports equivalent to its imports of US-produced cotton and man-made fiber (MMF) textile inputs, measured on a square-meter basis, he adds.

"This creative, win-win approach strengthens bilateral trade, supports Bangladeshi manufacturers and workers, and deepens supply-chain ties with US producers," it is stated.

It reflects growing momentum and goodwill in US-Bangladesh economic relations and marks a promising new chapter for Bangladesh's global trade prospects, the government notes about the latest developments in the aftermath of the Trump tariff tempest which is roiling global trade order.

Bangladesh Bank's far-reaching reforms under the interim government — from revealing the actual extent of defaulted loans to stabilising the foreign exchange market and tightening monetary discipline — signal a clear turning point for the banking sector and are set to influence its future governance.

As part of this overhaul, the central bank has formulated at least six key legislative drafts aimed at dismantling the culture of impunity that allowed influential families and political figures to hollow out the financial system over the last two decades.

Central to this mission are proposed amendments to the Bank Company Act and the Bangladesh Bank Order, which seek to curb the dominance of business conglomerates and establish the central bank's autonomy.

Grip of death

The proposed draft of the Bank Company Act introduces stringent limits on board representation to prevent a repeat of the systemic collapses seen during the Sheikh Hasina regime.

Under the new rules, the number of directors from a single family and its affiliates on a bank board will be slashed from five to two. Furthermore, a director's continuous term will be halved from twelve years to six.

These measures are a direct response to the "family dominance" of ousted prime minister Sheikh Hasina and her cohorts which crippled the sector, most notably by conglomerates like the S Alam Group.

Such entities allegedly gained control of multiple banks to siphon off thousands of crores of taka, much of which was reportedly laundered abroad.

To further ensure professional management, the central bank also proposes barring political figures from bank boards and restricting any single individual from holding significant stakes in multiple banks.

Reduce state control

In a bid to shield the regulator from political interference, the draft amendment to the Bangladesh Bank Ordinance 2025 proposes significant changes to key appointments.

Under the new mandate, the president will appoint the governor and deputy governors, and the governor's post will be upgraded from the status of a secretary to that of a minister.

The amendment also seeks to reduce state control over the central bank's board. While the current board includes three government representatives, the final draft proposes retaining only one, ensuring that the institution can make financial decisions based on economic necessity rather than political convenience.

Safety and debt recovery

Beyond structural governance, BB has already moved to implement the Bank Resolution Ordinance and the Deposit Protection Act. These laws have already facilitated the merger of five weak banks while raising the insurance coverage ceiling to protect small depositors.

To address the mountain of bad loans or non-performing loans, the central bank has introduced the Distressed Asset Management Ordinance and proposed updates to the Money Loan Court.

These reforms aim to treat general and "wilful" defaulters with equal severity and speed up the settlement of long-pending recovery cases.

Despite the central bank board's approval and pressure from the International Monetary Fund (IMF) to expedite these changes, the government has reportedly been responding slowly to the final review of the Bank Company Act and the Bangladesh Bank Order.

Bangladesh Bank sources indicate that the swift implementation of these laws is essential to restoring public trust and ensuring that the recent stabilisation of the foreign exchange market also translates into long-term financial health.

Bangladesh Bank's sweeping reform measures under the interim government – ranging from exposing the true scale of default loans to stabilising the foreign exchange market and enforcing monetary discipline – have marked a decisive turning point for the country's banking sector and are expected to shape its future governance.

These measures have restored depositor confidence, increased liquidity and contributed to a steady decline in inflation. Although inflation did not come down to the expected level, its further rise has been checked. However, little progress has been made in the repatriation of assets siphoned off from Bangladesh.

Under the reform programme, the Bangladesh Bank identified default loans of Tk6.44 lakh crore as of September, which was 36% of total loans, three times higher than the amount shown during the previous regime.

The huge default loans that were assessed through asset quality review by engaging foreign firms under the reform programme helped the central bank to go for proper treatment for weak banks.

In a landmark move, the Bangladesh Bank merged five Islamic banks – each burdened with default loan ratios exceeding 90% – to form a new entity, Sammilito Islami Bank.

Bangladesh Bank board also decided to liquidate another nine non-bank financial institutions, which are currently not in a position to continue to operate due to high default loans.

The total estimation for merger and liquidation is Tk70,000 crore, of which will be provided from the taxpayers' money to mitigate the hole created by massive corruption during the ousted prime minister Sheikh Hasina's 15-year regime.

Speaking at a recent event, Bangladesh Bank Governor Ahsan H Mansur said, "We have already started addressing the issues of five weak banks and provided Tk35,000 crore. But several others remain at risk. Resolving their problems will require another Tk35,000 crore, bringing the total cost to around Tk70,000 crore."

He said this massive amount cannot be mobilised overnight. "We are considering allocations over multiple fiscal years. It will have to be a phased recovery, not a one-time fix."

The governor said the Bangladesh Bank is taking steps to liquidate nine NBFIs, and four to five more NBFIs could face liquidation if they fail to restructure or raise fresh capital.

"Those which can prove viability will be given a chance to survive. We're not promising miracles. But with time, transparency, and the rule of law, we can rebuild trust in the financial system."

Mansur also acknowledged that the default loan situation is more serious than previously disclosed. The reported NPL figure had been hovering around 9% in the past. It is 36% now. "We are not going to manipulate the data. The public deserves transparency."

The governor said the central bank aims to bring down the NPL rate to 10% by March 2026. "It might take 10 years to reduce it to 4-5%, but that is the sustainable path."

What amendment in major laws

The Bangladesh Bank also formulated at least six laws, including amending the Bank Company Act to bring corporate governance in the board of banks, the Bangladesh Bank Order to ensure central bank autonomy, introduced Bank Resolution Act for effective resolution and Deposit Protection Act raising insurance coverage ceiling for depositors, Distressed Asset Management Ordinance for tackling default loans and Money loan court to speed up case settlement.

Out of six, two major laws, including the Bank Company Act and the Bangladesh Bank Order, are still under government review after the approval from the board of Bangladesh Bank.

Although the International Monetary Fund (IMF) has been pursuing Bangladesh Bank to implement the amendment of both laws, the government has been responding slowly, according to central bank sources.

In the final draft amendment to the Bank Company Act, the Bangladesh Bank focused on limiting the power of influential individuals and families and political figures.

The proposed draft limits the number of directors from a single family and their affiliates on bank boards from five to two, and cuts a director's continuous term from 12 years to six, in a move to curb family influence in bank management.

Such dominance by certain board members has crippled the country's banking sector over the past 15-20 years, particularly during the Sheikh Hasina regime, leading to rampant loan scams, rising non-performing loans, and loss of public funds and trust.

Conglomerates such as S Alam Group gained control of multiple banks and allegedly withdrew thousands of crores of taka, much of which was, ultimately, allegedly laundered out of the country.

The central bank also proposes to bar political figures from boards, ease foreign investors' shareholding limits, restrict one person from holding large stakes in multiple banks, and treat general and wilful defaulters equally.

The draft amendment to the Bangladesh Bank Ordinance 2025 introduces major changes in key appointments, mandate, and financial management to shield the central bank from political influence to ensure autonomy.

Under the draft, the president will appoint the governor and deputy governors. While the amendment initially removed government representatives from the board, the final version retained one, according to the draft approved by the board. At present, the board includes three government representatives.

The governor's post will be upgraded from secretary to ministerial status under the draft amendment.

The Bangladesh Bank already implemented the Bank Resolution Ordinance and Deposit Protection Act through merging five banks under the amended ordinance.

Reformation in forex market

The Bangladesh Bank also reformed forex market management by introducing a greater flexible exchange rate mechanism, which helped to bring stability in the currency market.

Foreign exchange reserves rebounded strongly after the interim government cleared external arrears. The Bangladesh Bank added over $8 billion to reserves within a year, raising the total from $18.8 billion in December 2024 to $26.8 billion as of 4 December 2025, enough to cover more than four months of imports.

A more flexible exchange rate regime, coupled with aggressive policy rate hikes, restored discipline to the currency market. The taka has held steady at Tk122-123 per dollar for six consecutive months. The central bank also stopped money printing and moved swiftly to merge and restructure troubled banks, calming depositors and bringing back liquidity. Deposits increased noticeably after governance reforms at problematic banks.

