Exporters and manufacturers in Bangladesh are facing growing pressure as rising raw material costs linked to the Middle East war begin to affect previously confirmed orders, limiting their ability to adjust prices and increasing the risk of financial losses.

As prices continue to surge, exporters and manufacturers with pre-existing orders are bracing for significant losses.

ABM Shamsuddin, managing director of knitwear manufacturer Hannan Group, said, "As we have already finalised our export orders, it will not be possible to pass the additional costs on to the buyers. We are forced to absorb these expenses, which may result in losses given our already thin profit margins."

He added, "We anticipate that fabric prices may climb further, as suppliers are now issuing proforma invoices with extremely short validity periods, often less than seven days."

Shamim Ahmed, president of the Bangladesh Plastic Goods Manufacturers and Exporters Association, said, "Due to the fresh hike in raw material prices, many plastic product manufacturers will face losses because they have already accepted purchase orders. It will not be possible to collect the additional costs from the buyers."

However, he added that for new orders, it may be possible to negotiate higher prices to reflect increased costs.

Garment industry stakeholders said weakening global demand for apparel is making it difficult to pass on higher production costs to international buyers, adding further pressure on exporters already dealing with market uncertainty.

Bangladesh's heavy dependence on Middle East-based energy supplies has created a major risk for the country's economic growth, Finance Minister Amir Khosru Mahmud Chowdhury said today (6 April).

"Uncertainties in the essential commodity supply chain, including energy security caused by recent global war situations, could make achieving growth forecasts challenging," he said while presenting the budget implementation progress report for the first quarter of the current 2025-26 fiscal year in parliament.

During his address, the minister emphasised that addressing the severe economic challenges left behind by eighteen years of financial mismanagement and looting is now a primary goal, alongside improving living standards and increasing employment opportunities.

Noting that while the global economy showed signs of recovery from the instability of the last five years, the minister warned that recent global volatility, including the Iran-Israel conflict, could make the economic path ahead even more difficult.

Citing forecasts from the International Monetary Fund, the minister mentioned that growth in advanced economies is expected to stabilise at 1.7% in 2025, while emerging and developing Asian countries may see growth near 5%.

Global inflation, which was 8.7% in 2022, is projected to drop to 4.2% in 2025 and 3.8% in 2026.

He noted that inflation in China and India – Bangladesh's primary import sources – is expected to remain near 2% and 4% respectively, which should assist in controlling domestic inflation.

Regarding domestic performance, the minister explained that while contractionary policies aimed at controlling high inflation slowed GDP growth in the 2024-25 fiscal year, recent government initiatives are expected to revitalise the economy.

He highlighted that food grain stocks remain satisfactory and duty concessions on imports are helping manage prices.

Data from the first quarter of the current fiscal year shows an increase in production across large, medium, and small industries.

Additionally, during the July-September period, remittance and export earnings grew by 15.94% and 5.26% respectively compared to the previous year.

By the end of September 2025, general inflation stood at 9.45%, with food inflation at 9.58% and non-food inflation at 9.33%.

To bring these numbers down, the government has implemented various measures including contractionary monetary policy and the cancellation of less important projects.

The government has set a target to reduce average inflation to 7% in the current 2025-26 fiscal year, with further targets of 6%, 5.5%, and 5% for the subsequent three fiscal years, alongside an expected acceleration in GDP growth.

Bangladesh Bank Governor Md Mostaqur Rahman yesterday assured business leaders that the export development fund (EDF) may be gradually expanded to $5 billion, according to the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

The assurance came during a meeting held at the central bank in Dhaka with FBCCI leaders, said Md Alamgir, secretary general of the apex business body, after the meeting.

Alamgir told journalists that the EDF, formed from foreign exchange reserves to support exporters, once stood at $7 billion but has now declined to around $2.2 billion.

Business leaders urged the central bank to raise the fund to $5 billion, and the governor responded positively, assuring that the amount would be increased in phases, he added.

On lending rates, Alamgir said business leaders stressed the need to keep interest rates stable to encourage investment and maintain industrial competitiveness.

They also recommended gradually bringing lending rates down to single digits.

The business leaders further urged the central bank to increase credit flow to the private sector, saying financing should be directed more towards productive sectors by reducing pressure from public-sector borrowing.

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, said the proposal to expand the EDF had received the governor’s agreement.

“The fund was reduced because of IMF-related conditions. We have proposed raising it from around $2.5 billion to $5 billion first, and later to $8 billion,” Hatem said.

He added that business leaders also sought relaxation in loan classification rules.

At present, borrowers are classified as defaulters if they fail to repay loans for three months.

Business leaders proposed extending that period to six months. They also urged the central bank to stop the practice under which one defaulting business affects the classification status of its affiliated entities.

In addition, business leaders proposed extending the repayment period after loan rescheduling from the current four to five years to 10 years.

FBCCI also recommended introducing low-cost green financing facilities to encourage investment in renewable energy, including solar power, to reduce energy costs.

Oil prices were little changed in choppy trade on ‌Monday, as investors awaited clarity on the status of talks between the US and Iran even as they remained wary about sustained supply losses due to shipping disruptions.

Brent crude futures rose 76 cents, or 0.7 percent, to $109.79 a barrel at 0656 GMT. US West Texas Intermediate crude ​futures were trading 53 cents, or 0.5 percent lower, at $111.01 per barrel.

The pricing moves in Asia trading on Monday ​were dwarfed by an 11 percent surge for WTI and an 8 percent rise for Brent during the previous trading session on Thursday, the biggest absolute price increase since 2020.

On Sunday, Trump ratcheted up pressure on Tehran, threatening ​in an expletive-laden Easter Sunday social media post to target Iran’s power plants and bridges on Tuesday if the strategic ​Strait of Hormuz is not reopened. Still, prices were largely unchanged on Monday.

Iran and the United States have received a plan to end hostilities that could come into effect on Monday and reopen the Strait of Hormuz, a source aware of the proposals said on Monday.

The Strait of ​Hormuz, which carries oil and petroleum products from Iraq, Saudi Arabia, Qatar, Kuwait and the United Arab Emirates, remains ​largely closed due to Iranian attacks on shipping after the war began on February 28.

“Not being able to open the Strait of Hormuz is ‌becoming ⁠more a question of political victory,” said Mukesh Sahdev, founder and CEO at consultancy XAnalysts.

Because of the Middle East supply disruptions, refiners are seeking alternative sources for crude, particularly for physical cargoes in the US and Britain’s North Sea.

Some vessels, however, including an Omani-operated tanker, a French-owned container ship and a Japanese-owned gas carrier, have passed through the Strait of Hormuz since Thursday, shipping data showed, ​reflecting Iran’s policy to allow ​passage for vessels from countries ⁠it deems more friendly.

The war threatens to linger on as Iran has officially told mediators it is not prepared to meet with US officials in Islamabad in the coming days ​and efforts to produce a ceasefire have reached a dead end, The Wall Street ​Journal reported on Friday.

On ⁠Sunday, Opec+, consisting of some members of the Organization of the Petroleum Exporting Countries and allies such as Russia, agreed to a modest rise of 206,000 barrels per day for May.

However, that decision will largely exist on paper as several of the group’s key ⁠producers ​are unable to raise output due to the war.

