United News of Bangladesh

Bangladesh's macroeconomy remains deeply fragile, battered by a Fitch rating downgrade, stubbornly high inflation, record low private credit growth, and a looming fiscal shortfall, the Policy Research Institute of Bangladesh (PRI) warned on Thursday, calling for sweeping productivity-enhancing reforms ahead of the national budget for fiscal year 2026-27. Dr Ashikur Rahman, Principal Economist of PRI, revealed the grim picture of the economy while making the keynote presentation at an event to launch the institute's Monthly Macroeconomic Insights titled “Restoring Growth through Productivity Reforms: Pre-Budget Priorities” at the PRI conference room at Banani. In a fresh blow to investor confidence, Fitch Ratings has revised Bangladesh’s long-term sovereign outlook to “Negative” from “Stable”, while affirming the rating at “B+”, according to the report. The agency cited rising external vulnerabilities from Middle East exposure, weak reserves, persistently low revenue at around 7.9 percent of GDP, elevated inflation near 9 percent, banking sector fragility with NPLs above 30 percent, and stalled institutional reforms. BERC Hearing: Stakeholders reject BPDB proposal to hike bulk power prices by up to Tk 1.50 per unit According to the PRI, the GDP growth stood at 3.49 percent in FY25. For FY26, the International Monetary Fund projects a modest recovery to 4.7 percent, while the World Bank, Asian Development Bank, and Fitch estimate more conservative figures of 3.9 percent 4.0 percent, and 3.7 percent respectively, citing fuel price pressures, weak investment, and slowing exports. Private investment dropped to 22 percent of GDP in FY25, its weakest level in 11 years. Foreign Direct Investment, at just 0.3 percent of GDP, continues to lag far behind regional peers Vietnam, Indonesia, and India, it said. Inflation re-accelerated above 9 percent in April 2026, driven by higher transport costs and non-food price pressures linked to US-Iran geopolitical tensions. With the policy rate held at 10 percent, the real policy rate stands at only 0.96 percent, well below the Monetary Policy Committee's own target of 3 percent and among the lowest in South Asia, undermining the central bank's ability to anchor inflation expectations. The PRI further warned that recent measures by Bangladesh Bank, including special credit windows and relaxed single-borrower lending limits for large corporates, are effectively diluting monetary tightening and sending mixed policy signals. Private sector credit growth collapsed to a historic low of 4.72 percent in March 2026. Banks have increasingly shifted into government securities, with net borrowing via treasury bills reaching Tk 132 billion in April alone, a classic crowding-out dynamic squeezing productive lending. On the fiscal front, the revenue collection by the National Board of Revenue (NBR) reached Tk 3.3 trillion by April FY26, only 65 percent of the revised annual target. To meet the full-year goal, the NBR will need to collect an implausibly high Tk T 1.76 trillion in the final two months alone. Even under optimistic scenarios of 15-30 percent revenue growth in May-June, the projected shortfall ranges between Tk 782 billion and Tk 895 billion. Interest payments consumed 21.4 percent of total government expenditure in FY25, up sharply from 14.4 percent in FY10. Subsidies crossed Tk 1 trillion in FY25 and are projected to rise further to Tk 1.16 trillion in FY27, absorbing 12.5 percent of the total budget despite IMF pressure for rationalisation. ADP implementation remained chronically weak at 36.2 percent in July-March FY26. After eight consecutive months of decline, goods exports rebounded 33 percent year on year in April to nearly US$ 4 billion, a rare bright spot. However, cumulative exports in July-April FY26 remained 2 percent below the same period last year, weighed down by a 2.8 percent contraction in RMG shipments and persistent energy shortages.   Remittances stayed above $ 3 billion for the fifth consecutive month in April, reaching $ 3.13 billion, up 13.6 percent year on year. Forex reserves crossed $ 30 billion in April, providing roughly five months of import cover.   However, the PRI cautioned that rising global energy prices could erode these gains.   The PRI presentation laid out six productivity-enhancing reform pillars it considers essential for restoring growth: deregulation and investment climate improvement, energy sector reform, SOE restructuring and selective privatisation, trade policy reform and tariff rationalisation, proactive FDI promotion, and sustained investment in critical infrastructure.   On fiscal reform, the report called for raising the tax-to-GDP ratio to 15-20 percent over 10 years, targeting a 50:50 direct-to-indirect tax ratio by 2035, and capping the personal income tax marginal rate at 25 percent while reducing the corporate tax rate to 15 percent for qualifying firms.   “Sustainable growth will depend less on stimulus and more on productivity, investment, institutions, and efficient use of resources,” the presentation concluded.   The event was chaired by PRI Chairman Dr Zaidi Sattar. END/UNB/MM/AM

