Around Tk3,000 crore worth of closed-end mutual funds under the trusteeship of the Investment Corporation of Bangladesh (ICB) are set to face conversion into open-end funds or liquidation under newly introduced mutual fund rules.

Of the 20 mutual funds under ICB's trusteeship, 18, including eight managed by ICB Asset Management Company, have fallen within the scope of the new regulations. This is even though the funds' original maturity periods run from 2027 to as late as 2033.

Under the rules, any closed-end mutual fund whose average trading price remains at a discount of 25% or more to its cost-based Net Asset Value (NAV) over six months must be converted into an open-end fund or liquidated.

The trustee must convene an extraordinary general meeting (EGM), seek unit holder approval, and obtain subsequent clearance from the Bangladesh Securities and Exchange Commission (BSEC). A decision requires at least 75% support from votes cast.

Data show that the discount between market prices and cost-based NAVs for the 18 affected funds ranges from 30% to 76% – well above the 25% threshold – making conversion or liquidation mandatory, subject to unit holder voting.

BSEC Executive Director and spokesperson Abul Kalam told The Business Standard that trustees would arrange unit holder meetings and implement whichever decision clears the 75% threshold.

The process became entangled in legal complications after investors filed writ petitions challenging the rules, prompting the High Court to issue a status quo order. On 9 June, BSEC directed trustees to proceed with conversion or liquidation.

Two days later, it issued a follow-up letter instructing trustees to continue while excluding the interests of petitioning unit holders – a move that alarmed market participants who feared compliance could be construed as a violation of the court order. ICB consequently sought clarification from the regulator and withheld action.

The impasse ended on 17 June when the Appellate Division's Chamber Court stayed the High Court order, clearing the path for the process to resume. Lawyers said trustees may now move forward, though an ICB trustee official said the organisation had yet to receive fresh instructions.

"We heard about the stay order, but have not received any instruction from the commission. We have already written to them seeking guidance," the official said.

Stakeholders continue to object to certain provisions, particularly Section 62, of the new rules. A senior asset management official, speaking anonymously, noted the rules were framed under the previous commission and called on the new commission to engage asset managers and trustees on their concerns.

Bangladesh RACE Asset Management, which has also filed a writ petition, is scheduled for a hearing on 22 June.

ICB Asset Management Company operates nine mutual funds, eight of which are caught by the new rules, with discounts to cost-based NAV ranging from 47% to 67%. All six funds managed by Bangladesh RACE Asset Management PCL also exceed the threshold and face conversion or liquidation.

Across the broader mutual fund industry, total approved fund size stands at Tk13,090 crore – 35 closed-end funds accounting for Tk4,431 crore and 105 open-end funds for Tk8,659.5 crore.

The Dhaka Stock Exchange (DSE) has resumed halting share trading under its real-time surveillance mechanism, a practice that had largely fallen out of use for nearly a decade.

In the past two weeks, the DSE halted trading in Sonargaon Textiles, Shyampur Sugar Mills and Bangladesh National Insurance, each after citing “unusual price movements”.

Trading resumed in all three the following day, but industry officials say the monitoring provides early warning signals to investors that there might be suspicious trading, which helps them make critical decisions.

“As this type of trading halt has not been practised in the market for many years, it seems unusual -- however, it’s business as usual,” said Nuzhat Anwar, managing director of the DSE. “We will always do that to protect investors’ interests.”

Real-time surveillance is a common practice to correct market distortions, and the DSE is equipped to do that, she said, adding that the stock exchange is getting support from the regulator in this regard.

The mechanism works in stages. Once a halt is triggered, the exchange asks the company whether it has any undisclosed price-sensitive information. If irregularities are suspected, it investigates whether unusual trading or malpractice occurred, and can take action accordingly.

Abul Kalam, spokesperson of Bangladesh Securities and Exchange Commission, said the halts serve as an early warning signal to investors that trading in a particular security may be suspicious.

He explained that previously, formal enquiries into suspicious trading took too long, that ordinary investors would buy into the stock in the meantime, unaware of the suspected irregularity, and suffer losses when the correction came.

“Now they are receiving early warning signals,” he said.

The real-time monitoring practice was last used around a decade ago before being discontinued. The DSE has authority under its listing rules to halt, suspend or delist securities.

The price data illustrates how sharply the targeted stocks had run up. Shyampur Sugar Mills, a junk-category stock, had surged 66 percent to Tk 239 in the month before the halt. It has since corrected around 30 percent to Tk 167, according to DSE data.

Shares of Sonargaon Textiles more than doubled from Tk 42 to Tk 87 over a month, and fell about 8 percent to Tk 80 after trading was halted.

Bangladesh National Insurance rose 46 percent to Tk 116 before the halt, and has since dropped around 9 percent.

Separately, the DSE board has decided to develop software to monitor investors’ funds and shareholding positions in real time, aimed at curbing misappropriation by brokers through consolidated customer accounts.

The move comes against the backdrop of thousands of investors falling victim to embezzlement at several brokerage firms over the past five years.

Saiful Islam, president of the DSE Brokers’ Association, welcomed the real-time surveillance but said a one-day suspension alone is not sufficient.

He noted that shares of companies that have been out of production for years continue to surge periodically, misleading investors.

Islam called on the exchange to publicly disclose the names of companies that have remained out of production for extended periods and to follow global practice, where such companies face trade suspension until they resume operations and are eventually delisted if they do not.

According to listing regulations, a company will be delisted if it remains out of production for three years. However, stock exchanges are reluctant to delist companies in Bangladesh as investors have strongly protested such decisions in the past, a top official of the Dhaka bourse said.

Islam hopes that the current DSE board will begin enforcing the rule. “Otherwise, the market will remain full of junk stocks year after year.”

The scale of the problem is significant. Of 396 listed shares, 125 are classified as Z category or junk stocks, while 75 are low-performing B category companies. Only 196 are A-category stocks, according to DSE data.

The government has formed a taskforce to oversee its deregulation drive and will launch a dashboard from the first week of next month to monitor the progress of project implementation in every ministry, Finance Minister Amir Khosru Mahmud Chowdhury said yesterday.

Running a business in Bangladesh is not possible without deregulation, the minister said at a discussion on the proposed national budget organised by the Centre for Policy Dialogue (CPD) at Lakeshore Hotel in Dhaka.

“Those who will create barriers in deregulation, we will show them the way out, as we are working for the country, for the people. We are an elected government,” he said.

He noted that project preparation alone currently takes more than one and a half years, with implementation taking considerably longer still, driving up project costs, the burden of which is ultimately borne by ordinary people.

To keep such delays in check, the government is rolling out dashboards in each ministry that will track implementation progress on a daily basis, said Khosru, who is also the planning minister.

As part of broader institutional reform, the government will also separate the National Board of Revenue’s (NBR) policy formulation and tax collection functions, he said. The policy formulation wing will be under a panel of experts, while a panel of bureaucrats will handle implementation.