Russian supply has been ​disrupted recently by Ukrainian drone attacks on its Baltic Sea export terminals. Media reports on Sunday said its Ust-Luga terminal resumed loadings on Saturday after days ​of disruptions.

The dollar was steady on Monday, while the yen flirted with the crucial 160 per dollar level, ​as nervous investors took stock of the escalating Iran war, with all eyes on the latest deadline from US President Donald Trump ‌to reopen the Strait of Hormuz.

In an expletive-laden Easter Sunday social media post, Trump threatened to target Iran's power plants and bridges on Tuesday if the strategic waterway is not reopened, setting a precise deadline of 8 p.m. Tuesday Eastern Time (0000 GMT).

With most of Asia and Europe closed for holiday on Monday, liquidity is likely to be thin, with investor focus on the possibility ​of a ceasefire after a media report suggested a last-ditch push from negotiators was underway.

"Trump's latest deadline itself is bearish not because ​investors think war is guaranteed tomorrow if Iran does not open the strait, but because every new ultimatum makes ⁠the disruption look longer, stickier and more macro-negative," said Charu Chanana, chief investment strategist at Saxo in Singapore.

The euro was at $1.1523, while sterling last fetched $1.3211. The dollar ​index , which measures the US currency against six rivals, was slightly lower at 100.12.

The Australian dollar was 0.3 percent higher at $0.69045, wobbling near the two-month low that it hit last ​week.

In the kind of mixed messaging that has baffled supporters, foes and financial markets alike, Trump told Fox News on Sunday that Iran was negotiating, with a deal possible by Monday.

Axios reported the US , Iran and regional mediators are discussing terms of a potential 45-day ceasefire that could lead to a permanent end to the war.

Global markets have been rattled ​since the US -Israel war on Iran broke out at the end of February, with Tehran effectively closing the Strait of Hormuz, a key waterway that is a ​thoroughfare through which about a fifth of the world's total oil and liquefied natural gas passes.

"If the strait is reopened fully around that time (Trump's Tuesday deadline), oil will fall sharply ‌and risk ⁠will rally hard," said Prashant Newnaha, senior rates strategist at TD Securities.

"However, if the US escalates, expect global markets to reprice sharply. It's wait-and-watch in what's turning out to be a binary event."

The closure has caused oil prices to surge well above $100 per barrel, stoking fears of high inflation and upending rates outlooks across the world. Worries about the hit to economic growth have also weighed as stagflation risks swirl.

Traders are now no longer pricing a move from the Federal Reserve well into ​the second half of 2027, compared ​with expectations of two rate ⁠cuts in 2026 at the start of the year.

Data last week suggested US labour market conditions remained calm in March, though economists warned that a prolonged war in the Middle East posed a downside risk.

Two more Indian-flagged liquefied petroleum gas tankers, Green Asha and Green Sanvi, ​have exited the Gulf carrying the fuel for ‌the South Asian nation, according to ship tracking data on LSEG and Kpler.

A third vessel, Jag Vikram, is still ​in the west of the Strait of Hormuz, ​the data showed.

The US-Israeli war against Iran has all ⁠but halted shipping through the strait, but Iran ​says "non-hostile vessels" may transit the waterway if they coordinate with ​Iranian authorities.

Green Asha and Green Sanvi have crossed the Gulf area and are in the eastern Strait of Hormuz, the data ​showed, taking the total number of Indian-flagged LPG ​carriers that have traversed the Strait to eight.

India is gradually moving ‌its ⁠stranded LPG cargoes out from the strait, with Shivalik, Nanda Devi, Pine Gas, Jag Vasant, BW Elm and BW Tyr already reaching India.

India, the world's second-largest LPG importer, is ​battling its worst ​gas crisis ⁠in decades, with the government cutting supplies for industries to shield households from any ​shortage of cooking gas.

The country consumed 33.15 ​million ⁠metric tons of LPG, or cooking gas, last year, with imports accounting for about 60 percent of demand. About ⁠90 percent ​of those imports came from ​the Middle East.

India is also loading LPG onto its empty vessels stranded in ​the Gulf.

Opec+ agreed on Sunday to raise its oil output quotas by 206,000 barrels per day for May, a modest rise that will largely exist on paper as its key members are unable to raise production due to the US-Israeli war with Iran.

The war has effectively shut the Strait of Hormuz - the world's most important oil route - since the end of February and cut exports from Opec+ members Saudi Arabia, the UAE, Kuwait and Iraq, the only countries in the group which were able to significantly raise production even before the conflict began.

Crude prices have surged to a four-year high close to $120 a barrel, translating into soaring prices for transport fuels which are pressuring consumers and businesses across the globe, and triggering government action to conserve supplies.

The Opec+ quota increase of 206,000 bpd represents less than 2% of the supply disrupted by the Hormuz closure, but it signals readiness to raise output once the waterway reopens, Opec+ sources have said. Consultancy Energy Aspects called the increase "academic" as long as disruptions in the strait persist.

"In reality it adds very few barrels to the market," said Jorge Leon, a former Opec official who now works as head of geopolitical analysis at Rystad Energy.

"When the Strait of Hormuz is closed additional barrels from Opec+ become largely irrelevant."

Opec+ concerned about attacks on energy assets

Eight members of Opec+ agreed to the increase in May quotas at a virtual meeting on Sunday, Opec+ said in a statement.

Besides the disruptions affecting Gulf members, others such as Russia are unable to increase output - in Moscow's case due to Western sanctions and damage to infrastructure inflicted during the war with Ukraine.

Inside the Gulf, damage to infrastructure from missile and drone attacks has also been severe. Several Gulf officials have said it would take months to resume normal operations and reach production targets even if the war stopped and Hormuz reopened immediately.

A separate Opec+ panel that also met on Sunday, called the Joint Ministerial Monitoring Committee, expressed concern about attacks on energy assets, saying they were expensive and time-consuming to repair and so have an impact on supply, Opec+ said in a statement.

Iran said on Saturday Iraq was exempt from any restrictions to transit Hormuz, and shipping data on Sunday showed a tanker loaded with Iraqi crude passing through the strait. Still, it remains to be seen if more vessels will take the risk involved, a source close to the issue said.

War causes world's worst oil supply disruption

May's Opec+ increase is the same as the eight members had agreed for April at their last meeting held on 1 March, just as the war began to disrupt oil flows.

A month later, the largest oil supply disruption on record is estimated to have removed as many as 12 to 15 million bpd or up to 15% of global supply.

Oil prices could spike above $150 - an all-time high - if flows via Hormuz remain disrupted into mid-May, JPMorgan said on Thursday.

Opec+ groups 22 members including Iran. In recent years only the eight countries meeting on Sunday have been involved in monthly production decisions, and they started in 2025 to unwind previously agreed output cuts to regain market share.

The eight raised production quotas by about 2.9 million bpd from April 2025 through December 2025, before pausing increases for January to March 2026.

The eight hold their next meeting on 3 May.

The overall capital position of the country's banking sector has slipped into the negative as the shortfall surged to Tk2.82 lakh crore within just three months, driven by a sharp rise in defaulted loans and long-standing weaknesses in governance and lending practices.

A report by the Bangladesh Bank, based on data up to September 2025 and seen by The Business Standard, shows that the capital shortfall of 23 state-owned and private banks almost doubled over the July-September period.

