The General Economics Division (GED) of the Bangladesh Planning Commission has raised alarms about the growing imbalance in credit flow.
Net credit to the government sector surged by 16.59 percent year-on-year in August, while private sector credit growth dropped to a historic low of 6.35 percent.
The government’s increasing reliance on bank borrowing is crowding out private investment, which could harm long-term economic growth, the division said in its latest monthly economic update report published on Tuesday.
The report attributes this gap to the government’s need to finance its fiscal deficit amid stagnant tax revenue collection.
The decline in private credit, on the other hand, signals reluctance from businesses to invest and expand, resulting in reduced job creation and expansion, GED said.
High interest rates, cautious lending, and political uncertainty have been identified as significant deterrents to private investment.
The Bangladesh Bank’s contractionary monetary policy, aimed at curbing inflation, has exacerbated this situation, leading to stagnant credit growth in the private sector.
While inflation edged up to 8.36 percent in September, the report highlights that balancing inflation control with investment stimulation is becoming more challenging.
Despite the credit crunch, the banking sector has experienced positive developments, with a 10.01 percent year-on-year increase in total deposits in August.
GED attributes this growth to restored public confidence, reforms in banking oversight, and more attractive deposit rates due to reduced Sanchaypatra interest rates.
Foreign exchange reserves have shown a steady increase, rising to $31.4 billion in September from $25.5 billion in March 2025.
The improvement reflects a stabilised foreign exchange market, supported by stable remittance inflows and moderated import payments.
Exports, however, dropped to $3.63 billion in September, down from $4.77 billion in July, primarily due to seasonal factors and slower shipments in the ready-made garment (RMG) sector, said GED.
Despite this dip, non-RMG sectors such as jute goods, leather, and light engineering products performed steadily.
GED remains cautiously optimistic about the short-term outlook, pointing to strong remittance flows and election-related economic activity as potential drivers of growth.
However, it stresses that reviving private sector investment is crucial for a sustainable recovery.
On the fiscal front, the National Board of Revenue (NBR) collected Tk 54,423 crore during July–August 2025, reflecting a 21 percent year-on-year increase. Despite this positive growth, revenue still fell short of targets, with customs revenue declining by 4.5 percent due to subdued external trade.
GED underscores the importance of ongoing administrative reforms, including the establishment of 12 new Commissionerates and customs houses, to improve tax collection and widen the tax net.
The report concludes by reflecting on Bangladesh’s progress towards achieving the Sustainable Development Goals (SDGs).
GED highlights notable progress in poverty reduction, health, and education, but emphasises the need for more work in gender equality, urban sustainability, and institutional development.