These measures helped inflation fall from a 12-year high of 11.36% in July 2024 to single digits for the past six months. Food inflation, once at 14%, dropped to 7.36% in November. Although still above the Bangladesh Bank's FY26 target of 6.5%, the government's Bangladesh State of the Economy 2025 attributes the improvement to monetary tightening, supply-side interventions, stable global commodity prices, and a steady exchange rate.

Development of asset recovery

Although the Bangladesh Bank formed a task force for supporting the identification, investigation, and repatriation of assets siphoned off from Bangladesh, little progress has been made in this regard due to the complex process.

Its key functions include removing legal barriers to expedite proceedings, managing recovered assets, coordinating with international partners for information sharing, and strengthening institutional capacity and internal coordination to ensure effective asset recovery.

According to monetary policy statement of Bangladesh Bank for first half of FY26, the BFIU (Bangladesh Financial Intelligence Unit) has formed Joint Investigation Teams (JITs), led by the Anti-Corruption Commission (ACC), with participation from the Criminal Investigation Department (CID), the Central Intelligence Cell (CIC), and the Customs Intelligence and Investigation Directorate (CIID). These teams have prioritised 11 nationally significant money laundering cases and are actively investigating them.

How Islami Bank was quietly taken over

So far, assets both within Bangladesh and abroad linked to the accused have been identified and attached. Additionally, BFIU has frozen over 6,500 suspicious accounts and shared more than 100 financial intelligence reports with relevant law enforcement agencies. The Task Force is also collaborating with several international law and litigation firms on other money laundering cases beyond the prioritized 11 cases, and is seeking to appoint legal representatives in various jurisdictions to overcome legal barriers to asset recovery.

The Task Force maintains close coordination with international organizations, including the Stolen Asset Recovery (StAR) Initiative, the US Department of Justice (USDOJ), the International Anti-Corruption Coordination Centre (IACCC), and the International Centre for Asset Recovery (ICAR), to access technical support, legal expertise, and training. To promote cross-border cooperation, the government is also working to sign Mutual Legal Assistance Treaties (MLATs) with several countries.

Bangladesh Bank's sweeping reform measures under the interim government – ranging from exposing the true scale of default loans to stabilising the foreign exchange market and enforcing monetary discipline – have marked a decisive turning point for the country's banking sector and are expected to shape its future governance.

These measures have restored depositor confidence, increased liquidity and contributed to a steady decline in inflation. Although inflation did not come down to the expected level, its further rise has been checked. However, little progress has been made in the repatriation of assets siphoned off from Bangladesh.

Under the reform programme, the Bangladesh Bank identified default loans of Tk6.44 lakh crore as of September, which was 36% of total loans, three times higher than the amount shown during the previous regime.

The huge default loans that were assessed through asset quality review by engaging foreign firms under the reform programme helped the central bank to go for proper treatment for weak banks.

In a landmark move, the Bangladesh Bank merged five Islamic banks – each burdened with default loan ratios exceeding 90% – to form a new entity, Sammilito Islami Bank.

Bangladesh Bank board also decided to liquidate another nine non-bank financial institutions, which are currently not in a position to continue to operate due to high default loans.

The total estimation for merger and liquidation is Tk70,000 crore, of which will be provided from the taxpayers' money to mitigate the hole created by massive corruption during the ousted prime minister Sheikh Hasina's 15-year regime.

Speaking at a recent event, Bangladesh Bank Governor Ahsan H Mansur said, "We have already started addressing the issues of five weak banks and provided Tk35,000 crore. But several others remain at risk. Resolving their problems will require another Tk35,000 crore, bringing the total cost to around Tk70,000 crore."

He said this massive amount cannot be mobilised overnight. "We are considering allocations over multiple fiscal years. It will have to be a phased recovery, not a one-time fix."

The governor said the Bangladesh Bank is taking steps to liquidate nine NBFIs, and four to five more NBFIs could face liquidation if they fail to restructure or raise fresh capital.

"Those which can prove viability will be given a chance to survive. We're not promising miracles. But with time, transparency, and the rule of law, we can rebuild trust in the financial system."

Mansur also acknowledged that the default loan situation is more serious than previously disclosed. The reported NPL figure had been hovering around 9% in the past. It is 36% now. "We are not going to manipulate the data. The public deserves transparency."

The governor said the central bank aims to bring down the NPL rate to 10% by March 2026. "It might take 10 years to reduce it to 4-5%, but that is the sustainable path."

What amendment in major laws

The Bangladesh Bank also formulated at least six laws, including amending the Bank Company Act to bring corporate governance in the board of banks, the Bangladesh Bank Order to ensure central bank autonomy, introduced Bank Resolution Act for effective resolution and Deposit Protection Act raising insurance coverage ceiling for depositors, Distressed Asset Management Ordinance for tackling default loans and Money loan court to speed up case settlement.

Out of six, two major laws, including the Bank Company Act and the Bangladesh Bank Order, are still under government review after the approval from the board of Bangladesh Bank.

Although the International Monetary Fund (IMF) has been pursuing Bangladesh Bank to implement the amendment of both laws, the government has been responding slowly, according to central bank sources.

In the final draft amendment to the Bank Company Act, the Bangladesh Bank focused on limiting the power of influential individuals and families and political figures.

The proposed draft limits the number of directors from a single family and their affiliates on bank boards from five to two, and cuts a director's continuous term from 12 years to six, in a move to curb family influence in bank management.

Such dominance by certain board members has crippled the country's banking sector over the past 15-20 years, particularly during the Sheikh Hasina regime, leading to rampant loan scams, rising non-performing loans, and loss of public funds and trust.

Conglomerates such as S Alam Group gained control of multiple banks and allegedly withdrew thousands of crores of taka, much of which was, ultimately, allegedly laundered out of the country.

The central bank also proposes to bar political figures from boards, ease foreign investors' shareholding limits, restrict one person from holding large stakes in multiple banks, and treat general and wilful defaulters equally.

The draft amendment to the Bangladesh Bank Ordinance 2025 introduces major changes in key appointments, mandate, and financial management to shield the central bank from political influence to ensure autonomy.

Under the draft, the president will appoint the governor and deputy governors. While the amendment initially removed government representatives from the board, the final version retained one, according to the draft approved by the board. At present, the board includes three government representatives.

The governor's post will be upgraded from secretary to ministerial status under the draft amendment.

The Bangladesh Bank already implemented the Bank Resolution Ordinance and Deposit Protection Act through merging five banks under the amended ordinance.

Reformation in forex market

The Bangladesh Bank also reformed forex market management by introducing a greater flexible exchange rate mechanism, which helped to bring stability in the currency market.

Foreign exchange reserves rebounded strongly after the interim government cleared external arrears. The Bangladesh Bank added over $8 billion to reserves within a year, raising the total from $18.8 billion in December 2024 to $26.8 billion as of 4 December 2025, enough to cover more than four months of imports.

A more flexible exchange rate regime, coupled with aggressive policy rate hikes, restored discipline to the currency market. The taka has held steady at Tk122-123 per dollar for six consecutive months. The central bank also stopped money printing and moved swiftly to merge and restructure troubled banks, calming depositors and bringing back liquidity. Deposits increased noticeably after governance reforms at problematic banks.

These measures helped inflation fall from a 12-year high of 11.36% in July 2024 to single digits for the past six months. Food inflation, once at 14%, dropped to 7.36% in November. Although still above the Bangladesh Bank's FY26 target of 6.5%, the government's Bangladesh State of the Economy 2025 attributes the improvement to monetary tightening, supply-side interventions, stable global commodity prices, and a steady exchange rate.

Development of asset recovery

Although the Bangladesh Bank formed a task force for supporting the identification, investigation, and repatriation of assets siphoned off from Bangladesh, little progress has been made in this regard due to the complex process.

Its key functions include removing legal barriers to expedite proceedings, managing recovered assets, coordinating with international partners for information sharing, and strengthening institutional capacity and internal coordination to ensure effective asset recovery.

According to monetary policy statement of Bangladesh Bank for first half of FY26, the BFIU (Bangladesh Financial Intelligence Unit) has formed Joint Investigation Teams (JITs), led by the Anti-Corruption Commission (ACC), with participation from the Criminal Investigation Department (CID), the Central Intelligence Cell (CIC), and the Customs Intelligence and Investigation Directorate (CIID). These teams have prioritised 11 nationally significant money laundering cases and are actively investigating them.