The sharp deterioration has raised fresh concerns about the stability of the financial system.

Bankers and economists say the situation stems from years of aggressive lending, poor oversight and politically influenced loan approvals. The growing capital gap is also limiting banks' ability to lend and putting pressure on international financing, signalling broader risks for the economy.

At the end of June 2025, 24 banks had a combined capital deficit of Tk1.55 lakh crore, according to the central bank's latest report.

The report also shows that the sector's capital-to-risk weighted assets ratio (CRAR) – a key measure of financial strength – fell to negative 2.90% at the end of September last year. Under international regulatory standards, banks are required to maintain a minimum CRAR of 12.5%.

What does the capital shortfall mean for banking sector?

By comparison, the sector's overall CRAR stood at 4.47% at the end of June 2025.

The ratio measures a bank's capital relative to its risk-weighted assets, with asset values adjusted according to their level of risk.

Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank, said uncontrolled lending – particularly aggressive loan disbursement and director-influenced lending – has played the biggest role in creating the crisis.

"Long-hidden defaulted loans are now coming to the surface, which has further worsened the situation," he said.

According to the latest data, defaulted loans have climbed to Tk6.44 lakh crore as of September 2025, further worsening the sector's financial position.

Deficits across banks

Among banks facing capital shortages, four state-owned lenders together account for a deficit of Tk37,698 crore, according to the central bank report.

Janata Bank has the largest shortfall at Tk19,973 crore, followed by Agrani Bank with Tk8,125 crore, Rupali Bank with Tk5,655 crore and BASIC Bank with Tk3,945 crore.

Meanwhile, nine private commercial banks recorded a combined capital deficit of Tk36,607 crore as of last September.

National Bank Limited has the largest shortfall among them at Tk10,651 crore. Other banks with significant deficits include AB Bank (Tk7,205 crore), Padma Bank (Tk5,837 crore), Premier Bank (Tk4,733 crore), and IFIC Bank (Tk4,455 crore).

Islamic banks account for the largest share of the sector's capital deficit. Eight Shariah-based banks together recorded a shortfall of Tk1.75 lakh crore by the end of September.

Banks with capital or provision shortfall can't pay incentive bonuses: BB

The largest deficit was reported by First Security Islami Bank at Tk65,090 crore, followed by Union Bank Limited with Tk27,103 crore.

Other banks with significant capital gaps include Islami Bank Bangladesh Limited (Tk22,982 crore), EXIM Bank Limited (Tk22,625 crore), Social Islami Bank Limited (Tk22,114 crore), Global Islami Bank (Tk13,758 crore), ICB Islamic Bank (Tk2,012 crore) and Al-Arafah Islami Bank (Tk138 crore).

Two specialised banks also reported a combined deficit of more than Tk32,000 crore.

The largest shortfall was recorded by Bangladesh Krishi Bank at Tk29,804 crore, while Rajshahi Krishi Unnayan Bank reported a deficit of Tk2,673 crore.

'Structural crisis' in banking

Bankers and economists warn that the capital shortage reflects deeper structural problems in the sector.

MTB Managing Director Mahbubur Rahman described the situation as a fundamental and structural crisis. "Capital is the backbone of a bank. If it becomes weak, the bank cannot operate normally," he said.

He noted that weak capital limits banks' ability to extend large loans to single borrowers and reduces their capacity to secure international financing, as foreign banks closely assess the financial strength of local partners before providing funds.

He added that in many cases, bank sponsors and directors have little understanding of the importance of capital. "Some believe that having deposits or liquidity is enough. But strong capital is essential for long-term stability," he said.

Banks with better governance and professional management remain in relatively stronger positions, maintaining capital ratios of around 13–14%, he added.

To address the crisis, he emphasised the need for fresh capital injections, either through retained earnings or new share issuance. However, he noted that raising capital remains challenging in the current economic climate due to weak business profits and low investor confidence.

Meanwhile, Zahid Hussain, former lead economist at the World Bank's Dhaka office, described the situation as a "systemic risk".

According to him, the capital shortage has made banks increasingly risk-averse, leading to a noticeable slowdown in private sector credit growth. Many banks are now surviving on liquidity support from the central bank.

He also warned that rising credit risk in Bangladesh is discouraging foreign banks from doing business with local institutions, which is increasing the country's cost of financing.

To tackle the crisis, Zahid suggested swift legal resolution of so-called "zombie" institutions, the introduction of an effective bank resolution framework and stronger risk-based supervision.

He also stressed the importance of publicly identifying major defaulters and ensuring strict punishment to restore discipline in the market.

Analysts say the deepening capital crisis in the banking sector is no longer confined to financial institutions alone. Without urgent structural reforms, improved governance and effective regulatory enforcement, the risks could spread to the wider economy.

Bangladesh's banking sector is bearing a burden of non-performing loans (NPLs) having ballooned to some Tk 5.45 trillion as of December 31, 2025, underlining deep-rooted weaknesses in credit discipline and financial oversight.Bangladesh economic report

The figure was disclosed Monday in the Jatiya Sangsad by Finance Minister Amir Khasru Mahmud Chowdhury, along with a list of top defaulters placed in the House.

He came up with the disclosure in response to a written question from lawmaker Md. Abul Hasnat of Comilla-4. The session was presided over by Deputy Speaker Kaiser Kamal.

In a move that sheds light on the concentration of financial risks, the minister tabled a list of the country's top 20 loan defaulters-dominated by large industrial and trading groups, many of which have longstanding ties to the banking system.

Multiple entities linked to S Alam Group feature prominently, alongside firms associated with Beximco and other major business houses.

Analysts say the clustering of defaults within a handful of conglomerates reflects "systemic governance failures and persistent concerns over connected lending".

Following is the list of top 20 defaulters presented in the House:

(1) S Alam Super Edible Oil Limited (2) S Alam Vegetable Oil Limited (3)S Alam Refined Sugar Industries Limited (4) S Alam Cold Rolled Steels Limited (5) Sonali Traders (6) Bangladesh Export Import Company Limited (Beximco) (7) Global Trading Corporation Limited (8) Chattogram Ispat Limited (9) S Alam Trading Company Private Limited (10) Infinite CR Strips Industries Limited (11) Keya Cosmetics Limited (12) Deshbandhu Sugar Mills Limited (13) PowerPac Mutiyara Keraniganj Power Plant Limited (14) PowerPac Mutiyara Jamalpur Power Plant Limited (15) Pacific Bangladesh Telecom Limited (16) Karnaphuli Foods Private Limited (17) Murad Enterprise (18) CLC Power Company Limited (19) Beximco Communications Limited (20) Rongdhonu Builders Private Limited.

The finance minister told parliament that the government, in coordination with Bangladesh Bank, is pursuing a range of measures to recover default loans. The steps include legal action under existing frameworks.

"However, recovery efforts continue to be hampered by lengthy judicial processes and court-imposed stays, which in some cases allow defaulted loans to be temporarily reclassified as regular."

Also disclosed in parliament that loans taken from banks and financial institutions under the names of current Members of Parliament (MPs) and their affiliated businesses total over Tk 111.17 billion or Tk 11,117 crore 31 lakh and more than Tk 33.3 billion of it is classified as defaulted loans.

