n the first eight months of the 2024–25 fiscal year, credit flow to the private sector in Bangladesh has stagnated significantly. According to the latest data from Bangladesh Bank, credit growth during this period was only 2.63%, nearly half of the 5.53% seen in the same period last year, and the lowest in 21 years. By the end of June 2024, total private sector credit stood at Tk 16.41 trillion, rising slightly to Tk 16.84 trillion in February.
Experts attribute this decline to political uncertainty and a weak investment climate, which discourage entrepreneurs from making new investments. Economists say the increase in total credit is not due to real lending but results from higher interest rates and the accumulation of suspended interest.
High interest rates have increased business costs, particularly affecting small and medium enterprises (SMEs).
Dr. Selim Raihan, Executive Director of SANEM, said, “High interest rates are discouraging investment, increasing default risk, and slowing economic growth.” He added that strict monetary policies have failed to control inflation but have intensified the crisis in the private sector.
Banks Shifting Focus to Government Bonds
Facing this stagnation, banks are increasingly investing in safer, higher-return government treasury bills and bonds, offering 11–13% interest. This shift has reduced the appetite for private sector lending. Political instability and an unfavorable investment environment have further worsened the situation.
Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank, said, “In the absence of stability, entrepreneurs focus more on sustaining existing businesses rather than making new investments.”
Import Decline Disrupts Production
Between July and February of FY 2024–25, overall imports rose by 5.33%, but imports of capital machinery fell by 26.02%. Raw materials and intermediate goods imports also declined. According to L/C (Letter of Credit) data up to March, petroleum, intermediate goods, and machinery imports dropped by 3.83%, 1.61%, and 26%, respectively.
Experts warn that these declines pose a serious threat to industrial output, with many factories operating below capacity or shutting down due to shortages.
Investment Paralysis Amid Credit Collapse
As of February 2025, total bank loan growth was only 6.82%, the lowest since 2004. Entrepreneurs are refraining from new investments due to 9–16% interest rates and market uncertainty, making it increasingly difficult to sustain existing businesses.
Anwar-ul-Alam Chowdhury Parvez, President of the Bangladesh Chamber of Industries, warned, “Without improved law and order, energy supply, and more tolerable interest rates, industrialization will collapse.”
Political Uncertainty and Foreign Investment
Since the events of August 5, 2024, political stability remains elusive. Masrur Reaz, Chairman of Policy Exchange Bangladesh, said, “With uncertainty over the return of democratic governance, both local and foreign investors are staying on the sidelines.”
Javed Akhtar, President of the Foreign Investors’ Chamber, added that unless customs and tax reforms are implemented and the business climate improves, foreign investment will not grow.
Employment and GDP Showing Negative Trends
According to the Bangladesh Bureau of Statistics, unemployment rose to 2.66 million in Q3 of 2024—an increase of 170,000 in one year. The labor force shrank by 1.95 million over the same period.
GDP growth also slowed to 4.22% in FY 2023–24, below government forecasts. Revenue shortfalls have grown, with a Tk 65,665 crore deficit in the first nine months of the current fiscal year.
Export Income Hits 10-Month Low in April; RMG Sector Also Affected
April brought a major shock to exports. Export earnings fell to $3.01 billion, the lowest in 10 months and down $1.24 billion from March. Readymade garments (RMG) brought in $32.64 billion over 10 months (up 10%), but April earnings were only $2.39 billion, just 0.44% higher than April 2024.
Woven garment exports in April dropped 4.65%, though knitwear grew 5.08%.
Mohiyuddin Rubel, former BGMEA director and managing director of Bangladesh Apparel Exchange, said, “Though yearly growth remains positive, April’s performance is a wake-up call. To remain competitive, we must strengthen our supply chain and production capacity.”
What Needs to Be Done
Experts recommend the following priority actions to recover from the ongoing crisis:
Restore political stability and create an investment-friendly climate.
Reform the banking sector and bring interest rates to a rational level.
Digitize and simplify customs and tax systems.
Ensure energy security, provide investment incentives, and offer easier loan facilities.The sooner these steps are implemented, the faster the industrial sector will rebound, leading to broader economic stability.