How Islami Bank was quietly taken over

So far, assets both within Bangladesh and abroad linked to the accused have been identified and attached. Additionally, BFIU has frozen over 6,500 suspicious accounts and shared more than 100 financial intelligence reports with relevant law enforcement agencies. The Task Force is also collaborating with several international law and litigation firms on other money laundering cases beyond the prioritized 11 cases, and is seeking to appoint legal representatives in various jurisdictions to overcome legal barriers to asset recovery.

The Task Force maintains close coordination with international organizations, including the Stolen Asset Recovery (StAR) Initiative, the US Department of Justice (USDOJ), the International Anti-Corruption Coordination Centre (IACCC), and the International Centre for Asset Recovery (ICAR), to access technical support, legal expertise, and training. To promote cross-border cooperation, the government is also working to sign Mutual Legal Assistance Treaties (MLATs) with several countries.

Bangladesh's financial system entered 2025 with fewer places left to hide. Years of weak loan discipline, repeated rescheduling, and regulatory forbearance had accumulated into visible stress across banks, especially those with governance and connected-lending problems. What followed was not a dramatic break, but a coordinated attempt to clean up balance sheets, install guardrails, and manage adjustment without panic.

The reform story of 2025 is therefore not about a single law or intervention. It is about sequencing: diagnose first, build tools for failure, protect depositors, tighten prudential rules – and only then confront the harder political questions about discretion, accountability, and central-bank power.

Uncovering the reality

Bangladesh Bank announced in 2024-25 that it would conduct independent Asset Quality Reviews of 17 banks – prioritising weak and Islamic banks – to establish a credible baseline of losses, capitalisation needs, and governance failures. AQRs would be conducted using best practice methodologies and external expertise.

A first group of six private banks AQRs was completed by mid-2025, with the remainder scheduled by year-end. The AQR results were shared with bank boards, confirming substantial under-recognition of non-performing assets and capital shortfalls. A second phase covering three additional banks was initiated, but the broader program stalled – effectively leaving the system with partial diagnosis and no system-wide reckoning.

AQRs are resource-intensive for both supervisors and banks. Conducting AQRs for all 17 banks in parallel would have strained BB's supervisory capacity and the availability of qualified external audit firms. The AQR program has crossed a point of no return – but not a point of no delay. Bangladesh has demonstrated that it can run credible diagnostics and act on some of them. Whether it completes the journey depends less on technical capacity than on political willingness to absorb the consequences of what the remaining AQRs are likely to show.

Resolving zombies and maintaining confidence

Bangladesh had long avoided: what happens when banks are not viable?

The Bank Resolution Ordinance filled a long-standing legal gap. It provided formal tools to intervene in failing banks through bridge institutions, purchase-and-assumption transactions, asset separation, bail-ins, bail-outs and – if necessary – temporary public ownership. A dedicated restructuring and resolution unit was set up to operationalise these powers.

This was about ending the default option of indefinite support. For the first time, the system was being designed to absorb bank failure without improvisation.

Resolution tools are politically fragile without depositor confidence. That constraint was addressed through the Deposit Protection Ordinance.

The reform doubled deposit coverage to Tk2,00,000 per depositor and cut payout timelines from months to just over two weeks. Separate protection funds were established for banks and finance companies, with clearer premium rules and membership obligations.

First results on the ground

The most visible application of this new framework was the consolidation of five troubled Islamic banks into a single institution under closer supervision. Rather than allowing multiple weak entities to drift independently – or triggering abrupt closures – authorities opted for aggregation. It is not a textbook resolution, but it marked a break from open-ended forbearance and signaled that Islamic banks would not be exempt from prudential discipline.

The consolidation was operationalised through a BB circular issued on December 30, which set out the legal and supervisory basis for transferring the operations of the five banks into the newly created Sommilito Islami Bank. The circular clarified the continuity of deposits and contracts, placed the new institution under enhanced regulatory oversight, and provided for liquidity support to ensure uninterrupted banking services.

From January 1, small individual depositors were able to access their funds through the new entity. Early results suggest the immediate objective was achieved: depositor panic was contained, payment services continued, and the authorities have gained time to address governance and capital issues within a single supervised platform.

Regulatory progress and regress

Alongside legal reform came quieter changes that matter just as much. Updated definitions of non-performing loans and forbearance reduced the scope for repeated cosmetic rescheduling. Cure-period requirements were tightened, and the transition path toward IFRS 9 – expected-credit-loss provisioning by 2027 – was reaffirmed. Once losses must be recognised earlier and provisioning becomes unavoidable, banks are forced toward recapitalisation, restructuring, or exit.

Rescheduling policy, however, moved in the opposite direction. While tighter classification rules constrained cosmetic rollovers, BB simultaneously revised rescheduling frameworks – especially for large loans. The rescheduling framework itself offered structured relief rather than blanket forbearance. It allows extended repayment tenors, grace periods on principal, and phased instalment schedules for stressed but operating borrowers, subject to documentation of cash flows and viability.

In effect, the framework created a formal channel to stretch repayment timelines while keeping loans within the banking system, delaying classification or resolution but avoiding abrupt defaults. Routing large loan rescheduling through a BB constituted committee reduced unilateral evergreening by weak banks, but it also created focal points for lobbying and rent-seeking. Credit outcomes shifted from bank–customer relationships to regulatory mediation, weakening the link between lending decisions and consequences. Discipline advanced – but cautiously, and unevenly.

The unfinished agenda

Reform intensity outside banking was more measured. The Bangladesh Securities and Exchange Commission focused on surveillance, disclosure, and market infrastructure rather than sweeping legislative change. Insurance reform under the Insurance Development and Regulatory Authority continued incrementally. Bankrupt non-bank financial institutions were dealt with through tighter supervision and restrictions on activity, aimed at containing risk rather than rapid turnaround.

Proposals to amend the Bangladesh Bank Order – aimed at strengthening independence, clarifying accountability, and aligning governance with international norms – remain unresolved. The bureaucracy has effectively played a kick-the-can game by protracting hard decisions about BB autonomy and oversight. At the same time, BB has continued to roll out risk-based supervision frameworks, sharpening off-site monitoring and prioritising supervisory attention toward weaker institutions, even as the legal foundations for its independence remain unsettled.

The uneven pace of reform reflects political triage: banking, as the core source of systemic risk and fiscal exposure, drew the heaviest attention. The deeper story of 2025 is not technocratic triumph or failure, but managed transition. Losses were surfaced, tools were built, and authority was reorganised – while discretion was carefully preserved. Whether this moment becomes a bridge to durable discipline, or hardens into a new equilibrium of managed delay, will turn on one unresolved question: whether reform of BB itself is finally confronted, rather than endlessly postponed.

Zahid Hussain is former lead economist at World Bank Dhaka office

Leaders of the Bangladesh LPG Autogas Station and Conversion Workshop Owners Association have called for urgent and effective government intervention to resolve the ongoing LPG crisis, warning that the situation has severely disrupted the country's transport sector.

Mohammad Serajul Mawla, association president, at a press conference held today (10 January) at the Dhaka Reporters Unity, said autogas or liquefied petroleum gas (LPG) is an environment-friendly, easily available and cost-effective fuel that has long been used as an efficient alternative to CNG, petrol, octane and diesel.

He added that with government encouragement, around 1,000 autogas stations have been established across all 64 districts of the country, while nearly 150,000 vehicles have been converted to run on LPG.

However, due to the severe shortage of LPG, almost all autogas stations across the country have effectively shut down, Serajul said.

As a result, station owners, as well as owners and drivers of LPG-run vehicles, are facing extreme hardship, he added.

"Vehicles are unable to get gas even after waiting for hours, disrupting traffic movement and severely affecting passenger services. Passengers are being harassed on a daily basis."

He further said that Bangladesh consumes an average of around 140,000 metric tonnes of LPG per month, of which only about 15,000 metric tonnes, roughly 10% is used in the transport sector.

"Yet the failure to ensure supply of this relatively small amount has pushed the entire LPG autogas industry to the brink of collapse," he said.

Calling on the government to take immediate action, Serajul said ensuring energy security, stability in the transport system, consumer interests and environmental protection requires visible and effective steps without delay.