The Finance Minister disclosed this in parliament on a question about the loan portfolios of the lawmakers in the newly elected Jatiya Sangsad.

The minister came up with the information during the question-and-answer session on the ninth day of the first session of the 13th National Parliament.

In response to another written question from Md. Abul Hasnat, the Finance Minister stated that the current outstanding loans taken from banks and financial institutions by MPs and enterprises owned by them amount to such a figure.Personal finance consulting

"A significant portion of these loans has already been classified as defaulted," the minister informed the House.

However, he added on a special note that "due to court orders or stay directives, a portion of these default loans may have been reported as regular loans".

Ballooning default loans from banks and nonbanks happen to be a big problem in Bangladesh's financial sector.

On this score, the minister said the government was preparing to take a tougher stance on mounting non-performing loans, with plans to publish a list of "willful defaulters" and introduce sweeping legal and institutional reforms to bolster loan recovery.

He was responding to a written question from Md. Abul Hasnat.

The proposed measures signal a more assertive policy approach aimed at addressing structural weaknesses in Bangladesh's banking sector, where loan defaults have accumulated to record levels.

A key element of the plan is the publication of separate lists identifying both general defaulters and "willful defaulters"-borrowers deemed capable of repayment but unwilling to do so.

Authorities also intend to introduce a cap on the total amount any private enterprise can borrow across the entire banking system, in an effort to limit excessive credit concentration.

The government is simultaneously working on establishing a legal framework to enable private-sector Asset Management Companies (AMCs), which would take over and manage distressed assets, thereby facilitating faster resolution of bad loans.

The finance minister outlined a series of legal reforms currently under way, including amendments to the Bank Company Act, the Negotiable Instruments Act, the Artha Rin Adalat Act, and bankruptcy laws, with the aim of expediting loan-recovery processes and strengthening enforcement mechanisms.

Officials are also seeking to address a persistent impediment to recovery efforts-court injunctions.

"Many defaulters file writ petitions that delay or suspend recovery proceedings. The government plans to consult the Attorney-General to devise measures that would limit such legal bottlenecks."

To improve adjudication, the authorities are considering incorporating experienced bankers into panels or jury boards in Artha Rin Adalats (loan courts), allowing complex financial disputes to be resolved more efficiently.Personal finance consulting

At the same time, policymakers are looking to introduce incentives for compliant borrowers. Existing policies will be updated to reward "good borrowers" who regularly service their loans, potentially improving credit discipline across the system.

The minister also indicates that some of the tough punitive measures currently reserved for willful defaulters could be extended to general defaulters through legal reforms, further tightening accountability.

In addition, the government is revising rescheduling policies for short-term agricultural loans to better support farmers.

Eight years ago on 22 March, Dhaka erupted in celebration. A colourful procession rolled out from Doyel Chattar, festooned with banners and buoyed by orchestra music. Balloons were released at Dhaka University.

Back then, LDC graduation was framed as a national triumph, a validation of governance, and, crucially, a legacy project of the now-ousted Prime Minister Sheikh Hasina.

Today, that narrative is unravelling.

A newly released UN Graduation Readiness Assessment tells a far more sobering story: Bangladesh may have met the formal thresholds to graduate from the Least Developed Country category, but it remains structurally unprepared for what comes next.

And that distinction between eligibility and readiness is now at the heart of a critical policy reversal as the current government is looking to defer the graduation.

The illusion of readiness

The United Nations has long emphasised a simple but often ignored principle that graduating from LDC status is not just about crossing statistical thresholds. It is about ensuring that development gains are not reversed once international support mechanisms are withdrawn.

By that standard, Bangladesh's preparedness is deeply questionable.

The assessment identifies four core vulnerabilities that continue to define the economy: dependence on international support measures, weak trade diversification, limited domestic resource mobilisation, and acute exposure to climate risks.

Take domestic resource mobilisation for instance. Bangladesh's tax-to-GDP ratio remains among the lowest globally, severely limiting fiscal space. Even medium-term targets fall short of what is required for a lower-middle-income economy.

In practical terms, this means the state lacks the capacity to absorb shocks — whether from the loss of trade preferences, reduced concessional financing, or external volatility. And the economy is yet to recover from the turbulence it faced from 2022 to 2025.

The report states that weak revenue mobilisation is "one of the most binding preparedness gaps" in Bangladesh's transition.

A narrow economy in a changing world

If fiscal weakness is one pillar of vulnerability, export concentration is another.

Bangladesh's export success has been built overwhelmingly on a single sector — ready-made garments. Apparel accounts for over 80% of merchandise exports, with limited diversification even within the sector itself.

This model worked under LDC conditions, where preferential market access and policy flexibilities provided a cushion. But post-graduation, that cushion disappears.

The UN assessment warns that Bangladesh remains "anchored in a narrow export base and limited industrial upgrading", with low value addition and constrained pathways for diversification.

Upon graduation, preference erosion could translate into billions in lost exports, eroding competitiveness at a time when global markets are already tightening.

Economic growth specialist and COO of Rancon Infrastructure and Engineering Subail Bin Alam's assessment captures this risk with precision.

"For too long, the RMG sector has been our safety net, accounting for over 80% of our exports. However, the 'LDC Graduation' means we are about to lose Generalised System of Preferences (GSP) benefits, which could result in an estimated $8 billion in annual export losses. Beyond apparel, the export basket is dominated by low-complexity products, reflecting a pronounced capability gap and limited scope for adjacent diversification," he explained.

In other words, Bangladesh is attempting to graduate with an economic structure that still resembles that of an LDC.

A preparatory period lost to crisis

If the structural weaknesses are longstanding, the failure of preparation is more recent — and more damning.

The five-year preparatory period, granted by the UN to ensure a smooth transition, was meant to be a time of reform, coordination, and strategic planning. Instead, it became a period of crisis management.

The UN report notes that the past five years were "largely consumed by crisis management, economic stabilisation and political survival," rather than long-term preparation.

This is consistent with the government's own admission. In its letter to the UN Committee for Development Policy, Bangladesh acknowledged that the preparatory period "has not functioned as intended".

Global shocks played a role — the Covid-19 pandemic, the Ukraine war, tightening financial conditions. But domestic factors were equally significant: financial sector irregularities, policy rigidity, and ultimately, the political upheaval of August 2024.

The result is an economy entering 2026 with depleted reserves, high inflation, weak investment, and limited fiscal space.

As applied macroeconomist and Director of Sydney Policy Analysis Centre Jyoti Rahman puts it, "The economic landscape has been severely battered. Honestly, from an external perspective, it is clear the economy is caught in a long-term entanglement. We saw a total stagnation of private investment throughout 2025 following the July Uprising. We have entered 2026 facing deep economic uncertainty, exacerbated by global conflicts and an acute energy crisis."

He adds a crucial point, "The transition from LDC status is an inevitable and necessary milestone. However, the true challenge lies in our preparation."

That preparation, by most accounts, has been inadequate.

The cost of policy hubris

In retrospect, the problem was not the ambition to graduate. It was the politicisation of that ambition.

Under the previous Awami regime, LDC graduation was framed less as a technical process and more as a symbolic victory. The 2018 celebrations were not an isolated event — they reflected a broader narrative that equated eligibility with readiness.

That narrative discouraged caution.