Economists, researchers and academics have emphasised curtailing non-performing loans to ensure good governance in the banking sector and make the country's economy vibrant. They also said that growing non-performing loans create challenges for banks and the economy of the country while global trate war is pushing the world towards chaos. They made the remarks in a session on the 2nd day of ‘10th Annual Banking Conference-2025, organised by Bangladesh Institute of Bank Management (BIBM) at its Mirpur office. Professor Dr. Barkat A Khoda was keynote speaker at the inaugural session of the second day. Several sessions including FinTech and Financial Sector, Islami Banking and Governance, Risk Management and Bank Performance were held on the 2nd day. The conference sessions cover contemporary issues and sustainability concerns on banking, finance and the economy both in the national and international context. Speaking at an event Dr. Shah Ahsan Habib, senior Professor of BIBM said that the global economic and financial landscape is undergoing unprecedented transformation. Bad loans in banking sector hits Tk6.75 lakh crore:  White Paper “We are witnessing a paradigm shift, a new wave of economic nationalism, protectionism, and currency uncertainty that is challenging for the foundation of the International Monetary Order,” he said. The economy in today’s context reminds us of a long-gone yet defining period in economic history: ‘Interwar Period’ or the period between the First and Second World War. That time was marked by suspended gold convertibility, monetary fragmentation, and the notorious “beggar-thy-neighbour” policies, he pointed out. “We know that Beggar-thy-neighbour policies were the economic strategies where a country tries to improve its own economy at the expense of others, often through tariffs or currency devaluation, so we have to prepare for any such previous situation,” he added. He said that the leading economies were engaged not with cooperation, but with tariffs, trade barriers, and exchange controls now. In conséquences, a great economic depression like 1930 could be repeated. So there is need to prepare for a bad situation. Md. Sabur Khan, chairman, Daffodil International University, Mohammad Abdul Mannan, chairman, First Security Islami Bank, Dr. Mahmood Osman Imam, Professor and dean, Business Studies, University of Dhaka chaired different sessions of the event on Thursday. Around 1000 officials of different banks, economists, academicians and panelists participated in the two days session of the conference. IMF voices concern over rising bad loans in banks The annunal conference has been thr hallmark of BIBM since 2012. The two- day event brings together experts, academicians and researchers from all over the world to exchange and share knowledge, experience and research outputs on banking and related issues.

The amount of bad loans in the banking sector has been increasing rapidly in recent years, as reflected in data from Bangladesh Bank (BB), according to the recently released White Paper. In June 2021, BB data showed the defaulted loan rate was 7.9 percent. By the end of June this year, it had exceeded 12 percent. Around 88 percent of these defaulted loans are categorised as bad quality loans, according to the report. The severity of the issue has been described as the 'black hole' of the banking sector, with a depth three times greater than what is visibly apparent. The central bank’s statement at the end of last June revealed defaulted loans amounting to Tk211,391 crore. This figure surged to over Tk288,000 crore by September. Domestic economists and international organisations have consistently questioned the accuracy of the defaulted loan data presented by the central bank. Following an independent assessment of banks’ assets by a committee comprising domestic and international chartered accountants, the defaulted loan ratio could rise to 25 percent, according to experts. Bangladesh Bank Governor Dr Ahsan H Mansur told UNB that the current defaulted loans ratio of 12.50 percent may double after the assets evaluation. “We have to accept the reality, which was hidden earlier. But there is no solution to the problems by hiding the information of banks’ bad loans,” he said. The White Paper formally released on December 2, shows that in the country’s bad debt data, Tk272,856 crore were re-disbursed, Tk75,389 crore were written off, Tk39,209 crore were in special mention accounts, and Tk76,185 crore were tied up in High Court cases. These loans have also become defaulted. Altogether, the actual default amount totals Tk675,000 crore. This staggering figure is equivalent to the construction cost of 13 metro rail projects or 22 Padma bridges. Crony capitalism created an undemocratic attitude: Rehman Sobhan Banks are required to maintain a 100 percent provision against bad loans. However, at the end of June, banks had kept only Tk89,355 crore in provisions, falling significantly short of the required Tk176,889 crore. Approximately 55 percent of the defaulted loans originate from the manufacturing sector. The dire situation in the banking sector has been attributed to the actions of senior central bank officials and influential external actors. Their combined influence has been particularly evident from 2015 to 2024. The white paper highlights that during this period, amendments to the Bank Company Act, influenced by economic and political factors, contributed to the sector’s decline. In 2023, the term for entrepreneur directors was increased to 12 years, up from 9 years in a 2018 amendment. The number of directors from a single family was reduced to three in 2023, after being increased to four earlier. Workshop on financial inclusion, rural transformation towards achieving SDGs begins Besides, a critical provision was removed: previously, if one company in a group defaulted, loans from others in the group would also be considered defaulted. This removal, the report notes, has further weakened the banking sector.  