He added that the traditional system of Letters of Credit will also be revised, as LC-related delays slow down trade and raise the cost of doing business.

Responding to criticism from various quarters over the budget’s size and targeted revenue mobilisation, the minister said the government would issue bonds to help finance the budget and reduce reliance on bank borrowing, in order to free up funds for the private sector.

He said he was hopeful these reforms would help raise the tax-to-GDP ratio.

Khosru also mentioned that the government has worked to make the Family Card programme transparent, with safeguards against political interference, to ensure intended beneficiaries receive the benefits.

He identified gas, electricity and reliable internet connectivity as major challenges, saying the government has been working to address them.

The minister projected that it may take around two years to stabilise the current fragile economy, with signs of broader prosperity expected to follow from the fourth and fifth years.

He also said the government has allocated Tk 800 crore for the creative economy, to provide loans for developing theatres and the sports economy and to support singers, bringing them into mainstream economic activity.

CPD FLAGS IMPLEMENTATION RISKS

Presenting the keynote paper at the event, CPD Executive Director Fahmida Khatun said the budget relies on optimistic assumptions and that its success will depend heavily on the quality of execution.

“This will require strong institutions that have the capacity to implement the budget efficiently and deliver tangible outcomes,” she said, adding that the budget represents the new government’s first major opportunity to demonstrate its ability to drive economic recovery through sustained structural reforms.

In the keynote paper, CPD laid out eight key observations on the proposed budget. The think tank said macroeconomic projections for FY2026-27 appear optimistic and warned that the proposed fiscal framework is unlikely to hold.

While public expenditure has been reprioritised towards human capital sectors, CPD noted that the Annual Development Programme, though ambitious, faces concerns over effective implementation.

The think tank also said fiscal measures reflect a degree of predictability but raise equity concerns, and flagged the absence of a comprehensive roadmap to support Bangladesh’s LDC graduation.

It further observed that the social sectors prioritised in the budget lack adequate implementation capacity, and that allocations meant to drive employment generation point to a deeper structural challenge.

Businessmen, ministers and economists participated in the discussion moderated by CPD Distinguished Fellow Mustafizur Rahman.

Hossain Zillur Rahman, executive chairman of the Power and Participation Research Centre (PPRC), called on the government to formulate a roadmap to implement the proposed budget, as there are concerns about its capacity for implementation.

The government should also publish a three-month progress report on budget implementation so that people can know its real status, he said.

Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development (RAPID), said the proposed budget stands at 13 percent of GDP, while 23 percent of GDP would be required to achieve the government’s targeted outcomes.

He said the Family Card programme could reduce the poverty rate by 7 percentage points if properly implemented.

To reach the government’s target of a $1 trillion economy by 2034, Razzaque said GDP growth would need to reach 8 percent, and the investment-to-GDP ratio, combining public and private investment, would need to rise to 40 percent from the current 28 percent.

He said the government should act quickly to achieve this while also controlling high inflation, noting that the revenue target is ambitious even as official development assistance continues to decline.

Anwar-ul Alam Chowdhury Parvez, president of the Bangladesh Chamber of Industries, said the private sector continues to face significant difficulties due to inadequate energy supply and high bank interest rates, despite various measures taken to address them.

Montu Ghosh, president of the Bangladesh Garment Workers Trade Union Centre, said budget implementation will be difficult given existing capacity constraints, and that the lives of workers are unlikely to change significantly as their concerns have not been given adequate importance in the proposal.

He noted that workers and union leaders have long demanded a rationing system for garment workers, which has yet to be introduced.

He also criticised the government’s bank borrowing plans, warning that they could affect credit flow to the private sector.

The capital bourse kicked off the week on a negative note today (21 June) as widespread profit-taking snapped a two-session winning streak, dragging the benchmark index down.

The DSEX, the prime index of the Dhaka Stock Exchange (DSE), shed 21 points to settle at 5,639. Meanwhile, the blue-chip DS30 index managed to buck the trend slightly, gaining 2 points to reach 2,145.

Market breadth heavily favoured the bears, with only 71 issues advancing, 298 declining, and 27 remaining unchanged.

A cautious investor stance also dampened trading participation, causing daily turnover to plunge 16% to Tk1,002 crore compared to the previous session.

According to the daily market review by EBL Securities, the benchmark index retreated in the first session of the week as profit-taking in recently appreciated stocks heavily outweighed selective buying in perceived fundamentally attractive scrips.

The brokerage firm added that the market came under sustained selling pressure from the opening bell, as widespread profit-taking gained momentum throughout the session, weighing on the majority of listed scrips and pushing the market into negative territory.

Mirroring this view, Sheltech Brokerage Limited noted that market sentiment was largely influenced by investors' profit-taking following the recent advance.

The brokerage highlighted that despite a strong start to the session, supported by buying pressure in selective large-cap stocks, the market failed to sustain its early gains as profit-taking pressure intensified from mid-session onward.

On the sectoral front, pharmaceuticals accounted for the highest share of turnover at 13.5%, followed closely by engineering at 12.5% and textiles at 11.8%.

Most of the sectors displayed negative returns, out of which services fell by 3.9%, miscellaneous dropped by 3.4%, and general insurance corrected by 2.1%, exerting the most downward pressure.

On the flip side, telecommunication, pharmaceuticals, and food sectors bucked the trend to exhibit the highest returns on the bourse today, gaining 1.5%, 0.5%, and 0.3% respectively.

The primary index draggers pulling down the market included Olympic Industries, United Commercial Bank, Asiatic Laboratories, National Bank, and Summit Alliance Port.

Despite the correction, Beximco Pharmaceuticals, Summit Alliance Port, IPDC Finance, and Robi emerged as the top traded stocks of the day.

In terms of individual performance, Prime Finance First Mutual Fund led the gainers with a 7.61% jump, followed by Simtex Industries at 5.70% and KDS Accessories at 4.64%.

On the losing side, Meghna Pet and Beximco Limited hit the bottom by plummeting 9.87% each, followed by Regent Textile which lost 9.67%.

The port city bourse, the Chittagong Stock Exchange (CSE), also mirrored the capital city's bearish tone.
The CSCX index ended 61 points lower at 9,327, while the CASPI broad index plummeted 104 points to close at 15,249. Trading activity on the CSE witnessed a massive contraction as its daily turnover dropped by 64% to stand at a meager Tk30 crore.

Bangladesh has proposed allowing individual taxpayers to submit income tax returns throughout the year, with a 5 percent rebate for those filing in the first quarter, under changes outlined in the 2026–27 budget proposal.

The proposal comes as repeated extensions of return filing deadlines have still failed to bring in the expected number of taxpayers, prompting revisions through the Finance Bill 2026.Bangladesh economic report

Under the proposed amendment to the Income Tax Act, taxpayers will be able to file returns across the entire fiscal year after the end of an income year.

However, tax payment and incentive calculations will depend on the quarter in which the return is submitted.