"For too long, the RMG sector has been our safety net, accounting for over 80% of our exports. However, the 'LDC Graduation' means we are about to lose Generalised System of Preferences (GSP) benefits, which could result in an estimated $8 billion in annual export losses. Beyond apparel, the export basket is dominated by low-complexity products, reflecting a pronounced capability gap and limited scope for adjacent diversification."
Subail Bin Alam, economic growth specialist and COO, Rancon Infrastructure and Engineering

Economists, business leaders, and development practitioners had, for years, urged a more measured approach. After the Covid-19 shock and the 2022 dollar crisis, calls for deferral grew louder.

Yet these concerns were largely ignored.

When Bangladesh government finally requested 3 years deferral for LDC graduation in February, 2026, Dr Fahmida Khatun, the Executive Director of Centre for Policy Dialogue (CPD) told TBS, "In the international arena, such decisions of time extensions are not driven by emotion or political rhetoric, but rather based strictly on data, statistics, and measurable indicators."

The data, it now appears, was pointing in a different direction all along.

Why deferral makes economic sense

Against this backdrop, the current government's decision to seek a three-year deferral is a necessary recalibration. Especially given the looming economic crisis due to the ongoing Iran War.

First, time is needed to negotiate post-LDC trade arrangements.

BGMEA President Mahmudul Hasan Khan said, "New trade opportunities — such as Free Trade Agreements, Preferential Trade Agreements or Economic Partnership Agreements — may open up. But these agreements do not materialise overnight. They require careful preparation, technical analysis, and lengthy negotiations. If rushed, there is a risk of securing unfavourable terms or overlooking key national interests."

At the same time, macroeconomic stability must be restored.

Jyoti Rahman explained, "In the immediate term, the government's primary duty is to maintain macroeconomic stability. It is about managed stability rather than just obsessing over the absolute reserve figure."

Moreover, structural reforms must be accelerated — particularly in taxation, banking, and the investment climate. As Subail Bin Alam cautioned, "When banks are burdened by bad debt, they stop lending to the 'missing middle', the SMEs. We cannot build a modern economy if our entrepreneurs are forced to borrow at 14–16% interest rates while competing against global players who have access to capital at 4–5%."

The consequences of proceeding without adequate preparation are not hypothetical.

Loss of trade preferences could erode export competitiveness. Reduced concessional financing could strain public finances. Withdrawal of policy flexibilities could limit industrial policy options.

The UN assessment points out that these risks are compounded by Bangladesh's continued reliance on LDC-specific support measures and limited institutional capacity to manage their withdrawal.

In short, the country risks losing the benefits of LDC status before it has built the resilience required to operate without them.

This is why the report warns that graduation, under current conditions, could "disrupt development gains".

That is not a risk any responsible government should take.

What must be done next

Deferral, however, is not a solution in itself. It is an opportunity — one that must be used wisely. Over the years, the experts have pointed out the priorities. Now the necessary measures need to be taken to increase our preparedness.

"At this juncture, we need more than just a budget; we need a detailed roadmap. The government should use the upcoming budget to outline exactly how they plan to achieve their long-term growth targets," Jyoti Rahman said.

However the Awami regime portrayed it, LDC graduation was never meant to be a trophy. It was meant to be a transition. For too long, that distinction was blurred.

Today, the reality is unavoidable: Bangladesh is not yet ready to graduate in a way that is smooth, sustainable, and irreversible. The data says so. The experts say so. Even the government, implicitly, acknowledges it.

And in policymaking, that is often the hardest and most necessary step.

Shadique Mahbub Islam is a journalist.

Mohammed Trading, owned by SAK Ekramuzzaman, managing director of RAK Ceramics (Bangladesh), plans to purchase around 5 lakh shares of the company at current market price, according to disclosures published on stock exchanges today (5 April).

Data from the Dhaka Stock Exchange (DSE) shows that RAK Ceramics shares closed at Tk21.80 each, down 3.11% from the previous session, valuing the planned acquisition at approximately Tk1.09 crore.

The disclosure also confirms that Ekramuzzaman is the proprietor of Mohammed Trading and a sponsor of RAK Ceramics. As of September last year, he held a 3.94% stake in the company, equivalent to 1.69 crore shares.

According to its website, founded in 1996, Mohammed Trading has grown into a prominent player in Bangladesh's trading sector, dealing in high-quality tiles, sanitary ware, faucets, paints, and other consumer products.

The disclosures said the shares to be bought at the current market price through the Dhaka Stock Exchange and Chittagong Stock Exchange.

At the last annual general meeting, shareholders of RAK Ceramics approved entering into contracts for the sale or purchase of goods and materials with Mohammed Trading, amounting to 10% or more of the company's revenue in the immediately preceding financial year, in line with the meeting agenda of the company.

In October last year, Mohammed Trading announced its plan to buy 85 lakh shares of RAK Ceramics at the prevailing market price through the both stock exchanges.

In 2025, RAK Ceramics incurred a loss of Tk39.59 crore, even as its revenue grew by 10.56%, mainly due to higher manufacturing costs, prolonged disruption in gas supply until June, and rising finance expenses.

The multinational ceramic manufacturer's sales rose to Tk7330 crore in 2025 from the previous year, driven largely by increased production following uninterrupted LNG supply from July onward, which helped boost market sales.

Despite the widening losses, its board of directors unanimously recommended a 10% cash dividend for general shareholders for 2025, amounting to Tk11.95 crore.

The declared dividend approved by shareholders in its AGM held on 31 March.

US President Donald Trump is due to meet Chinese President Xi Jinping in May during his first visit to China in eight years, a closely watched trip that comes just a year after Washington rolled out sweeping and at times erratic global tariffs.

The confrontation between the world's two top economies has evolved from slapping tit-for-tat tariffs to managing tensions following numerous rounds of trade talks, as well as phone calls and a meeting between their presidents last year.

Developments this year

March - US launches new Section 301 unfair trade probes into Chinese industries. China responds with reciprocal investigations. Plans for a summit between Trump and President Xi Jinping were underway but Trump delays Beijing visit to mid-May as the Iran war continues.

US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer meet Chinese Vice Premier He Lifeng and top trade negotiator Li Chenggang in Paris for a sixth round of talks that both sides described as "constructive."

February - US Supreme Court rejects Trump's global tariff regime. Trump indicates he will still use tariffs.

June-August - Trump says trade truce was back on track after some Chinese rare earth magnet producers begin to receive export licences. US starts issuing licences to Nvidia to export its advanced artificial intelligence chips to China, while Trump urges China to quadruple US soybean purchases. Tariff truce was extended another 90 days.

May - At the first round of trade talks, held in Geneva, both sides strike a 90-day truce that allowed lofty tariffs to come down. Three weeks later, Trump says China violated an agreement to mutually roll back tariffs and ease curbs on critical minerals exports. China says US had introduced multiple "discriminatory restrictive" measures against China.

April - After returning to office with a 10% punitive tariff on Chinese goods, Trump announces at the start of April sweeping "Liberation Day" tariffs on all imports that hurt relations with China more. China retaliates and both countries take turns raising levies against each other to exceed 100%. China also begins restricting some rare earth exports.

Crude oil prices opened higher on Monday, with US benchmark West Texas Intermediate up 1.86 percent to $113.62 a barrel, as the war in the Middle East continues to squeeze global energy supplies.