The visiting International Monetary Fund (IMF) delegation has advised Bangladesh Bank to disclose detailed and complete information regarding bad and risky loans fin the public interest. Meeting sources said that the visiting IMF delegation gave this suggestion in the meeting held with the BB officials on Sunday (April 28).  In the meeting, the IMF asked to make the financial health of the banks and the inspection report open to the customers. At the same time, it urged to increase the number of inspections to prevent irregularities-corruption and loan scams. Officials concerned in the meeting said that bad loans or risky assets are increasing in banks due to various irregularities including big loan scams. Several banks have weakened which also acknowledged by the BB Governor.  Therefore, the IMF believes that the deposits of those banks which are in trouble are also at risk. In such a situation, the global lender suggested that the banks should disclose the full report of risky assets to the customers.  Read more: DUJ, DRU, TIB condemn ban on journalists entering Bangladesh Bank According to the IMF Officials, “If these reports are published, the customers will be able to make informed decisions about keeping their deposits.” In the meeting, the IMF sought to know whether the central bank's inspection of banks' financial health is continuing or not. Clarification has also been sought as to whether inspection reports are disclosed to customers or not.  In addition, the IMF delegation suggested increasing the quality and number of inspections to prevent irregularities, corruption and loan scams, sources said. When asked about the meeting with the BB, the executive director and spokesperson of the BB Mesbaul Haque said that the meetings with the IMF are ongoing. This meeting will be held step by step till May 8. He did not agree to make any comment other than that and said the details will be given in future. Read more: Islamic Banking in Bangladesh: Commendable contribution to the country’s economic growth

In any country, a safe and sound banking system is the sine qua non of a strong economy. By channelising funds from savers to borrowers, banks help keep the wheels of the economy moving, in the way boosting the confidence of businesses, investors and consumers. But for years, state-owned banks in Bangladesh have been foundering under the weight of stressed or non-performing assets -- or bad loans, in lay man's term -- all thanks to irrational lending and inadequate evaluation and monitoring of debtors. Read: SMEs, women-led enterprises need access to stimulus loans Any loan that remains overdue for over three months is termed as a stressed asset in the banking sector. And today, this huge pileup of bad loans threatens to derail the economic revival in Bangladesh by choking the credit supply channel of the economy, as against export earnings and the resilience of the private sector in fuelling growth amid Covid. In fact, the cumulative non-performing loans (NPL) of six state-owned commercial banks (SCBs) currently stand at Tk 43,836 crore against that of the combined figure of Tk 49,191 crore of 42 private commercial banks (PCBs). Read Bangladesh Bank announces 4 pc export subsidy on bicycle, cement sheet, and MS steel For years, Bangladesh Bank (BB) -- the central bank -- has been underscoring the need for state-owned banks to strengthen the recovery of loans lying unrealised by defaulters, many wilful. At the same time, banks have been advised to take necessary steps in meeting the capital deficit and creating a professional asset liability management ecosystem. Md Serajul Islam, central bank's spokesperson and executive director, told UNB that the stressed assets of the state-owned banks increased "marginally due to the higher volume of total outstanding loans". Read Bangladesh Bank tops Cyber Drill 2021 Implementation of a slew of stimulus packages has caused an increase in the outstanding loans in the country's banking system during the first half (H1) of the year, he said. The amount of outstanding loans rose by more than 3% to Tk 12,13,164 billion as of June 30, 2021, from Tk 11776.59 billion quarter on quarter, as per BB data in UNB's possession.