According to the Finance Bill 2026, individual taxpayers filing returns between Jul 1 and Sept 30 -- the first quarter -- will be eligible for a 5 percent rebate for early submission, capped at Tk 25,000.

However, the Bill does not provide detailed mechanisms for how the rebate will be applied, raising concerns among tax analysts.

Experts say it would be preferable to adjust incentives at the point of tax payment.

They caution that if rebates are issued through refunds after full tax payment, taxpayers may fear delays or non-receipt.

They also note that if adjustments are tied to audit processes, many may not perceive it as a meaningful incentive.

There are already complaints that excess advance tax or withholding tax is often not refunded promptly, with allegations of administrative delays and informal payments in some cases.

Taxpayers filing in the second quarter, from Oct 1 to Dec 31, will not receive any rebate but will also not face penalties.

Those filing in the third quarter, from Jan 1 to Mar 31, will be subject to a late filing penalty of 2 percent of tax or a maximum of Tk 3,000.

Returns filed in the final quarter, from Apr 1 to Jun 30, will attract a penalty of 5 percent of tax or a maximum of Tk 5,000.

Under the current system, taxpayers generally submit returns by Nov 30 without additional tax, and there is no incentive for early filing.

The government may extend deadlines by one month at a time under special consideration, a practice commonly seen each fiscal year.

Previously, extensions ran until December or January, but in recent years deadlines have been pushed to February and March.

In the current fiscal year, multiple extensions and the introduction of mandatory online filing allowed taxpayers to get up to 90 additional days, with many effectively filing throughout the year without penalty.

The government is set to split the National Board of Revenue into separate policy and implementation wings as part of broader efforts to address Bangladesh's persistently low tax-to-GDP ratio and strengthen revenue administration, Finance Minister Amir Khosru Mahmud Chowdhury said today (21 June).

Speaking at a budget dialogue organised by the Centre for Policy Dialogue at a hotel in Dhaka, Khosru said the planned restructuring would separate tax policy formulation from tax administration, with experts rather than bureaucrats taking the lead in designing tax policies.

He argued that weaknesses in tax policy formulation were at the core of the country's revenue challenges.
"Bangladesh's major taxation problem and NBR's problem is policy-making. If you get that right to start with, then 50% of the problem is solved," he said.According to the minister, the policy wing will comprise tax specialists and individuals with a strong understanding of Bangladesh's socio-economic realities, while career bureaucrats will focus on implementation and enforcement.

"We want an expert group to make the policy, not the bureaucrats. The expert group will make the policy. Bureaucrats' job is to execute it," he said.

The interim government on 13 May 2025 proceeded with the reforms, officially dissolving the NBR and establishing two separate entities -- the Revenue Policy Division and the Revenue Management Division.

The move later got stalled amid protest by revenue officials who viewed the move as undermining their roles and the integrity of the tax administration system.

Centre for Policy Dialogue (CPD) on Sunday said the national budget for FY2026-27 reflects a clear philosophy of economic recovery through human development, but its ambitious macroeconomic targets rest on shaky ground and the fiscal framework is unlikely to hold as proposed.

CPD Executive Director Dr Fahmida Khatun presented the think tank's Independent Review of Bangladesh's Development (IRBD) analysis at its Budget Dialogue 2026 held at a hotel in Gulshan, UNB reports.

The think tank put forward eight key observations on the FY27 budget, which Finance Minister Amir Khosru Mahmud Chowdhury presented to parliament on June 11.

CPD noted that the government's GDP growth target of 6.5 per cent represents a recovery from an estimated 5.0 per cent in the revised FY26 budget, but provisional data from the Bangladesh Bureau of Statistics (BBS) puts actual FY26 growth at only 4.14 per cent.

On revenue mobilisation, CPD said the government targets an 18.2 per cent increase in revenue collection to Tk 6.95 trillion (Tk 695,000 crore). However, its own projection based on data through March 2026 suggests actual FY26 collection may be around Tk 4.5 trillion (Tk 450,000 crore), implying that the required growth would be closer to 54.4 per cent.

The think tank welcomed the budget's reprioritisation of public expenditure toward human capital sectors, noting that allocations for health and education increased by 124 per cent and 42.7 per cent, respectively, compared with the revised FY26 budget.Bangladesh stock market

However, it cautioned that both sectors suffer from persistently weak budget utilisation, with health-sector development spending utilisation falling from 80 per cent in FY15 to just 30 per cent in FY25.

On the Annual Development Programme (ADP), CPD said the Tk 3 trillion (Tk 300,000 crore) allocation, a 50 per cent increase over the revised FY26 figure, reflects an ambitious fiscal stance. However, only 35.4 per cent of last year's ADP was spent in the first 10 months, signalling low absorptive capacity.

It also noted that none of the eight mega projects scheduled for completion in FY27, including the Rooppur Nuclear Power Plant, is expected to be finished on time.

CPD raised equity concerns over the personal income tax structure, pointing out that lower-income groups face a proportionately higher increase in tax burden than those earning more than Tk 3 million annually.

On social protection, the Social Safety Net Programme (SSNP) allocation rose 13.9 per cent to Tk 1.44 trillion (Tk 144,000 crore) in FY27. However, CPD observed that pension management and agricultural subsidies together account for 43.2 per cent of the total SSNP allocation, although these programmes are not strictly targeted at the poor.

Regarding the government's pledge to create 10 million new jobs within 18 months, CPD found that budget allocations for four key employment-related ministries either declined or remained stagnant as a share of total expenditure.

The Ministry of Commerce recorded the sharpest cut, with its allocation reduced from Tk 9.09 billion (Tk 909 crore) to Tk 3.29 billion (Tk 329 crore).

CPD also highlighted the absence of a medium-term roadmap to address preference erosion ahead of Bangladesh's graduation from the least developed country (LDC) category, despite the government's formal request for a three-year deferral in February 2026.

“This budget is the first major opportunity for the new government to demonstrate its ability to drive economic recovery through sustained structural reforms,” Fahmida Khatun said, adding that its success would ultimately depend on the quality of implementation and the strength of institutional capacity.

Finance Minister Amir Khosru Mahmud Chowdhury on Sunday said the government will overhaul its public finance architecture to fund the proposed budget for fiscal year 2026-27 while minimising the debt burden on the economy.

“We cannot keep looking towards the World Bank, International Monetary Fund (IMF) and Asian Development Bank (ADB). We need to restructure our own public financing,” he said while speaking at the “CPD Budget Dialogue 2026” organised by the Centre for Policy Dialogue (CPD) at a city hotel.

The minister said the government is working to develop alternative financing channels and will introduce market-based financing mechanisms to fund the budget.

He noted that the gap between multilateral financing rates and market interest rates is narrowing, making borrowing costs considerably higher and leaving little option but to rely on market-based instruments.

Announcing a phased withdrawal from local bank borrowing, Khosru said local banks are charging 12-14 per cent interest, a burden that even the private sector struggles to bear. “It is simply not feasible for the government to sustain such borrowing costs.”