North Sea Brent crude was also higher at the week's market opening, climbing 1.16 percent to $110.30 a barrel.

President Donald Trump has set a Tuesday deadline for Iran to end the war and reopen shipping in the critical Strait of Hormuz waterway, threatening in an expletive-laden social media post Sunday to strike the country's power plants and bridges if it did not comply.

"Tuesday will be Power Plant Day, and Bridge Day, all wrapped up in one, in Iran. There will be nothing like it!!!" Trump wrote on his Truth Social platform, before later telling Fox News he thought there was a "good chance" Iran would agree to a deal on Monday.

The war, entering its sixth week since the US and Israel first attacked Iran on February 28, has engulfed the Middle East in conflict and upended the global economy.

Iran has virtually blocked the Strait of Hormuz, through which about 20 percent of the world's oil and gas transits, sending petroleum prices skyrocketing.

Eleven banks and the majority of non-bank financial institutions (NBFIs) in Bangladesh reported no spending on corporate social responsibility (CSR) in 2025, exposing gaps in participation despite a rise in overall CSR expenditure by banks in the latter half of the year, according to a Bangladesh Bank report published today (5 April).

The report shows that 11 of the country's 61 banks recorded zero CSR expenditure during the year. A similar pattern was seen among NBFIs, where 21 out of 35 institutions reported no CSR spending at all.

Despite the limited participation by many institutions, overall CSR spending by banks increased significantly in the second half of 2025. Total CSR expenditure by banks reached Tk197.85 crore between July and December, up from Tk147.19 crore in the first half of the year.

The data also indicates that CSR spending remains concentrated among a small number of banks, with a handful of lenders accounting for a large share of the total outlay.

Standard Chartered Bank contributed the highest amount at Tk27.71 crore, followed by BRAC Bank with Tk20.04 crore and EXIM Bank with Tk19.85 crore.

Private banks dominated overall CSR spending, accounting for 79.16% of the total. In contrast, state-owned banks contributed only 4.09%, highlighting a stark imbalance between the two groups.

CSR spending also remained largely focused on traditional sectors.

Education received the largest share, accounting for 32.47% of total CSR expenditure, while health accounted for 29.07%. Together, the two sectors received nearly 60% of the total CSR allocation.

Spending on environment and climate-related initiatives remained comparatively low. Allocations for environmental protection and climate action stood at 14.81%, falling short of the 20% guideline set by Bangladesh Bank.

Under Bangladesh Bank regulations, banks and financial institutions are required to allocate up to 1% of their net profits to CSR activities.

Of this amount, at least 30% must be spent on education and another 30% on health. A further 20% is required to go towards environmental protection and climate change mitigation, while the remaining 20% may be allocated to areas such as income generation, disaster management, infrastructure development, sports and cultural activities.

Bangladesh Bank is set to hold another special auction of Tk5,000 crore worth of 91-day treasury bills on 8 April, taking the total amount raised through such auctions in this month to Tk10,000 crore.

A senior central bank official confirmed the development to The Business Standard today (5 April), saying the move comes in response to the government's growing financing needs.

Bankers say the government is increasingly relying on the banking sector due to a revenue shortfall and rising expenditure pressures. At the same time, excess liquidity in banks has created room for such borrowing.

A senior official from a private sector bank noted that banks had placed around Tk11,500 crore in the standing deposit facility (reverse repo) toward the end of last month, indicating surplus funds in the system. This has encouraged the central bank to mobilise funds from the market.

BB to hold Tk5,000cr special repo auction as govt cash demand rises

Additionally, Bangladesh Bank has been purchasing US dollars from commercial banks through auctions since the beginning of the fiscal year, further injecting liquidity into the banking system.

Another banker said the government had also resorted to off-calendar borrowing in the October-December quarter, raising around Tk10,000 crore to meet urgent funding needs.

Such off-calendar auctions typically signal immediate financing requirements, driven by various government initiatives, including social safety net programmes.

For the April-June quarter, the government plans to borrow Tk1.10 lakh crore in short-term funds through treasury bills. This includes Tk44,000 crore in 91-day bills, Tk36,000 crore in 182-day bills, and Tk30,000 crore in 364-day bills, to be auctioned in 12 weekly sessions.

Treasury bill yields fall below 10% amid rising banking liquidity

In addition, the government aims to raise another Tk39,000 crore through treasury bonds of medium and long-term tenures.

Officials from the central bank's Debt Management Department said the auction schedule has been prepared based on the government's financing requirements. However, they noted that this borrowing does not reflect net new debt, as maturing bills and bonds are routinely rolled over through fresh issuances.

Meanwhile, private sector credit growth remains subdued at 6.03%, reflecting weak investment demand. With limited lending opportunities, banks are increasingly investing in government securities, which are considered risk-free.

Prime Bank PLC has reported a strong financial performance for 2025, posting a consolidated net profit of Tk910 crore and announcing a 30% dividend for its shareholders, reflecting robust growth and improved operational efficiency.

The board of directors approved the audited financial statements at a meeting held today (5 April) and recommended a total dividend comprising 25% cash and 5% stock.

The latest payout marks a significant increase from the previous year's 20% dividend, which included 17.5% cash and 2.5% stock, according to the press release.

The bank's net profit after tax rose by 24% year-on-year, up from Tk732 crore in 2024. Earnings per share also improved to Tk7.84 in 2025, compared to Tk6.31 in the previous year, indicating enhanced profitability and better returns for investors.

Prime Bank's financial position remained solid, with key performance indicators showing steady growth. Net asset value per share stood at Tk40, while net operating cash flow per share reached Tk58.07, highlighting strong liquidity and operational strength.

The bank's total assets expanded to Tk64,890 crore by the end of December 2025, underscoring its continued business expansion. Its capital adequacy position also remained strong, with a Capital to Risk Weighted Assets Ratio of 18.07%, one of the highest in the country's banking sector.

The bank has scheduled its annual general meeting for 21 May 2026, with the record date set for 28 April to determine eligible shareholders for dividend entitlement.

Market observers view the improved earnings and higher dividend declaration as a positive signal for investors, especially at a time when the broader financial sector is navigating economic challenges. The bank's consistent growth trajectory and prudent risk management have helped it maintain stability and deliver value to shareholders.

Shares of Prime Bank closed at Tk29.40 today at the Dhaka Stock Exchange, reflecting steady investor interest in the stock.

The country's capital market opened the week on a sharply negative note today (5 April), as stocks tumbled amid heavy selling pressure, wiping out significant value and deepening investor anxiety over economic uncertainty and policy direction.

The benchmark index of the Dhaka Stock Exchange (DSE), DSEX, dropped by 107 points, or 2.05%, to close at 5,112, marking one of the steepest single-day declines in recent weeks.

The blue-chip DS30 index also fell significantly, shedding 35 points, or 1.76%, to settle at 1,945.

The broad-based downturn reflected overwhelming bearish sentiment, with 354 issues declining against just 25 gainers, while 11 remained unchanged.

Market turnover also took a hit, falling by 18% to Tk512 crore, indicating reduced participation as investors opted to stay on the sidelines. Total market capitalisation dropped by around Tk8,500 crore in a single session, underscoring the scale of the sell-off.