"If the LPG crisis is not resolved quickly, its impact will deepen further, affecting the overall economy and public life," he added.

At the press conference, the association placed three key demands: urging LPG supplier companies, operators and LPG Operators Association of Bangladesh (LOAB) to ensure adequate supply of LPG autogas in line with demand; calling on the Bangladesh Energy Regulatory Commission (BERC) and other relevant authorities to quickly resolve complications related to LPG imports and ensure sufficient supply to the autogas sector through operators; and taking all necessary measures to prevent future supply disruptions, including importing LPG from alternative sources if needed under government initiative.

The country's revenue collection has grown by 16.7% in the first six months of the current fiscal year, Centre for Police Dialogue (CPD) said today (10 January), but warned that achieving the annual target will be challenging.

The observation came during CPD's independent review of the state of the Bangladesh economy for the first half of FY2025-26. CPD Executive Director Fahmida Khatun presented the assessment at a press conference at the organisation's office in Dhaka.

The review covered seven areas, including public expenditure, the inflationary trend, food security and private investment.

CPD noted that the new government will need to give priority to each of these sectors following the upcoming election next month.

On the public financial system, CPD said both revenue mobilisation and expenditure management are critical areas that will need attention.

It also observed that the interim government initiated some reforms, but these will need to be completed by the incoming administration.

According to CPD, tax collection has grown by 15.2%, mainly through income tax and VAT components. However, it said questions remain over whether the revenue target can be met even after revision.

To reach the full-year goal, an additional 3% growth would be required, which CPD noted as challenging given current trends.

Gold prices surged sharply in Bangladesh as jewellers announced a fresh hike, pushing the cost of the precious metal to a new high amid continued volatility in the local market.

In a statement issued on Saturday night, Bangladesh Jewellers Association (BAJUS) said the price of 22-carat gold has been increased to Tk227,856 per bhori (11.664 grams), up from the previous rate.

The association cited a rise in the price of tejabi (pure) gold in the local market as the reason behind the latest adjustment, saying the new rates were fixed after reviewing the overall market situation.

According to the revised price list, 21-carat gold will be sold at Tk217,534 per bhori, while the price of 18-carat gold has been set at Tk186,449 per bhori. Gold made under the traditional method will cost Tk155,423 per bhori.

In addition to the selling price, buyers will have to pay a government-mandated 5 percent VAT and a minimum 6 percent making charge fixed by BAJUS. However, the making charge may vary depending on the design and quality of the jewellery.

BAJUS last adjusted gold prices on January 8, when it reduced the price of 22-carat gold by Tk1,050 per bhori to Tk226,806.

With the latest revision, gold prices have been adjusted five times so far this year—three hikes and two cuts. In 2025, BAJUS revised gold prices a total of 93 times, increasing rates on 64 occasions and cutting them 29 times.

Gold prices rose on Friday and were on track for a weekly gain, as investors weighed weaker-than-expected US payrolls data along with broader policy and geopolitical uncertainty.

Spot gold was up 0.5 percent at $4,496.09 per ounce as of 01:31 p.m. ET (1618 GMT), and was set for about 3.9 percent weekly gain. Bullion hit a record high of $4,549.71 on December 26.

US gold futures for February delivery settled 0.9 percent higher at $4,500.90.

US nonfarm payrolls in December rose by 50,000, missing expectations of a 60,000 gain, while the unemployment rate eased to 4.4 percent, below forecasts of 4.5 percent.

“Payrolls are showing us a poor job creation environment. Potentially more (geopolitical tension), somewhat higher oil prices, which are inflationary, uncertainty and an easing Fed — all a combination for precious metals,” said Bart Melek, global head of commodity strategy at TD Securities.

Market participants continued to factor in at least two Federal Reserve rate cuts this year, a backdrop historically favorable for gold.

Geopolitical tensions remained elevated amid intensifying unrest in Iran, continued fighting in Russia’s war in Ukraine, the US capture of Venezuela’s President Nicolas Maduro, and Washington’s renewed signals over taking control of Greenland.

Metals Focus projected gold prices could hit fresh record highs above $5,000 in 2026, citing de-dollarization trends and geopolitical risks.

Retail demand for gold in India remained subdued due to elevated prices, while gold premiums in China widened.

Meanwhile, uncertainty over tariffs persisted, as the US Supreme Court is not expected to issue a ruling on Friday in a major case testing the legality of President Donald Trump’s sweeping global tariffs, with decisions now expected on January 14.

The SME board of the Dhaka Stock Exchange (DSE) suffered a sharp year-on-year decline in 2025, significantly underperforming the main market index.

Sixteen of the 20 SME stocks suffered erosion in market value during the period, many of which had experienced unusual surges without any fundamental factors or corresponding improvements in financial performance.

As a result, the SME index of the prime bourse lost 22 per cent, or 235 points, during the year to close at 856 points-well below its base level set at the board's launch.

The SME board was launched in September.

2021 with six companies and a base index of 1,000 points. It peaked at 2,244 points in August 2022 amid a wave of speculative trading.

In 2025, SME stocks endured price erosion ranging from 6 per cent to 65 per cent. Consequently, the market capitalisation of the SME board fell by more than Tk 4 billion to Tk 17.56 billion at the end of the year.

By contrast, the main board of the Dhaka bourse recorded a comparatively modest decline of 6.7 per cent in its benchmark index over the same period.

Market analysts said the downturn in the SME board was inevitable, given the artificial nature of earlier price hikes that were not supported by corporate earnings or operational performance.

SME companies saw profits decline year-on-year in FY25 as overall economic activities remained subdued following the political shift, which also weighed on their stock prices, said Akramul Alam, head of research at Royal Capital.

"SME companies lack the capital intensity needed for expansion and scalability, which ultimately constrains their financial performance and growth," Alam told The Financial Express.

Several SME stocks had surged earlier without any positive earnings disclosures, raising concerns about market manipulation. At the time, analysts flagged speculative behaviour and rumour-driven trading as key drivers behind inflated valuations.

The SME index began to decline after the fall of the Sheikh Hasina-led regime in August 2024, amid speculation that the new securities commission formed after the political transition would take tougher measures against price manipulation.

Himadri, a stock that had previously played a dominant role in driving the SME index upward, witnessed sharp corrections over the past year.

The Financial Express had published several reports highlighting abnormal price hikes in small-cap stocks, particularly Himadri.

Himadri-an SME company operating six potato cold storages in northern Bangladesh-saw its share price plunge 55 per cent to Tk 657.9 per share by the end of last year.

What surprised market observers was that the little-known stock had surged to nearly Tk 10,000 per share in November 2023, despite the fact that many well-performing, dividend-paying blue-chip companies traded at far lower prices.

In November 2024, the securities regulator penalised one individual investor and three firms a total of Tk 17 million for manipulating Himadri's stock.

The fines were imposed following hearings based on investigation reports submitted by the DSE, which found the four investors engaged in manipulating Himadri's shares in 2023.

Despite the sharp correction, Himadri's share price remains elevated, with a price-to-earnings ratio of 178 as of Thursday.

"Himadri shares should never have traded above blue-chip stocks on the main board," Alam said.

Another SME stock, Oryza Agro Industries, which manufactures and markets fish and poultry feed, recorded the steepest price fall, plunging 65 per cent to Tk 8.5 as its profit declined 31 per cent to Tk 49.75 million in FY25.

Meanwhile, Yusuf Flour Mills, another little-known SME stock, surged 86 per cent to Tk 2,200 at the end of 2025, despite weak fundamentals. The stock had peaked at Tk 6,352 per share in June 2024.

Analysts said the price surge was artificial, as Yusuf Flour's financial performance did not justify the rally. The company's profit fell 43 per cent year-on-year in FY25, and it paid only a 5 per cent cash dividend.Financial planning tools

"A group of dishonest traders has been targeting the SME board to manipulate stocks," Alam said.

However, the new securities commission has taken several market-supportive measures and initiated tough actions against wrongdoers.

As part of a broader effort to promote sustainable capital market development, the commission has imposed heavy fines on several market manipulators and errant companies for malpractices committed during the tenure of the previous commission.

Economists and policymakers today (8 January) called for a clear and coordinated strategic roadmap to accelerate Bangladesh's transition to a cashless economy, citing low adoption of QR code payments and persistently high reliance on cash transactions.