On broader economic challenges, he said the Middle East labour market, worth $4 billion, is facing headwinds and that the government inherited hundreds of crores of taka in outstanding bills across all sectors upon taking office.

The minister also noted that the government had only one and a half months to prepare a budget that normally takes six months.

He said the government inherited 1,300 projects from the previous administration, many of which were conceived to serve personal interests, and that a number of schemes have since been cancelled or repurposed. Projects that were 80 per cent complete were being finished despite uncertain returns.

To ensure accountability, Khosru announced that an ADP dashboard will go live in the first week of July, allowing real-time tracking of project progress and implementation status.

On trade facilitation, he said Bangladesh will gradually move away from the letter of credit (LC) system towards direct payment mechanisms for import and export transactions, in line with global practice, allowing credible businesses to trade internationally without opening LCs.

On education, the minister said the allocation will be raised to 5 per cent of the ADP by the end of the government's current term, up from the current 2 per cent.

He stressed that vocational training will receive the strongest emphasis this year, citing China's model, where 60 per cent of students pursue vocational education after secondary school. “Bangladesh's certificates hold little value in the job market because skills are absent. Vocational training is how we bridge that gap.”

On health, Khosru said the government is working towards establishing universal healthcare, with preventive healthcare as the first priority.

Addressing questions over the Family Card programme, he said 72,000 people have already received cards under a pilot project, which he described as the largest social protection initiative in Bangladesh's history.

The minister said the selection process has been deliberately kept free of political interference, with a new formula developed to ensure fairness at both the local and central levels.

He acknowledged a roughly 1-1.5 per cent error rate and said the government is actively working to identify and resolve the causes.

Khosru reaffirmed the government's commitment to carrying out all necessary economic reforms during its tenure.

The government’s proposal to significantly reduce import duties on plug-in hybrid electric vehicles (PHEVs) has raised concerns among local automobile manufacturers, who say the move could encourage imports at the expense of domestic production.

In a letter to National Board of Revenue (NBR) Chairman on June 17, the Bangladesh Automobiles Assemblers and Manufacturers Association (BAAMA) urged the tax authority to revise the proposed fiscal measures, arguing that they create a policy imbalance between imports and local manufacturing.

“The existing budget framework will encourage imports of completely built vehicles rather than the establishment of PHEV manufacturing and assembly operations in Bangladesh,” Hafizur Rahman Khan, president of BAAMA, wrote in the letter.

In its letter, the association called for extending to local PHEV manufacturers the same level of support currently available to EV producers.

Under the proposed budget for fiscal year 2026-27, the total tax incidence on completely built-up (CBU) PHEVs with engine capacities of up to 1,800cc would fall to 73.44 percent from 93.16 percent. For vehicles between 1,801cc and 2,000cc, it would decline to 96.10 percent from 132.66 percent.

However, BAAMA says comparable incentives have not been offered for the local production, assembly and value addition of PHEVs.

The association noted that while the government recently introduced special incentives for locally manufactured electric vehicles (EVs) through SRO No. 163-Ion/2026/18/Customs, issued on June 8, no similar support has been announced for PHEV production.

Industry representatives say this could make importing fully built vehicles more attractive than investing in manufacturing facilities and supply chains in Bangladesh.

The concern comes as hybrid vehicles continue to gain popularity. Data cited by BAAMA from Bangladesh Road Transport Authority (BRTA) registrations show hybrids accounted for 57 percent of passenger vehicle registrations in 2025, up from 42 percent in 2021. Over the same period, the share of conventional internal combustion engine (ICE) vehicles fell from 58 percent to 42 percent.

Despite growing interest in cleaner transport, fully electric vehicles remain a niche segment, accounting for only 0.57 percent of registrations last year. Industry stakeholders attribute the slow uptake to limited charging infrastructure, high battery costs and concerns over long-distance travel.

BAAMA argues that Bangladesh is in a transition phase between conventional fuel-powered vehicles and full electrification, making PHEVs an effective intermediate technology that combines electric driving capability with the flexibility of a conventional engine.

The association said PHEVs can reduce fuel consumption by 40 percent to 60 percent, helping cut fuel import costs while lowering carbon emissions and air pollution.

The debate also has implications for Bangladesh’s emerging automotive industry. Several global brands, including Hyundai, Mitsubishi, Chery and Proton, have invested in local assembly operations through partnerships with Bangladeshi companies. Chinese EV manufacturer BYD has also initiated plans to establish manufacturing operations through a joint venture with Runner Automobiles.

According to BAAMA, policies that favour imports over domestic production could affect future investment decisions and discourage expansion by existing manufacturers.

The association also said the proposed tariff structure departs from the principle of tariff escalation, under which higher duties are imposed on finished vehicles while lower tariffs and incentives support local assembly, component manufacturing and value addition.

Such frameworks are intended to promote industrialisation, employment, technology transfer and the development of domestic supply chains.

BAAMA also referred to the Automobile Industry Development Policy 2021, which commits to supporting local manufacturing through fiscal incentives and investment-friendly measures while promoting fuel-efficient and environmentally friendly vehicle production.

An NBR official, speaking on condition of anonymity, said the proposed duty reduction on plug-in hybrid electric vehicles is part of the government’s broader strategy to promote energy-efficient and environmentally friendly transport

The measure is expected to reduce reliance on fossil fuels and accelerate the adoption of cleaner vehicle technologies.

The official said the government has not overlooked the interests of local manufacturers, noting that a range of fiscal and policy incentives has already been introduced to support the domestic production and assembly of electric vehicles.

Issues related to PHEVs remain under review, and any future policy decisions will seek to balance industrial development, investment promotion, technology transfer, and environmental sustainability.

A multi-year credit drought in Bangladesh’s private sector has deepened while government borrowing from the banking system has increased. Central bank data show the government took BDT 756.2 billion more in net bank credit during the first ten months of the 2025–26 fiscal year than it did a year earlier. Private-sector borrowing fell by BDT 250 billion over the same period. The trend intensified through May and June, officials said, leaving entrepreneurs more credit-starved than before.

Net government borrowing from banks stood at BDT 325.62 billion in the July to April period of FY 2024–25. It reached BDT 1,081.82 billion in the same stretch this year — a threefold rise. The original budget had set a bank-borrowing target of BDT 1,040 billion. The revised budget raised it to BDT 1,180 billion.

Finance ministry and Bangladesh Bank officials now expect net borrowing to exceed even the revised target by the fiscal year-end. The revenue shortfall had already topped BDT 1.04 trillion by April and is forecast to widen further in May and June. A large portion of that gap must be met through bank credit.

This outsized reliance on banks is pushing the private sector into an ever more precarious condition, according to former finance secretary and comptroller and auditor general Mohammad Muslim Chowdhury. “Government expenditure far exceeds revenue capacity. That’s why borrowing is overshooting targets,” he told Bonik Barta. “High interest rates on treasury bills and bonds are also driving up the cost of this borrowing. No effective steps to curb spending or raise revenue are yet visible.”