Major large-cap stocks acted as key draggers behind the decline, including Grameenphone, BRAC Bank, Robi Axiata, BAT Bangladesh, and Square Pharmaceuticals, all of which witnessed significant price erosion.

According to EBL Securities, the market came under pressure from the opening bell, as investor sentiment remained fragile amid concerns over macroeconomic stagnation following the government's recent austerity measures.

The brokerage noted that selling pressure dominated from the opening bell, leaving little room for recovery throughout the session as investors reacted cautiously to ongoing uncertainties.

The downturn comes just a day after the stock exchanges shortened trading hours by 30 minutes in line with government directives aimed at reducing fuel consumption.

Market insiders believe the move, coupled with broader austerity measures, has further dampened investor confidence at a time when the market is already struggling with low liquidity and weak sentiment.

Adding to the uncertainty, investors are closely watching developments surrounding regulatory leadership.

The recent appointment of a special assistant for investment and capital markets to the prime minister initially raised expectations of changes in the leadership of the Bangladesh Securities and Exchange Commission.

However, the absence of any immediate reshuffle has left many investors cautious, with some opting to remain inactive until there is greater clarity.

Sector-wise, all major segments posted losses, with mutual funds leading the decline, followed by ceramics and jute. Despite the broad-based losses, a handful of stocks managed modest gains, while several others faced steep corrections.

The bearish trend was mirrored at the Chittagong Stock Exchange, where the CSCX index fell by 128 points to 8,854, and the CASPI dropped 228 points to close at 14,473. Interestingly, turnover at the port city bourse surged significantly, suggesting selective participation despite the overall negative sentiment.

March brought an easing of inflation in Bangladesh, with the rate falling to 8.71% from February's 10-month high of 9.13%, according to the Bangladesh Bureau of Statistics (BBS) data released on Sunday (5 April).

The overall decline was driven by a sharp drop in food inflation to 8.24% from 9.30% in February. The drop came in stark contrast to the Food and Agriculture Organization (FAO) warning on 3 April that global food prices rose in March to their highest level since September last year.

The FAO cautioned that prices could rise further if the Middle East conflict – which has already pushed up energy costs – continues.

In March, the average wage index increased slightly to 8.09%, marking gains in farm, factories and services, also breaking a 50-month declining streak in workers' real incomes since February 2022.

Dr Fahmida Khatun, Executive Director of the Centre for Policy Dialogue, said, "In reality, the drop in inflation appears somewhat 'disjointed,' meaning it does not fully reflect ground realities."

"If the data does not match people's lived experiences, questions will naturally arise," she said.

However, Zahid Hussain, former lead economist at the World Bank Dhaka office, does not find the March inflation figure unusual.

He explained that a decline in inflation does not mean prices are falling, rather, the rate of increase has slowed. "Prices are still rising, but at a slower pace."

He noted that although the war situation emerged toward the end of February, its full impact had not yet been reflected in March inflation data.

"Prices of fuel, fertiliser, and other inputs are rising in international markets, but these take time to transmit domestically," he said.

Explaining March's decline in price index, the economist also pointed out that domestic adjustments in gas, electricity, and petroleum prices were not made in March, while LPG prices were adjusted only in early April.

He also noted that in countries like India, Pakistan, and the United States, fuel prices are adjusted more frequently, so the impact of global shocks is felt more quickly. In Bangladesh, the monthly adjustment system delays this impact.

However, he noted that in many cases fuel is being sold at 50% to 100% higher prices in informal markets outside fuel stations, but these prices are not captured in the Consumer Price Index, meaning the real pressure is not fully reflected in official statistics.

The impact of higher costs of transportation, imports, shipping, and insurance premiums is likely to become visible from April-May, he warned.

According to BBS data, the food price index dropped more in rural areas than urban areas, which saw steeper decline in non-food indices in March.

The country's private sector credit growth fell to a historic low of 6.03% in February, driven by prolonged political instability and a high interest rate regime. Bankers and business leaders say that due to the Iran war, a recovery in credit growth is unlikely in the near future.

According to the latest data from the Bangladesh Bank, credit growth edged down from 6.1% in December, continuing a sharp decline from 10.13% recorded in July 2024.

Although there was a brief spike to 6.58% in November, analysts attribute this to loan restructuring ahead of the 12 February national election, rather than genuine new investment in productive sectors.

In its monetary policy statement for January-June 2026, the central bank attributed the slowdown to tight monetary conditions, increased government borrowing to finance the budget deficit, and subdued loan demand amid ongoing uncertainty over new investment decisions.

Sohail RK Hussain, Managing Director of Bank Asia PLC, told TBS, "There was an election in early February. After the election, when the government began focusing on private sector growth, the unexpected challenge of the Iran war emerged."

He added, "Our investment outlook now largely depends on when the war ends. Even if the war stops now, credit growth will not recover for the next few months."

"The biggest challenge for businesses at the moment is energy. Importing fuel at competitive prices will raise costs, putting pressure on businesses. This may require further increases in interest rates to control inflation."

"Overall, the coming months will be quite challenging – particularly in terms of inflation, rising dollar exchange rates, and demand for export products."

Private credit growth dips to record low at 6%

The decline has been consistent in recent months, with growth recorded at 6.29% in September, 6.35% in August, 6.52% in July, 6.40% in June, 7.17% in May, and 7.5% in April. In contrast, private sector credit growth stood at 10.13% in July 2024 before dropping sharply following the political transition in August.

Newly appointed central bank Governor Md Mostaqur Rahman has indicated that policy support will be introduced to revive private sector lending and restore economic momentum.

On his first day in office, he said lending rates would be gradually reduced to encourage investment, and reopening closed factories and businesses would be essential to revitalise economic activity-signalling a possible shift away from the prolonged contractionary monetary stance.

However, despite the governor's assurance of lowering lending rates, the central bank has not yet taken steps to reduce policy rates due to new challenges such as the Iran war.

A deputy managing director of Sonali Bank, speaking anonymously, told TBS that investment had remained low due to prolonged political uncertainty. Although credit growth was expected to rise under an elected government, the war has introduced fresh uncertainty.

He said, "Businesses want to invest, but there is no assurance of energy supply. The government's current method of procuring fuel is also costly, which will increase investment costs. At the same time, banks' loan recovery situation is very weak. Many clients have rescheduled loans under policy support, creating pressure on cash flow and reducing the capacity to issue new loans."

Syed Mahbubur Rahman told TBS that banks are currently lending at around 11% interest while paying similar rates on deposits, leaving very thin margins.

He noted that although high lending rates are a constraint, investors prioritise reliable infrastructure – such as gas, electricity, and port facilities – over financing conditions.

Persistent energy shortages and infrastructure bottlenecks, he said, have prevented both expansion by existing businesses and entry by new investors.

Tight monetary policy strains banking sector, slows deposit and credit growth: Planning Commission report

A major factor behind the slowdown in credit growth has been increased government borrowing from banks. Between July and 19 March of the 2025-26 fiscal year, net credit to the government reached Tk98,000 crore, equivalent to 94.73% of the revised annual target of Tk1.18 lakh crore.

Banks are also struggling with rising non-performing loans, which climbed to a record Tk5.57 lakh crore by the end of December 2025 – about one-third of total outstanding loans.

High default levels have weakened bank capital positions, increased provisioning requirements, and made lenders more cautious in approving new loans.