More than 70% of Bangladesh's economic transactions are still conducted in cash, leaving the country far behind its regional peers despite ongoing efforts by the Bangladesh Bank to promote digital payments, said Ashikur Rahman, principal economist at the Policy Research Institute of Bangladesh (PRI).

Ashikur noted that QR code-based transactions remained almost negligible. By value, they accounted for less than 1% of total transactions in October 2025, when Bangladesh recorded just 1.06 million QR code payments, he said.

In contrast, India processed around 723 million such transactions during the same period, highlighting what he described as a "day and night" difference between the two countries.

The PRI principal economist was speaking at a stakeholder consultation workshop titled "Towards a Cashless Economy: A Strategic Roadmap for Bangladesh," organised by PRI in collaboration with the Gates Foundation.

The event brought together policymakers, regulators, economists, representatives from the financial sector and development partners to discuss pathways, challenges and policy priorities for expanding digital and cashless transactions.

Ashikur pointed out that in China even the most marginalised citizens routinely use QR codes to receive financial assistance.

The keynote paper presented at the workshop acknowledged that Bangladesh had made notable progress in digital payments, led by mobile financial services, QR payments and online banking. However, it said a large share of transactions remained cash-based due to key constraints, including limited interoperability, infrastructure gaps, cybersecurity risks and low digital literacy.

The paper identified financial inclusion, reduced transaction costs and improved economic governance as major benefits of a cashless economy. Drawing on global and regional experiences, it emphasised the importance of strong digital public infrastructure and a coordinated regulatory framework. The proposed roadmap recommended phased reforms, stronger inter-agency coordination, expansion of digital infrastructure, enhanced consumer protection and fintech-driven innovation to ensure an inclusive and secure transition.

Addressing as the chief guest, Bangladesh Bank Executive Director Arief Hossain Khan said the central bank is actively implementing initiatives to strengthen digital payments, financial inclusion and a secure payment ecosystem.

He stressed that effective coordination among regulators, financial institutions and technology providers was crucial to ensure that the move towards a cashless economy benefited all segments of society.

PRI Chairman Zaidi Sattar said transaction systems had come full circle in human civilisation. While cash was once a transformative invention, he said, it had now become cumbersome for modern economic activity, pushing societies once again towards cashless modes of exchange.

The workshop was chaired by Sattar and attended by PRI Research Director Bazlul H Khondker, along with senior officials, academics and development partners.

Auditors have found major documentation gaps over about Tk76 crore in cash withdrawn by listed Fortune Shoes Limited during the 2024-25 financial year, leaving the funds untraceable.

The audit was conducted by G Kibria & Co, Chartered Accountants, which reported that the company withdrew the funds from a regular account maintained with Islami Bank through 207 cheques.

However, the company failed to provide necessary documentation – such as the cash book, bank book, cheque counterfoils, invoices, vouchers, and delivery challans – to verify the use of the withdrawn funds.

The absence of even the cash book made it impossible for the auditors to confirm whether the money was used for legitimate business purposes.

On Thursday (8 January), the share price of the company closed at Tk14.40 on the Dhaka stock exchange.

The audit report also highlighted Tk19.73 crore in insurance claims related to fire damage to raw materials and finished goods in 2022, which the company had included in its financial statements.

Of this, Tk13.65 crore was claimed from Takaful Insurance Limited and Tk6.08 crore from Prime Insurance Company Limited. Nearly three years have passed, yet the claims remain unsettled.

No correspondence or documentation regarding the likelihood of recovery was provided to the auditors, raising significant uncertainty over the realisability of the claims.

The auditors further noted that although Fortune Shoes declared and approved dividends for the 2022, 2023, and 2024 financial years, the full amounts were not distributed. Dedicated dividend accounts were opened with Prime Bank PLC, but the entire approved amounts were not transferred.

As a result, Tk10.05 crore in dividends remained unpaid as of 30 June 2025, in violation of applicable laws and regulations.

Material discrepancies were also found between the company's accounting records and its monthly VAT returns. According to the auditors, differences included Tk143.63 crore in revenue, Tk13.86 lakh in local raw material purchases, and Tk40.21 crore in imported raw material purchases, indicating significant reporting inconsistencies.

The audit report additionally raised concerns over employee retirement benefits. Fortune Shoes does not maintain any approved provident fund or gratuity scheme.

Instead, an employee-initiated fund is being operated without proper authority and is not subject to regular audits, which is contrary to the Financial Reporting Council (FRC) requirements.

With optimism surrounding the upcoming election next month, capital market investors are reshuffling their portfolios toward blue-chip and fundamentally strong stocks, as increased buying appetite pushed these shares to the top of the turnover chart last week.

Riding on strong trading driven by investors' sector-specific concentration in blue-chip and bank stocks, turnover at the Dhaka Stock Exchange (DSE) surged by 34% last week, while all indices posted gains, data showed.

The other two indices – DS30, the blue-chip index, and DSES, the Shariah index – gained 45 points and 4.8 points respectively, to close at 1,915 and 1,011.

Throughout the week, total turnover stood at Tk2,373 crore, with average daily turnover of Tk474.54 crore – up 34% from the previous week.

In its weekly market commentary, EBL Securities said the benchmark index of the capital bourse extended its upward trajectory over the week, carrying forward New Year optimism, as dominant buying interest prevailed amid expectations of moderation in prevailing market uncertainties.

"Investors selectively repositioned into heavyweight banking stocks amid improving sectoral expectations and perceived clarity on the political front, which added strength to the market's upward trajectory," it said.

"While intermittent profit-taking emerged as cautious participants booked recent gains, buying interest ultimately outweighed selling pressure by week's end, driven by strong accumulation in particular large-cap stocks," the commentary added.

Investors were mostly active in the banking sector, which contributed 19.5% of total turnover, followed by the textile sector at 13.9% and the pharmaceuticals sector at 13.0%.

DSE data showed that of the top ten turnover stocks, nine were from the A category, while one was from the B category. Orion Infusion led the turnover chart with a 4.83% share of total turnover, followed by Square Pharmaceuticals, City Bank, Uttara Bank, and Fine Foods.

On the gainers' front, mostly A- and B-category stocks dominated the top ten gainers. Tallu Spinning Mills, a Z-category stock, topped the chart with a 20.29% rise in share price to Tk8.30 each, followed by GQ Ball Pen, which rose 16.33% to Tk527.10, Pubali Bank by 14% to Tk36.60, Islami Bank by 12.65% to Tk37.40, and NRB Bank by 11.29% to Tk6.90.

Meanwhile, Z-category stocks – mostly weak non-bank financial institutions – dominated the top ten losers. Peoples Leasing, Fareast Finance, FAS Finance, Premier Leasing, and International Leasing featured prominently on the losing list.

City Bank PLC has decided to construct a multi-storied office at Gulshan-2 in the capital at an estimated cost of Tk855 crore.

The bank announced the decision through a disclosure filed with the Dhaka Stock Exchange (DSE) on Thursday.

According to the disclosure, the bank's board of directors, in a meeting held on 7 January, decided to purchase approximately 20 katha of land on Gulshan Avenue to facilitate the construction. The purchase price for the land is Tk345 crore, inclusive of all related expenses.

This newly acquired land is adjacent to the bank's existing 20-katha plot in Gulshan. By combining these two parcels of land, the bank will now have a total of approximately 40 katha at the site, where the multi-storied building will be constructed.

The land purchase received approval from the Bangladesh Bank on 6 January 2026.

The bank stated that the project is subject to obtaining all necessary approvals from relevant regulatory authorities and ensuring full compliance with the guidelines and conditions stipulated by the central bank.

Following the disclosure, City Bank's share edged down by 0.396% to close at Tk25.80.

Earlier, City Bank has posted a remarkable surge in profits for the first nine months of 2025, as the lender strategically shifted towards risk-free investments in government securities amid an uncertain economic environment.

The bank's consolidated net profit rose 60% year-on-year to Tk720 crore in the January-September period, from Tk450 crore a year earlier. Earnings per share (EPS) climbed to Tk4.75, up from Tk2.96, reflecting strong earnings momentum across its investment portfolio.

"As a strategic initiative, City Bank's substantial investment in government securities led to a marked increase in investment income, effectively offsetting the decline in net interest income and supporting the coverage of escalating operational expenses," the bank said in its statement.