“The private sector has been struggling for years. Entrepreneurs are either not getting bank loans or have no appetite to expand their businesses,” the former CAG said. “Interest rates are also quite high, and the prevailing economic conditions don’t favour a private-sector revival. To create jobs and get the economy moving, the private sector must be rejuvenated. There’s no alternative to increasing credit flow.”

The private sector accounts for roughly 95 percent of employment and more than 80 percent of GDP in Bangladesh. Yet it is this engine of the economy that has been languishing for years. Many banks have now withdrawn from private lending after a third of their loans turned non-performing. Central bank data show private-sector credit growth was a mere 4.75 percent in April this year — a nadir that bank executives call rare in the country’s history.

Even that meagre expansion does not signal fresh lending, the executives say. It reflects the capitalisation of unpaid interest on defaulted loans. Credit extended through past irregularities and graft has gone largely bad, yielding no revenue for the lenders. The accrual of overdue interest inflates the loan books of weak banks, while sounder lenders have seen their portfolios shrink.

BRAC Bank, widely rated as one of the country’s best-run banks, reported an outstanding loan book of BDT 731.40 billion at the end of December. By end-March it had fallen to BDT 717.08 billion. Over the same period, its investments in government bills and bonds climbed from BDT 419.37 billion to BDT 449.65 billion. Most healthier banks show a similar shift.

Central bank data corroborate the picture. Net private-sector credit flow reached BDT 558.38 billion in the first ten months of FY 2025–26, against BDT 805.93 billion in the same stretch of the 2024–25 fiscal year — a drop of BDT 247.55 billion.

Anwar-ul Alam Chowdhury Parvez, president of the Bangladesh Chamber of Industries, traced the imbalance to government yields. “The government is paying 10 to 12 percent on treasury bills and bonds. For three or four years, banks have preferred lending to the state over entrepreneurs,” he told Bonik Barta. “Unless government borrowing demand falls, the private-sector crisis won’t end. Interest rates were hiked in the name of containing inflation, but we see inflation rising instead. No entrepreneur can run a business at 14 or 15 percent interest. If this stagnation continues, the economy will face a far bigger disaster.”

When the BNP government took office in February this year, total public debt stood at more than BDT 23 trillion. By end-March it had climbed to nearly BDT 24 trillion, of which BDT 6.41 trillion was owed to the banking system. There is no sign the borrowing will slow soon. The finance division’s latest projections show that on the current trajectory the debt stock will reach roughly BDT 34 trillion by the 2028–29 fiscal year.

The division’s medium-term macroeconomic policy statement warns that debt will rise to a level that places heavy strain on the wider economy, private-sector growth and foreign-exchange reserves. It projects the total at BDT 26.33 trillion by the close of FY 2026–27, BDT 29.56 trillion the following year and BDT 33.77 trillion in FY 2028–29. Domestic borrowing would account for BDT 18.80 trillion and external debt for BDT 14.97 trillion.

The surge is multiplying interest costs. The government will pay BDT 1.27 trillion in interest in FY 2026–27, rising to BDT 1.62 trillion two years later. A large share of the budget will consequently be absorbed by servicing past obligations, squeezing development spending. Because the bulk of domestic debt is raised from banks, the private sector will suffer further.

Mashrur Arefin, chairman of the Association of Bankers, Bangladesh and managing director of City Bank PLC, said private credit demand has collapsed. “For several years, entrepreneurs have retreated from business expansion. Hardly any new entrepreneurs have emerged. That’s why private credit growth has dropped to around 4 percent. I have never seen such low demand in my banking career,” he told Bonik Barta.

Arefin said the government and central bank have taken steps to revive the private sector. “Bangladesh Bank has created a BDT 600 billion incentive fund. If implemented, the private sector will recover. I expect banks to play an effective role in implementing the scheme.”

The Bangladesh Securities and Exchange Commission (BSEC) has instructed the Dhaka Stock Exchange (DSE) to strengthen its surveillance system through effective real-time monitoring and control measures aimed at curbing market irregularities and protecting investors.

The instruction was given at a meeting held between the regulator and the DSE surveillance team at the BSEC headquarters in Agargaon yesterday.

BSEC Acting Chairman Tanwir Habib Rahman, along with Commissioners Nahid Mahtab and Md Nafeez Al Tarik, and other senior officials attended the meeting. The DSE was represented by its Managing Director Nuzhat Anwar and Acting Chief Regulatory Officer Mohammad Shafiqul Islam Bhuiyan, among others.

According to a BSEC press release, the meeting focused on the development and modernisation of the capital market, with particular emphasis on maintaining market integrity and protecting investors’ interests.

The regulator also stressed the need to prevent all forms of market manipulation and misconduct, while discussing surveillance and oversight issues at the stock exchange. BSEC officials said a transparent, accountable and efficient capital market is essential for sustainable market development. In line with international best practices, the commission directed the DSE to enhance its real-time surveillance capacity and adopt necessary monitoring tools.

The meeting also covered plans to upgrade and modernise the surveillance system to improve investor protection and overall market supervision.

The move reflects the regulator’s efforts to restore investor confidence and ensure a fair and orderly market through stronger oversight and improved technology.

Finance and Planning Minister Amir Khosru Mahmud Chowdhury said on Sunday the government is moving towards market-based and alternative financing while reducing reliance on bank borrowing, arguing that excessive state borrowing from banks puts pressure on private sector investment.

He made the remarks at a budget review dialogue in Dhaka organised by the Centre for Policy Dialogue, noting that steps to reduce reliance are included in the 2025–26 and 2026–27 budgets.

“I’ve been saying for 10 years that the government shouldn’t borrow excessively from domestic banks,” he said. “When the government takes money at 10 to 13 percent interest, it becomes difficult for the private sector to survive, and the question of how such expensive loans will be repaid looms large.”

The current FY26 budget will spend about BDT 1.25 trillion on interest payments, he said, limiting the government’s fiscal space. The budget was prepared in about one and a half months instead of the usual six, and the government inherited arrears from the previous administration, including about BDT 5 billion in unpaid electricity bills.

The minister said the government wants to transfer cash directly to housewives or eligible family members through family cards, without intermediaries. He said the mechanism recognises women’s domestic labour and is intended to strengthen social resilience, not only serve as financial assistance. Direct support for disabled people and food-security measures for farmers are also being expanded.

Despite constraints, education spending is set at 2 percent of GDP, with a target of raising it to 5 percent, he said. Preventive healthcare is being prioritised to reduce households’ out-of-pocket medical costs, alongside emphasis on skill development, reskilling and new skills creation.

The National Board of Revenue (NBR) has recorded its highest-ever revenue collection during the first 11 months of a fiscal year, collecting Tk3,60,642 crore during the July 2025 to May 2026 period, surpassing all previous records.

According to a statement issued today (21 June), revenue collection during the period increased by Tk32,856.22 crore compared with Tk3,27,785.78 crore collected during the same period of FY25.