Liquidity pressures and slow deposit growth have further constrained lending capacity. In an effort to curb inflation, the central bank earlier raised its policy rate to 10%, pushing commercial lending rates close to 13.5% and discouraging businesses – especially small and medium enterprises – from taking new loans.

The effects of weak credit growth are increasingly visible across the economy. Imports of capital machinery have declined, signalling slower industrial expansion, while reduced investment has dampened money circulation. Many factories are operating below capacity, consumer demand remains weak, and private sector job creation has slowed.

As Bangladesh moves towards its scheduled graduation from Least Developed Country (LDC) status on 24 November 2026, a new assessment highlights significant risks and structural vulnerabilities that could undermine a smooth transition.

While Bangladesh meets the graduation criteria, it is not fully prepared for a sustainable post-LDC phase due to long-standing issues such as loss of trade preferences, macroeconomic pressures, fiscal and financial vulnerabilities, and institutional and implementation weaknesses, the UN-sponsored assessment finds.

With significant readiness gaps remaining, the 2026 graduation could disrupt development gains, making the coming months crucial for policy action and decision-making, concludes the Bangladesh Graduation Readiness Assessment, conducted by the UN Office of the High Representative for LDCs.

The report was discussed at a stakeholders' meeting today (5 April) at the National Economic Council auditorium in Sher-e-Banglanagar, attended by ministers, trade diplomats, and representatives from the private sector and international agencies.

Speaking as chief guest, Finance and Planning Minister Amir Khosru Mahmud Chowdhury said the country is not yet fully prepared to achieve this goal. Key challenges include pressures from foreign and domestic debt, the high cost of borrowing, and weaknesses in overall financial management.

The minister added that the current global energy crisis and disruptions in international supply chains could place further strain on Bangladesh's economy. "The impact will extend beyond the energy sector, affecting markets for food and other goods and driving up inflation, which is already a global concern."

He further said that while fuel prices have surged worldwide, Bangladesh has so far kept them relatively under control, though the government cannot maintain this indefinitely.

"Being an elected government, we are trying to avoid placing sudden extra burdens on the people. Yet if financial pressures continue and government resources are drained, the ultimate cost will fall on citizens. Economic decisions must therefore be taken with extreme caution, balancing public welfare with long-term stability of the economy," he added.

Months before the Middle East conflict, Bangladesh formally requested a three-year extension of its preparatory period to November 2029 under the Enhanced Monitoring Mechanism.

It also sought an independent Graduation Readiness Assessment from the UN Office of the High Representative for LDCs, Landlocked Developing Countries, and Small Island Developing States, which commissioned the report.

'Past five years consumed by crisis management'

Economists Daniel Gay and MA Razzaque presented the report's key findings, highlighting the external and domestic crises Bangladesh faced during the five-year preparatory period from 2021.

These included the Rohingya refugee crisis, the Covid-19 pandemic, the Russia-Ukraine war, the July 2024 political transition, inflation, fiscal stress, falling investment, and rising debt.

Rather than a period of strategic preparation, the report notes, the past five years were dominated by crisis management, economic stabilisation, and political survival. It adds that the Middle East crisis has further disrupted supply chains, caused energy price volatility, and raised risks in remittance inflows.

The assessment identifies six critical vulnerabilities. Chief among them is potential loss of preferential access to the European Union market, which accounts for 44% of Bangladesh's exports.

An extension or postponement of graduation for around three years would allow time to strengthen key economic fundamentals.
Amir Khosru Mahmud Chowdhury, finance minister

Under the GSP+ scheme beyond 2029, apparel exports could face 12% tariffs, compared with zero-duty access now, leaving Bangladesh at a disadvantage versus competitors like Vietnam and India.

The report also flags a deepening banking sector crisis, with NPLs reaching 35% of total credit by September 2025, weakening the financial sector's ability to support investment.

Fiscal pressures are mounting, with government revenue at just 6.8% of GDP and debt servicing consuming about 31% of revenue. The IMF and World Bank have already classified Bangladesh's debt distress risk as "moderate," the report mentions.

Structural competitiveness challenges persist, including logistics costs around 16% of GDP, port congestion, customs inefficiencies, and energy shortages that raise production costs. Implementation capacity remains weak, with slow progress on the government's transition strategy due to limited coordination and administrative strain.

Social pressures are rising as well. Inflation has pushed an estimated 90 lakh people into poverty, raising the poverty rate to over 21.2% in 2025 from 18.7% in 2022. Employment fell by 19 lakh between 2023 and 2024, disproportionately affecting women and highlighting a fragile labour market.

Given these challenges, the UN Committee for Development Policy allows for possible deferral under exceptional circumstances, citing General Assembly resolution 67/221 (2012), which stresses that graduation "should not disrupt the development progress achieved" by a country.

Govt waiting for UN CDP's response

Earlier, the government formally requested a three-year extension, signalling that while Bangladesh meets the formal criteria for graduation, the challenge lies in managing the transition.

According to the Economic Relations Division (ERD), a clear process governs any decision on postponing graduation. First, the UN Committee for Development Policy (CDP) evaluates whether an extension is warranted. If so, the CDP submits its recommendation to the UN Economic and Social Council (ECOSOC). After review and approval by ECOSOC, the matter goes to the UN General Assembly for final endorsement.

ERD sources said the CDP has not yet issued a final assessment. While it was initially expected in March, the report has now been delayed to May. A key ECOSOC meeting on 10-11 June may discuss Bangladesh's request, where preliminary decisions or recommendations could emerge.

UN Under-Secretary-General and High Representative for LDCs Rabab Fatima said the request is under CDP review. "Once the technical assessment is complete, CDP will submit recommendations to ECOSOC, which will form the basis for a UN General Assembly decision."

ERD Secretary Shahriar Kader Siddiky said the extension request does not indicate a change in graduation ambition, but is a strategic measure to ensure a smooth, sustainable, and irreversible transition.

Govt 'firefighting' to manage daily crises: Khosru

Endorsing the identified vulnerabilities, Minister Amir Khosru said Bangladesh is currently navigating a complex economic situation, where the government is largely "firefighting" to manage daily crises.

He added that the government inherited an economy where all key macroeconomic indicators were in decline. "We are simply fighting to salvage the economy," he said.

The government views capacity building as the most critical factor for navigating this crisis, he said, claiming the policies outlined in the BNP manifesto have been explicitly aligned with this approach.

"If these policies are implemented effectively and on schedule, the economy can gradually be strengthened on a solid foundation, making it possible to prepare for LDC graduation," said the minister.

He also said that an extension or postponement of graduation – around three years – would allow time to strengthen key economic fundamentals.

"If necessary reforms, capacity building, and economic stabilisation can be achieved during this time, graduation will become a realistic and sustainable goal.

Commerce Minister Khandakar Abdul Muktadir highlighted prudent debt management and expanding the tax base as essential to regaining economic momentum.

Rashed Al Mahmud Titumir, finance and planning adviser to the prime minister, added that structural transformation, economic diversification, and productivity enhancement are crucial to achieving a "Trillion Dollar Economy" by 2034.

State Minister for Planning Zonayed Abdur Rahim Saki said the government will prioritise medium- and long-term development plans that explicitly address the challenges of LDC graduation.