If the national election is held according to the timeline announced by the Election Commission, the new government will face the challenge of managing high Ramadan market prices immediately upon taking office. At the same time, analysts say certain policy decisions and actions taken by the interim government are creating financial and political pressure for the next elected government.

The new government will have to confront multiple challenges, including controlling high inflation, strengthening revenue collection to cover development and operating expenditures, increasing investment to generate new employment, restructuring a banking sector burdened by defaulted loans, and expanding foreign assistance.

Since assuming office, the interim government has increased operating expenditures in several ways. In particular, general and retrospective promotions have been granted within the public administration. Allowances for training, committee responsibilities, and other benefits have been increased. A new pay commission has also been formed, raising expectations among government employees that salaries will be increased, expectations that the next government will now have to address.

In addition, the government has accumulated substantial debt by borrowing at high interest rates to pay electricity subsidies, import fuel oil, and settle various arrears. Spending on social safety net programmes and fertiliser subsidies has also increased.

On the other hand, the interim government has reduced spending under the Annual Development Programme (ADP), leading to a decline in domestic demand. Accelerating ADP spending will be another challenge for the elected government. Overcoming the slowdown in revenue collection will also be a major hurdle.

Since the current government took office, several large industrial factories have shut down, while new investment has failed to materialise. As a result, many workers have lost their jobs, and new employment opportunities have not been created. Consequently, Bangladesh currently has a large unemployed population, and creating jobs for them will be a major challenge for the next government.

Controlling high inflation, overcoming weaknesses in the banking sector, and increasing revenue collection will also be key challenges. Beyond this, stimulating both domestic and foreign investment and expanding external cooperation will pose additional difficulties.

Managing social disorder and religious extremism will also remain a challenge.

Analysts believe improving internal political stability and foreign relations will be difficult. They note that the current government has banned the activities of the Awami League, a major political party in the country. Governing effectively while keeping such a large party banned will not be easy. At the same time, lifting restrictions on the party carries political risks that the government may not be able to take quickly. Maintaining the ban may also complicate foreign relations, as some countries may be reluctant to engage with a government that has banned the Awami League.

Inflation control

According to data from the Bangladesh Bureau of Statistics (BBS), inflation rose slightly in November, reaching 8.29%, up from 8.17% in October. Inflation has fluctuated over recent months but has remained around the 8% level. Inflation is expected to rise further during Ramadan.

Pressure from increased expenditure

After taking office, the current government recorded the lowest development expenditure in several years. In the 2024–25 fiscal year, only 67.85% of the ADP allocation was spent, the lowest level in more than a decade. ADP allocations have also been reduced in the 2025–26 fiscal year, with Tk2,38,695 crore allocated. Even from this reduced allocation, spending has fallen short.

During the first five months of the current fiscal year (July–November), only 11.75% of the ADP allocation was spent, the lowest on record. This has resulted in limited job creation, declining demand for private-sector goods, and negative trends in GDP growth. The next government will face pressure to increase development spending to stimulate employment and private investment. However, experts question where the funding for this increased spending will come from.

Former finance secretary Mahbub Ahmed told The Business Standard that job creation will be the biggest challenge for the elected government. "To address this, GDP growth must be boosted by increasing both public and private investment. Raising public investment will require higher revenue collection, which will not be easy. Increasing private investment will require improving the investment climate and restoring confidence, which in turn requires improving law and order and reducing administrative complexity—both of which are difficult tasks."

He added that increased government spending could fuel inflation, making inflation management another major challenge.

Revenue collection challenges

In the 2024–25 fiscal year, revenue collection fell short by Tk92,626 crore. For the current 2025–26 fiscal year, the government has set a revenue target of Tk4,99,000 crore through the National Board of Revenue (NBR).

In the first five months of the current fiscal year, NBR revenue grew by more than 15% compared with the same period last year, but collections still fell short of the target by Tk24,047 crore. Meanwhile, the government has taken on large volumes of both foreign and domestic debt, including high-interest loans.

Former NBR chairman Abdul Majid told The Business Standard that the elected government will face serious challenges in revenue collection. "The expected progress in revenue reform has not materialised. The NBR has been dissolved and split into two divisions, but it remains unclear when and how these divisions will begin operations. Bangladesh, therefore, continues to suffer from a low tax base and an opaque tax system, making additional revenue mobilisation difficult."

Overall, the elected government will face growing expenditure pressure and may be forced to rely once again on foreign borrowing.

Additional spending in public administration

The government has formed a pay commission to raise salaries for public servants. While the current government intended to introduce a new pay scale, it has not been able to do so, leaving the responsibility to the next government.

The last pay scale was implemented in 2015, when salaries were increased by 70% to 100%. Ten years later, a similar increase would raise government salary expenditure by nearly Tk84,000 crore, with pension costs also increasing.

Higher public-sector salaries will also create pressure to raise wages in the private sector, particularly in sectors where the government sets minimum wages. Overall wage increases in both sectors are likely to add inflationary pressure, which the next government will have to manage.

Weaknesses in financial institutions

The current government has merged five troubled Islamic banks to form a new entity, United Islamic Bank, injecting Tk20,000 crore in capital from the budget. Ensuring depositor confidence and recovering loans will fall to the next government.

As of September, defaulted loans stood at Tk6,44,515 crore, accounting for 36% of total bank lending. Seventeen banks have default ratios exceeding 50%, pushing them into capital shortages. Several financial institutions and insurance companies are also in distress, making revitalisation of the financial sector a major challenge.

Towfiqul Islam Khan, additional director (research) at CPD, told The Business Standard that the expected positive changes after the change in government have not materialised. There has been no significant improvement in revenue collection or government spending efficiency.

"The government is borrowing without fully assessing repayment capacity, while simultaneously taking steps that may increase future expenditure. Job creation has stalled, investment has stagnated, and regardless of who takes responsibility for the state next, they will have to confront challenges related to revenue mobilisation, debt repayment, rising expenditure, employment generation, and revitalising investment," he said.

The Centre for Policy Dialogue (CPD) has urged the next elected government to implement immediate and politically challenging reforms – particularly in banking, energy, revenue mobilisation and food supply – to stabilise the economy and restore confidence.

The think tank cautioned today (10 January) that delaying tough decisions early in the government's term could sharply increase both economic and political costs. With revenue targets under strain, banks posting historically low profitability and investor confidence already weakened, the CPD said reform momentum must be restored quickly to stabilise expectations among businesses, lenders and consumers.

In its latest Independent Review of Bangladesh's Development 2025-26, the CPD flags multidimensional risks across public finance, food security, banking, energy and trade. While export earnings and foreign exchange reserves have provided a degree of stability, the organisation warned that weak revenue mobilisation, entrenched inflation, deteriorating bank health and prolonged policy uncertainty could undermine growth and social stability without decisive action.

The CPD stressed that rebuilding confidence will depend less on new policy announcements and more on credible execution through experienced leadership at key institutions, transparent communication with stakeholders and sustained implementation of reforms initiated under the interim administration.

Revenue collection rises 16.7%, but meeting target still challenging: CPD

CPD Executive Director Fahmida Khatun presented the findings of the state of the economy for the first half of the 2025-26 fiscal year at a press conference at the organisation's Dhaka office.

Banking sector remains most fragile area

The banking sector continues to be one of the most fragile segments of Bangladesh's economy, marked by weak capital adequacy, deteriorating asset quality and falling profitability, Fahmida said.

The CPD warned that persistent weaknesses in the banking system pose risks to overall economic stability and stressed the need for swift enactment and implementation of reform legislation.

It said restoring Bangladesh Bank's independence and authority, along with consistent application of the bank resolution framework, is essential to bring discipline back to the sector.

According to the CPD, most banks are struggling to maintain adequate risk-based capital, with capital positions continuing to weaken across the sector.

Asset quality has also deteriorated significantly, with defaulted loans now accounting for about 36% of total loans, amounting to Tk5,44,549 crore – nearly 12 times higher than the level recorded in 2015.

At the same time, the CPD noted that although liquidity is available in the banking system, demand for loans remains low due to prolonged stagnation in investment.

High interest rates and political uncertainty have discouraged private investment, leading to a decline in the loan-deposit ratio and leaving many banks with excess liquidity.

Import reliance and LNG spending threaten energy security

The CPD warned that import dependency in the power and energy sector is increasing.