The year-on-year growth rate stood at 10.02%.
The revised revenue collection target for FY26 was set at Tk5,03,000 crore. Against the target of Tk442,084 crore for the first 11 months, actual collection reached Tk3,60,642 crore, achieving 81.58% of the target and leaving a shortfall of Tk81,442 crore.

Among the major revenue wings, customs revenue grew by 7.08%, VAT collection rose by 10.05%, and income tax revenue increased by 12.54% during the period.

The NBR said revenue collection reached Tk3,89,953 crore by 20 June 2026, after collecting Tk29,311 crore during the first 20 days of June. This figure has already exceeded the total revenue collection of Tk3,70,843.03 crore recorded in the entire previous fiscal year.

The revenue authority expressed optimism that an additional Tk25,000 crore could be collected during the final 10 days of June, allowing total revenue collection in FY26 to reach a record Tk4,15,000 crore.

If achieved, the figure would still fall short of the revised target by around Tk88,000 crore but would exceed the previous fiscal year's collection by Tk43,157 crore.

To accelerate revenue mobilisation, the NBR has formed three separate task forces comprising field-level officials from the income tax, VAT and customs wings.

The task forces have undertaken various initiatives, including expediting cases pending before appellate authorities, tribunals and higher courts, strengthening tax recovery efforts, enhancing audit and compliance activities, monitoring tax and VAT collection at source, and intensifying customs risk management and post-clearance audits.

The NBR said these measures have helped boost revenue collection and that efforts to mobilise resources for the country will continue.

Conventional banks outperformed Islamic banks in deposit collection, investment, and asset growth over the past year, mainly due to instability in the Islamic banking sector following the July 2024 uprising.

According to a recently released report by the Bangladesh Bank, deposits in conventional banks rose from Tk 15.22 lakh crore in April 2025 to Tk 17.16 lakh crore in April 2026, marking a year-on-year growth of 12.73 percent.

In contrast, deposits in Islamic banks increased from Tk 4.41 lakh crore to Tk 4.81 lakh crore over the same period, showing a moderate growth of about 8.98 percent.

“This steady growth in deposits in conventional banks can be primarily attributed to an unstable situation in the Islamic banking sector after the July 2024 uprising, which shifted depositor confidence towards conventional banks,” the BB report said.

The report added that following the July uprising, BB’s measures -- such as providing liquidity support, identifying weaknesses in banks and appointing administrators to improve management -- may help restore depositor confidence.

It also found that depositors mainly rely on Mudaraba-based deposits, which account for around 87.21 percent of the Islamic banking deposit base. As of April 2026, the deposit base is largely driven by the private sector, which makes up about 90.2 percent of total deposits.

In terms of assets, conventional banks recorded stronger and more consistent growth over the same period. Their assets rose from Tk 32.93 lakh crore in April 2025 to Tk 37.78 lakh crore in April 2026, a year-on-year increase of about 14.72 percent.

Islamic banks’ assets grew more slowly, increasing from Tk 9.14 lakh crore to Tk 9.56 lakh crore over the same period, reflecting a 4.58 percent rise.

The overall banking sector in Bangladesh saw strong investment growth between November 2023 and April 2026, with total investments increasing from Tk 18.99 lakh crore to Tk 24.45 lakh crore, a rise of 28.71 percent.

Within this, investments by conventional banks grew from Tk 16.73 lakh crore to Tk 18.53 lakh crore between April 2025 and April 2026, an increase of 10.71 percent.

Islamic banks’ investments rose from Tk 5.57 lakh crore to Tk 5.92 lakh crore over the same period, reflecting growth of about 6.26 percent.

“The year-on-year growth indicates gradual expansion, supported by rising demand for Islamic financing products, especially profit-and-loss sharing modes,” the report said.

From a sectoral perspective, the report added that Islamic banks’ investments were distributed across different areas of the economy, with the largest share going to industry and trade and commerce, highlighting their role in supporting productive and commercial activities.

Tyre importers, dealers and transport operators have urged the government to withdraw a proposed 20 percent supplementary duty on commercial vehicle tyres, arguing that the measure would increase transport costs and add to inflationary pressures.

At a press conference in Chattogram yesterday, leaders of the Chattogram Tyre Tube Importers and Dealers Group said the proposed duty would raise the overall tax incidence on imported commercial vehicle tyres to 96.1 percent from 64.25 percent.

They alleged that the measure seeks to protect local manufacturers, who meet only 10-15 percent of domestic demand, at the expense of an import-dependent market that supplies around 85-90 percent of the country’s commercial vehicle tyres.

“Tyres are not luxury goods; they are essential to the transport and supply chain,” said Main Uddin Ahmed, president of the organisation. “Higher tyre prices will increase operating costs for trucks, buses and cargo vehicles, ultimately pushing up the prices of goods and services.”

Rejecting allegations of duty evasion in tyre imports, he said imported tyres undergo 100 percent physical inspection and are assessed based on weight, leaving little room for under-invoicing or tax avoidance.

Representatives of transport owners’ associations who attended the event warned that higher tyre costs would raise freight charges and passenger fares, creating a ripple effect across the economy and putting additional pressure on consumers.

The speakers called on the government to reconsider the proposed duty and engage with stakeholders before finalising the measure.

Commerce Minister Khandakar Abdul Muktadir on Sunday said that the government is strengthening efforts to introduce a centralised online one-stop investment service to create a more business-friendly environment by simplifying and integrating licensing and approval procedures.

“The government is working to make the licensing and approval process easier, faster and more integrated so that investors don’t have to move from one office to another,” he said.

The minister made the remarks during a courtesy meeting with a delegation of the Japan-Bangladesh Chamber of Commerce and Industry (JBCCI), led by its President Tareq Rafi Bhuiyan, at the Ministry of Commerce conference room in the capital this morning.

Commerce Secretary Md Ataur Rahman Khan was also present at the meeting.

Highlighting ongoing reforms to improve the investment climate, Muktadir said the government aims to establish a digital platform through which investors can obtain all necessary approvals and services efficiently.

Referring to factory establishment procedures, he said completing all approvals within 15 days is not always feasible because the process requires inspections related to safety, risk management, fire protection, and environmental compliance.

To prevent delays in investment activities, he said, the government plans to introduce provisional licences that will allow investors to begin preliminary operations while completing the remaining formalities.

The minister said a roadmap has already been prepared to shorten approval timelines, with particular attention being given to sector-specific licensing requirements.

“Licensing needs vary significantly from sector to sector. The requirements for a power plant are different from those for a textile factory,” he noted.

He also announced that the Bangladesh Investment Development Authority (BIDA) will coordinate factory inspections under a unified mechanism.

Through this system, BIDA will schedule inspection dates and bring all relevant agencies together for a single joint visit, reducing administrative burdens on investors, he added.

On sustainable transportation, Muktadir said the government is seeking to reduce dependence on conventional fuels by promoting electric and hybrid vehicles.

