Bangladesh’s private-sector credit growth fell to a new historic low of 4.47 per cent in June, exposing the depth of the investment slowdown and setting a major test for the central bank’s latest policy-rate cut.
The June figure was down from 4.98 per cent in May and below the previous low of 4.72 per cent recorded in March, according to Bangladesh Bank data.
Businesses have remained reluctant to borrow amid prolonged economic weakness, high financing costs and severe gas and electricity shortages in industrial areas. The energy crisis has disrupted existing production and discouraged companies from setting up new units or expanding capacity.
The credit decline preceded Bangladesh Bank’s policy-rate cut, which took effect on 2 August. The central bank lowered the benchmark rate by 50 basis points to 9.50 per cent from 10 per cent to reduce borrowing costs and stimulate private investment, employment and economic growth.
It also cut the Standing Lending Facility rate to 11 per cent from 11.50 per cent, while leaving the Standing Deposit Facility rate unchanged at 7.50 per cent.
Although the rate cut may gradually reduce banks’ funding and lending costs, economists and bankers say cheaper credit alone may not revive investment without reliable gas and electricity supplies.
Bangladesh Bank said it considered private credit, investment, employment and economic growth, alongside inflation and external-sector conditions, before cutting the policy rate.
The move, however, carries inflationary risks, with headline inflation remaining above 9 per cent and reserve money expanding rapidly.
Former lead economist in the World Bank’s Dhaka office Zahid Hussain says the central bank should have done the risk-benefit analysis before reaching such a critical decision under the current macroeconomic circumstances. “It’ll undoubtedly enhance inflationary risk in the coming days,” he said.
According to Bangladesh Bank data, credit growth had declined from 6.58 per cent in November 2025 to 6.20 per cent in December and 6.03 per cent in both January and February. It then dropped sharply to 4.72 per cent in March, edged up to 4.75 per cent in April and 4.98 per cent in May, before sinking further in June.
The central bank has published private-sector credit data since 2003.
A managing director of a private commercial bank, requesting anonymity, said borrowing costs are not the primary constraint on investment in Bangladesh.
“You can lower interest rates as much as you want, but without reliable gas and electricity, there will be no new investment. That is the biggest challenge facing the economy today,” he said.