It noted that the sector is facing multiple pressures, including an outstanding payment burden of Tk20,000 crore that must be repaid, stagnant production capacity, and a continued reliance on imported fuel.

Food supply shows no improvement despite easing inflation: CPD

It said Tk58,000 crore is expected to be spent on LNG imports alone, a situation the CPD described as a matter of grave concern for energy security.

The think tank pointed out that transmission lines have increased by 12.5% and distribution lines by 1.25%, with some growth in renewable-based generation.

Coal use has increased by 3% over the past one and a half years, which the CPD flagged as concerning at a time when the interim government has committed to a zero-carbon path.

It noted that 34 cancelled solar power projects have weakened investor confidence, and that implementation processes remain slow and complex, preventing expected benefits from materialising.

The CPD recommended reducing dependency on LNG imports, shutting down inefficient old power plants, and phasing out tax exemptions on fossil fuels.

It said such incentives should instead be directed towards renewable energy.

According to the organisation, these measures are achievable within the first 100 days of the new government after the election next month.

Revenue target challenging

The CPD said that although the country's revenue collection has grown by 16.7% in the first six months of the current fiscal year, achieving the annual target will be challenging.

On the public financial system, the organisation said both revenue mobilisation and expenditure management are critical areas that will need attention.

It also observed that the interim government initiated some reforms, but these will need to be completed by the incoming administration.

To reach the full-year goal, an additional 3% growth would be required, which the CPD noted as challenging given current trends.

Food supply shows no improvement despite easing inflation

The CPD said there has been no improvement in Bangladesh's food supply system in the first half of FY26, warning that structural weaknesses continue to keep prices elevated despite easing global trends.

The organisation said weaknesses in storage, distribution and market competition remain unresolved, contributing to persistently high food prices.

The CPD pointed out discrepancies in the domestic market, saying the country produces more rice than its estimated demand.

It pointed out that annual demand stands at 41 million tonnes while production is 44 million tonnes, highlighting weaknesses in supply management.

The organisation also noted a decline in agricultural labourers' wages, even as food prices continue to rise.

On policy recommendations, the CPD stressed that inflation cannot be reduced merely through higher market interest rates.

It said increasing supply, preventing hoarding and enhancing market competition are necessary to stabilise prices.

The organisation called for an integrated food policy framework to ensure effective imports, maintain adequate food stock, and streamline supply and transport systems.

Q&A session

In response to a question, Fahmida said, "We want the upcoming election to be fair, neutral, and participatory. The election candidates will use money according to the policy that the Election Commission (EC) has formulated regarding the use of funds. The EC will ensure that there is no excessive use of money. We wish for there to be no violence of any kind, and that the general public can cast their vote by going to the polling stations."

Addressing the risks of rising coal-based electricity use, CPD Distinguished Fellow Professor Mustafizur Rahman warned that Bangladesh's RMG sector relies on electricity generated from coal plants, which could trigger carbon-related penalties under export conditions.

He said higher coal use may create obstacles for Bangladeshi products entering international markets, beginning with the European Union and potentially extending to other destinations.

Responding to another question, Fahmida said that Bangladesh's biggest problem is that investment is declining, and for quite some time, there has been no significant jump in investment. "Employment will not be created unless the private sector develops."

Regarding Bangladesh's potential, she said that the country's potential lies in its energetic young population.

In response to another question, Prof Mustafizur said that over-valued mega projects have been implemented using foreign loans without properly considering the economic and financial returns. "Caution is necessary regarding this in the future."

He strongly advised placing the greatest emphasis on increasing revenue collection, particularly collecting revenue from direct income/taxes.

Regarding the issue of the debt trap, Fahmida said, "Transparency and accountability are necessary in the use of loan funds."

Bangladesh’s readymade garment exports to the United States, the country’s largest single-market destination, grew more than 15 percent year-on-year to $7.08 billion in the January-October period, according to US government data.

Local apparel makers say the surge was largely driven by front-loaded shipments ahead of the Trump administration’s reciprocal tariff enforcement.

A temporary 10 percent baseline tariff was applied by the US from part of April to the entire July before higher country-specific rates took effect on August 7 last year. It added with the existing 16 percent, taking the total rate to around 26 percent.

During the low baseline tariff period, local apparel makers say American buyers brought in larger-than-usual consignments. Apparel exporters said this rush pushed overall shipments in the January-October window above normal levels, somewhat masking the basic trend for the rest of the year.

For Bangladesh, a punishing 35 percent reciprocal rate was initially announced in April last year. It was later revised to 20 percent after bilateral negotiations.

The growth came amid a largely flat US apparel market. Total imports from the world by the United States declined 0.61 percent year-on-year to $66.63 billion during the January-October period last year, according to the Office of Textiles and Apparel (OTEXA), an agency under the US Department of Commerce.

Similar to Bangladesh, most other major exporting countries also saw positive growth in the American market during the period.

Vietnam’s exports to the US rose 11.5 percent to $14.16 billion, India’s 8.6 percent to $4.39 billion, Pakistan’s 12.3 percent to $2.02 billion, Indonesia’s 10.1 percent to $3.98 billion, and Cambodia’s 25.5 percent to $4.04 billion.

China was the exception, with exports to the US falling 32.4 percent to $9.49 billion.

During the period, unit prices of Bangladeshi garments declined slightly, reflecting intense competition and cautious buying by US retailers, according to OTEXA data.

The unit price for Bangladeshi items declined 0.63 percent. The decline for Vietnam was 0.46 percent and 10.47 percent for China. Cambodia’s price declined by 7.26 percent, Pakistan’s 6.85 percent and Indonesia’s 2.72 percent, show OTEXA data.

In the case of India, the unit price increased by 1.57 percent during January-October.

Despite the strong headline growth, exporters said momentum began to ease after August. Shipments weakened in October and November, following the enforcement of the higher tariffs.

Anwar-ul Alam Chowdhury (Parvez), former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the January-October figures do not fully reflect the year’s underlying trend.

“The growth was concentrated in the early months, when shipments were rushed ahead of tariff enforcement,” he said.

Parvez added that export performance slowed after August but expects shipments to stabilise after Bangladesh’s general election next month, as international buyers are likely to place full work orders once the heated political atmosphere cools off.

Meanwhile, retail sales in the United States posted solid year-on-year growth in November, with early holiday-season activity keeping results on track to meet the National Retail Federation’s (NRF) 2025 spending forecast, the organisation said in a statement recently.

It means the retail buying is likely to consume the fashion inventory, prompting the US buyers to place fresh orders.

“Retail sales showed healthy year-over-year gains in November, while month-on-month data was largely flat,” NRF President and CEO Matthew Shay said.

For large apparel manufacturers like Bangladesh, it is positive news on the export front.

Shay said, “Shoppers looking for online deals may have held back a bit until Cyber Monday, which fell in December this year due to a late Thanksgiving, likely shifting some spending. Consumers are focusing on value and spending carefully during the holiday period, and retailers are offering products at competitive prices to fit every budget.”

“We remain confident in our holiday forecast as well as our retail sales projections for the full year,” he concluded.

The banking sector continues to be one of the most fragile segments of Bangladesh's economy, marked by weak capital adequacy, deteriorating asset quality and falling profitability, according to an assessment by the Centre for Policy Dialogue (CPD).

The findings were presented by CPD Executive Director Fahmida Khatun at a press conference at the organisation's Dhaka office today (10 January), as part of CPD's independent review of the state of the economy for the first half of the 2025–26 fiscal year.

CPD warned that persistent weaknesses in the banking system pose risks to overall economic stability and stressed the need for swift enactment and implementation of reform legislation.

It said restoring Bangladesh Bank's independence and authority, along with consistent application of the bank resolution framework, is essential to bring discipline back to the sector.

According to CPD, most banks are struggling to maintain adequate risk-based capital, with capital positions continuing to weaken across the sector.

Asset quality has also deteriorated significantly, with defaulted loans now accounting for about 36% of total loans, amounting to Tk5,44,549 crore – nearly 12 times higher than the level recorded in 2015.

An asset quality analysis of six banks showed that in some cases, the volume of distributed loans and defaulted loans has become almost equal, indicating severe financial stress.

Loan loss provisioning remains inadequate, covering only around 38% of classified loans, further weakening banks' ability to absorb losses.

At the same time, CPD noted that although liquidity is available in the banking system, demand for loans remains low due to prolonged stagnation in investment.