While the government remains positive about the transition to electric vehicles, he said Bangladesh is not yet fully prepared for a complete shift to EVs.

As an interim measure, he said, the government is prioritising the import and use of plug-in hybrid vehicles to strengthen economic and energy security.

During the meeting, the JBCCI delegation stressed the importance of expanding Japanese investment and trade in Bangladesh and encouraged greater adoption of sustainable technologies.

The delegation also welcomed the proposed Bangladesh-Japan Free Trade Agreement, saying it would further enhance bilateral trade and investment cooperation between the two countries.

Reaffirming the government’s commitment to Japanese investors, the minister said, “We want to create an investment environment where an investor can access all necessary services with a single click on an online platform.”

Bangladesh's cashew processing industry leaders have expressed concern over proposed tariff changes in the FY2026-27 budget, warning that the new structure could make imported finished cashews cheaper than locally processed products and threaten the viability of domestic processors.

Industry leaders say the proposed measures create an inverted duty structure by increasing the tax burden on imported raw cashew nuts while allowing finished cashew imports from India to continue benefiting from tariff preferences under the South Asian Free Trade Area (Safta) agreement.

They argue that the policy could put around 20 processing factories at risk and discourage planned investments worth hundreds of crores of taka.

The issue involves two categories of products – raw cashew nuts in shell, which are used by local processors, and shelled cashew kernels, the finished product sold in the market.

Industry insiders say five kilograms of raw cashew nuts are required to produce one kilogram of finished kernels.

Under the proposed budget, imports of raw cashew nuts in shell would be subject to 15% customs duty and 15% VAT, raising the total tax incidence from 13.58% to 40.38%.

At the same time, imported shelled cashews, particularly from India, would continue to receive preferential treatment under Safta reducing the impact of higher customs duties.

According to industry calculations submitted to the National Board of Revenue (NBR), the proposed structure would raise the cost of producing one kilogram of locally processed cashew kernels to about Tk1,725.

In comparison, imported finished cashews from India would cost around Tk1,282 per kilogram, creating a price difference of nearly Tk471.

Processors say such a gap would make local production commercially unsustainable.

"If this structure remains unchanged, factories will be forced to shut down as importers will be able to sell finished products at prices far below our production costs," said Robiul Islam Azad, managing director of Green Harvest Fresh Produce Ltd.

He said Bangladesh imports most of its raw cashew nuts from African countries because local production is insufficient.

"Bangladesh imports raw cashew mainly from African countries because domestic production is insufficient. These countries are outside Safta so we have to pay the full customs duty. Importers of finished cashews from India, however, benefit from preferential tariffs," he said.

NBR officials have defended the proposed measures, saying local farmers need protection from cheaper imports and should receive better prices for domestically grown cashews.

However, processors argue that domestic production remains too low to support such a policy.

Industry estimates show Bangladesh produces about 2,000 tonnes of in-shell cashew nuts annually, while demand exceeds 15,000 tonnes.

The country consumes around 3,000 tonnes of shelled cashews each year, of which local processors produce about 800 tonnes and imports account for the remaining 2,200 tonnes.

"Even for existing production, processors need over 4,000 tonnes of raw cashew nuts annually. Local production is only around half that amount. Imports are therefore a necessity, not a choice," BSRM Group Deputy Managing Director Tapan Sengupta said.

Industry seeks supplementary duty

Bangladesh's cashew processing industry emerged about a decade ago, supported by growing cultivation in the Chittagong Hill Tracts and other regions.

However, processors say they have long struggled to compete with imported products.

Entrepreneur Shakil Ahmed Tanvir, who established the country's first commercial cashew processing plant, said the facility ceased operations in 2022 after years of losses.

"Local processors have long faced unfair competition from imported kernels sold at prices below domestic production costs," he said.

Despite those challenges, several large companies have recently invested in the sector.

BSRM launched a processing plant in Chattogram in 2023 and announced plans to invest Tk157 crore in a larger facility at the Mirsarai Economic Zone.

Kazi Farms has also announced plans to invest Tk181 crore in a similar project.

Industry representatives warn that these investments could be delayed or reconsidered if the proposed tariff structure is finalised without changes.

They argue that increasing customs duties alone does not provide effective protection because imports from India continue to receive concessions under Safta, while raw cashew imports from countries such as Tanzania, Benin, the Ivory Coast and Ghana remain subject to the full duty burden.

To address the issue, processors have proposed imposing a 20% supplementary duty on imported shelled cashews instead of increasing customs duty.

They say a supplementary duty would apply equally to all imports and would not be offset by Safta preferences.

"Raising customs duty alone will not solve the problem because Safta reduces its impact. A supplementary duty would ensure fair competition and prevent cheaper imported kernels from dominating the market," said Mohammad Azad Iqbal Pathan, president of the proposed Bangladesh Association for Cashew Processors.

Industry leaders argue that conventional tariff comparisons fail to account for the economics of cashew processing. According to Robiul Islam Azad, the global average kernel outturn ratio is only 22%, meaning processors recover just 20-24 kilograms of edible kernels from every 100 kilograms of raw cashew nuts. "Because more than four kilograms of raw cashew nuts are required to produce one kilogram of kernels, the tariff on imported finished cashews should be at least 4.5 times higher than the duty on raw materials. Otherwise, local processors cannot compete with imported kernels," he said.

The Bank of Japan’s decision to raise a key interest rate is expected to have both positive and negative impacts on households and businesses. While interest earned on bank deposits will increase, burdens from borrowing, such as housing loans, will rise. Whereas the elderly are expected to benefit greatly from the interest rate hike, younger people are likely to be adversely affected.

In response to the central bank’s decision, three major banks -- MUFG Bank Ltd, Sumitomo Mitsui Banking Corp and Mizuho Bank Ltd -- announced Tuesday that they would raise interest rates on savings accounts by 0.1 percentage points to 0.4 percent, effective August 3. The rate stood at 0.001 percent in March 2024, when the Bank of Japan ended its negative interest rate policy, meaning that the new interest rate represents a 400-fold increase.

For MUFG and Sumitomo Mitsui, this will mark the highest level in 34 years, or since August 1992, at a time when the two banks had yet to be formed through mergers of their various predecessors. As for Mizuho, the new interest rate will be the highest level since the bank’s founding in 2002.

According to estimates by the Mizuho Research Institute, the overall household economy will see a net gain of ¥1 trillion per year after balancing the positive and negative effects of the interest rate hike. This will be primarily due to an increase in interest income, which translates into an average annual gain of ¥20,000 per household.

However, the degree of the benefits will vary for each household depending on the size of their deposits and borrowings. Generally speaking, older people with larger financial assets will benefit more from increased interest income, while younger households with large outstanding housing loans will tend to be more negatively impacted.

According to the company that operates mogecheck, a site comparing mortgages, in a case where ¥50 million is borrowed on a 35-year variable-rate mortgage and the variable interest rate rises to 1.25 percent, the monthly payment will increase by ¥5,900 to reach ¥147,043, compared to before the hike. Since 80 percent of mortgage borrowers choose variable-rate loans, many households are expected to be affected.

The total repayment amounts for student loans, education loans and auto loans are also expected to rise. As interest rates are determined based on various factors, such as government bond yields, borrowers may be forced to revise their repayment plans.

As the interest burden of borrowing increases, the interest rate hike will inevitably affect corporate management. Mizuho Research Institute estimates that ordinary profit across all industries, excluding the finance and insurance sectors, will be reduced by 1.0 percent, or about ¥1.1 trillion. Small and medium-sized companies with low profits against interest-bearing debt will tend to be affected. Businesses with capital of less than ¥10 million are projected to see their ordinary profit decline 6.6 percent.

Looking Back on 1995

The year 1995 — the last time the Bank of Japan’s key interest rate was at 1 percent — witnessed a series of major events, such as the Great Hanshin Earthquake and the sarin gas attack on the Tokyo subway.

On the economic front, the prolonged economic slump following the collapse of the bubble economy brought down a number of financial institutions, as they struggled with nonperforming loans. With the consumer price index stuck at zero percent growth, the nation fell into a long period of deflation.

The BOJ was in the process of cutting interest rates, lowering the official discount rate -- then the policy interest rate -- from 1.75 percent to 1 percent in April, and then to 0.5 percent in September.

Along with the economic slump, successive failures of banks and credit cooperatives in July and August stoked concerns about the financial system.

Meanwhile, the yen was appreciating, at one point strengthening to the ¥79 level to the dollar.

Monetary easing was aimed at simultaneously correcting the strong yen to improve the earnings of exporters, stimulating the economy and disposing of nonperforming loans.

However, progress stalled on the nonperforming loans issue, causing Hokkaido Takushoku Bank and the former Yamaichi Securities to fail in 1997.

As prices remained flat, the government acknowledged in 2001 for the first time since World War II that the Japanese economy was deflationary.

The BOJ introduced its zero-interest-rate policy in 1999 and maintained ultralow rates thereafter.

Haruhiko Kuroda, who became BOJ governor in 2013, pursued aggressive monetary easing, culminating in the adoption of a negative interest rate policy in 2016.

The World Bank’s board is set to approve $1.5 billion in budget support under three loan programmes for Bangladesh this month, a development that will bring much relief to the strained government finances amid the Middle East war.

Of this, about $800 million will be repurposed from existing project loans under the Rapid Response Option (RRO) window, $300 million for fertiliser imports and food assistance, and $400 million for banking sector reforms.

The breakthrough came after multiple rounds of talks in both Washington DC and Dhaka, The Daily Star has learnt from officials involved with the negotiations.

Bangladesh will need an additional $2.61 billion to pay the elevated energy and fertiliser import bills for the last quarter of fiscal 2025-26 because of the Iran war that began on February 28, according to a finance ministry impact analysis.

Subsequently, in April, the finance ministry sought urgent budget support from the WB and other donor agencies due to rising expenses for LNG, fuel and fertiliser imports following the Iran war, and the Washington-based multilateral lender is providing support as part of that request.

Any member state of the WB can restructure or repurpose up to 10 percent of its ongoing portfolio in the event of an unexpected natural or man-made emergency under the RRO window. Bangladesh applied to the WB on April 5 to receive assistance through the RRO.

Assistance under the RRO can be accessed in two ways. One is through the creation of a Contingent Emergency Response Project (CERP), which allows financing of emergency expenses such as food and other essential imports.

Bangladesh is set to repurpose $785 million from 12 projects through this CERP mechanism, which will be taken as budget support. Another $300 million will be taken as budget support to ensure food security.

And $400 million will be taken under the Financial Sector Support Programme for banking sector reforms. As part of the conditions, the government has agreed to scrap the much-criticised Bank Resolution Act, 2026.

The WB has also advised stricter enforcement of related-party lending rules, full supervisory powers for the BB and corporate governance aligned with international norms.

Relevant draft amendments prepared during the interim government were shelved due to opposition from bank owners, The Daily Star has learnt from finance ministry officials involved with the proceedings.

The Financial Institutions Division has now sent them back to the BB for review and consultation.

The other reforms include amending the Deposit Protection Act, enacting laws on distressed asset management and insolvency, and licensing small companies to recover bad loans under the BB regulation.

Two new laws, the Distressed Asset Management Act (DAMA) and the Insolvency and Bankruptcy Act, will be enacted.

Under DAMA, small companies will be licensed to recover bad loans with legal authority similar to banks, regulated by the BB.

The law will establish a framework for recovery, management, securitisation and trading of defaulted loans.

The World Bank Group’s International Finance Corporation will provide technical support.

The Insolvency and Bankruptcy Act will align with international best practices to strengthen insolvent banks and financial institutions.

State-owned banks will also undergo asset quality reviews (AQR).

The interim government conducted AQR in nine private banks, after which five were merged into Sommilito Islami Bank.

The WB’s programme documents noted structural weaknesses, including poor corporate governance, regulatory capture and politically influenced related-party lending.

Loopholes in definitions allowed complex inter-family relationships to obscure the scale of related-party lending, leading to fraudulent and willful defaults, and embezzlement by banks’ shareholders and management.

“A few big business groups siphoned off billions of dollars from the banking sector. In addition, the lack of proper enforcement and regulatory forbearance has exacerbated the problems, encouraging risky behavior, impacting market discipline and delaying necessary reforms,” the WB said.

State-owned banks are the most vulnerable, holding 27 percent of total assets, over $50 billion or 12 percent of GDP. Three state-owned commercial banks are systemically important.

In this context, the Financial Sector Support Project II is seen as critical for stabilising the sector.

It aims to strengthen deposit protection, improve supervisory capacity, and support resolution and restructuring, including reforms of state-owned banks.

“These interventions will address longstanding issues, improve authorities’ preparedness for and management of the current banking sector turmoil, paving the way for resolution and restructuring of weaker banks, including possible recapitalisation of the reformed SOBs.”

The programme is expected to restore stability, strengthen intermediation, and support long-term growth, the WB said.

China urged the Group of Seven to abide by market economy principles and international economic and trade rules and stop undermining the global trade order on Thursday, responding to the bloc’s latest joint statement that calls for reducing reliance on China for critical minerals and rare earths.

Foreign Ministry spokesman Lin Jian made the remarks at a regular press briefing. China’s position on safeguarding the stability and security of critical minerals and the global industrial and supply chains remains unchanged, Lin said. All parties share the responsibility to play a constructive role in this regard, he added.

He noted that China’s efforts to standardize and improve its export control system are consistent with internationally accepted practices and are intended to better safeguard world peace and regional stability and fulfill non-proliferation obligations.

“We urge the G7 to earnestly abide by market economy principles and international economic and trade rules, and stop using the rules of small exclusive circles to disrupt the international economic and trade order,” Lin said.