High interest rates and political uncertainty have discouraged private investment, leading to a decline in the loan-deposit ratio and leaving many banks with excess liquidity.

Bank profitability has declined sharply, while asset quality has fallen to its lowest level in nearly three decades, CPD said.

To address the crisis, the government has provided Tk20,000 crore in capital support to facilitate the merger of weak banks.

CPD acknowledged that some reform measures have been initiated, including asset quality reviews in six banks, with reviews already underway in three more and plans to extend the process to 17 banks in total.

It also noted steps to strengthen depositor protection by increasing deposit insurance coverage from Tk1 lakh to Tk2 lakh, as well as amendments to the Bank Resolution Ordinance and the Bank Company Act, 1991 to curb excessive family control and improve governance.

However, CPD cautioned that implementation remains the biggest challenge.

Political influence, vested interest groups, limited regulatory capacity and weak depositor confidence continue to undermine reform efforts.

It stressed the need to quickly translate legal reforms into fully enacted laws and ensure Bangladesh Bank's independence so that reforms are sustained and weak banks are not given concessions.

Companies turn to the stock market to raise long-term capital and ease balance-sheet pressure, particularly when bank borrowing becomes costly. Yet even as lending rates in Bangladesh climbed to 14–15% from single digits over the past two years, the equity market has remained effectively closed to new issuers.

In a striking anomaly, not a single initial public offering (IPO) has been brought to market by any of the country's 66 licensed merchant banks in nearly two years since March 2024. Over the same period, India hosted more than 370 IPOs in just one year.

The freeze goes beyond a cyclical market downturn. Since the 2024 political transition and the appointment of a new securities commission, capital-raising through public offerings has stalled entirely, leaving the primary market dormant for more than one and a half years and steadily eroding confidence among issuers and investors.

Widespread regulatory non-compliance

Regulatory data suggest that the paralysis is also self-inflicted. According to the Bangladesh Securities and Exchange Commission (BSEC), 42 out of 66 merchant banks have failed to submit even a single effective IPO proposal within the legally mandated timeframe, in clear violation of the Public Issue Rules in force since 2010. The remaining institutions did submit proposals, but those applications were rejected.

The rules are explicit: every merchant bank must place at least one documented public issue proposal before the regulator within any two consecutive calendar years. The scale of non-compliance points to a deeper structural failure, raising questions about why so many licences were issued without ensuring market contribution.

Market participants acknowledge that political uncertainty and increasingly stringent listing criteria have discouraged companies from going public. However, economists and regulators argue that many merchant banks have long retreated from their core mandate, opting instead for proprietary investments, private placements and short-term financing — activities that generate quick returns but add little to market depth.

The result is an overcrowded but largely inactive intermediary landscape, sharply at odds with regional peers where merchant banking licences are closely tied to deal origination and capital mobilisation.

Analysts warn that without decisive regulatory action — through consolidation, licence cancellation or tougher enforcement — Bangladesh risks entrenching a prolonged IPO drought that undermines capital formation and long-term growth.

Regulator response

BSEC spokesperson Abul Kalam told The Business Standard that ongoing reforms to the Public Issue Rules do not prevent merchant banks from submitting new proposals.

"The Commission is regularly monitoring the activities of merchant banks. Legal action will be taken against those who fail to comply with the rules," he said.

He added that the "Merchant Banker and Portfolio Manager Rules" are currently being updated and are expected to address many of the systemic weaknesses once implemented.

Professor Abu Ahmed, chairman of the Investment Corporation of Bangladesh (ICB) and a noted economist, said that while the current economic downturn makes entrepreneurs wary of achieving fair pricing, merchant banks must take responsibility for identifying and encouraging quality companies instead of remaining inactive.

What merchant banks are meant to do

The main activities of merchant banks include issue management, underwriting, portfolio management services, corporate advisory services, and fund-raising and loan syndication.

However, with the prolonged IPO freeze and capital market downturn, corporate advisory services have been severely affected. Consequently, the business of most institutions in this sector has practically collapsed.

42 firms fail regulatory compliance, why?

The list of institutions that have failed to submit a single effective IPO proposal includes several prominent names, such as AB Investment, BRAC EPL Investment, EBL Investments, MTB Capital, NBL Capital and Equity Management, Shanta Equity, UniCap Investments, and many others across bank-sponsored and private entities.

Merchant bankers argue that the environment, rather than their lack of effort, is to blame.

They contend that the massive political shift following the fall of the Sheikh Hasina government has left entrepreneurs in a state of paralysis. Since the new Commission took charge, no major public offerings have been approved.

Industry insiders estimate that around Tk1,000 crore worth of capital-raising applications were either cancelled or withdrawn amid ongoing amendments to the Public Issue Rules. According to merchant banks, rejected or withdrawn applications damage the reputation of both issuers and issue managers, discouraging future attempts.

Faced with regulatory uncertainty and evolving criteria, many banks have opted not to submit new proposals at all.

Impacts on merchant banks

A merchant bank official, speaking anonymously, said, "Except for the top 10 firms, most merchant banks are in a poor state. Many have resorted to layoffs, and in several cases, paying regular salaries has become difficult. In some places, one month's salary is paid only every three months."

He added, "At one firm, only an officer and a peon remain, and the officer hasn't received a salary for several months. According to him, the political transition has brought many merchant banks' operations to a complete halt, leaving them unable to manage an IPO."

Meghna Capital Management Limited is an affiliate of Meghna Group of Industries (MGI). The company was licensed as a full-fledged merchant banker by the BSEC on 22 May 2018. However, it currently has no active operations in IPO management.

Structural weakness and the "easy profit" trap

Experts, however, suggest that arguing on political instability is only a partial picture. Many merchant banks have drifted away from their core responsibility — identifying and grooming quality companies for the market. Instead of the rigorous work of IPO management, documentation, and corporate restructuring, many firms have pivoted toward "easy profit" activities.

These include managing their own investment portfolios, trading placement shares, and engaging in short-term high-interest financing. A significant number of these institutions exist merely to "hold the license," contributing nothing to the primary market's growth.

Furthermore, there is a chronic shortage of skilled human resources in corporate finance, valuation, and legal compliance within these banks, making it difficult for them to provide high-quality advisory services to potential issuers.

Regional contrast

Bangladesh's experience contrasts sharply with that of neighbouring countries. In India, the Securities and Exchange Board of India (SEBI) maintains strict oversight of merchant bankers. Firms that fail to originate deals within a specified timeframe face licence suspension or cancellation.

In 2025, India had around 102 registered merchant banks, of which only 25–30 were actively involved in IPO origination. Even so, they facilitated roughly 373 IPOs and SME listings in a single year.

Similar accountability frameworks exist in Pakistan, Malaysia and Thailand, where investment banking licences are directly tied to capital market performance.

'Licenses should be cancelled'

ICB Chairman Abu Ahmed attributed this crisis to flawed policies and political favouritism in the past.

"In the past, far more merchant banking licenses were issued than necessary, and in many cases, political affiliation was prioritised over professional competence. This has harmed the sector. The time has come to weed out the inactive institutions. Those who haven't brought a single IPO to the market in years should have their licenses cancelled immediately," he stated.

A CEO of a merchant bank echoed this sentiment, saying, "If merchant banks limit themselves to their own portfolios and placements, the equity crisis will persist. We have too many 'paper' merchant banks. We should consider merging weak and inactive firms to increase competitiveness."

Private sector forced to go for high-cost bank loans

With fundraising from the stock market coming to a halt, private sector entrepreneurs are unable to implement their business plans, and in many cases, are forced to postpone them. Under these pressures, many have become reliant on bank loans to fund company expansion and sustain ongoing operations.

What is the way out?

HA Mamun, vice president of UCB Investment, proposed a three-step solution to revive the primary market: Ensure only active and capable players remain in the market; Increase the pace and predictability of the listing approval process to regain issuer confidence; Treat the issuance of corporate bonds and preference shares as equivalent to listing mandates to keep merchant banks active.

Rubayet-E-Ferdous, CEO of Shanta Equity, remains cautiously optimistic. While acknowledging that the absence of an IPO pipeline has forced banks to look for alternative revenue streams like corporate advisory and debt instruments, he believes that once the new rules are enacted and market conditions stabilise, IPO activity will see a revival.