Dhaka, Bangladesh (BBN)- Private-sector credit growth fell to a historic low of 6.49 per cent as of June 2025, according to official figures, indicting a deep slowdown in business investment and raising concerns about Bangladesh’s long-term economic momentum.
The General Economics Division (GED) of the Planning Commission revealed the trend in its latest September report “Economic Update and Outlook”.
The report warns that industrial expansion, job creation, and overall growth could face significant headwinds unless the flow of credit to private enterprises improves.
Citing Bangladesh Bank (BB) data, it notes that overall domestic credit growth decelerated to 7.97 per cent at the end of June, down from 9.8 per cent a year earlier. The decline is particularly sharp in the private sector, reflecting weak investment demand, high lending rates, political and economic uncertainty, and cautious bank lending.
By contrast, public-sector credit rose sharply to 13.09 per cent in June from 9.66 per cent a year earlier, driven largely by government borrowings to finance fiscal deficits. Heavy state reliance on bank loans is effectively “crowding out” private investment, the GED cautioned.
Deposit growth in the banking system also slowed, standing at 7.77 per cent in June compared to 9.25 per cent a year earlier. While remittance inflows and improved public confidence temporarily boosted deposits in March, this momentum faded in July and August. High inflation, reduced liquidity, and a shift toward time deposits further weighed on savings, limiting funds available for lending.
The report also flagged sluggish development expenditure. Implementation of the Annual Development Programme (ADP) stood at just 2.39 per cent in July–August of FY2025-26, slightly below 2.57 per cent in the same period last year.
“Despite a marginal improvement in August, overall progress remains unsatisfactory, indicating that structural bottlenecks in project execution continue to hamper development activities,” it observed.
Revenue mobilisation remains another weak spot. The government collected BDT 271.62 billion in August against a target of BDT 308.89 billion, leaving a shortfall of BDT 37.27 billion. While year-on-year revenue grew 17.63 per cent, the shortfall underscores fiscal challenges and reliance on bank borrowing, which in turn contributes to crowding out private credit.
On a positive note, inflation showed signs of easing, with overall consumer prices down to 8.29 per cent in August—the lowest in two years. Food inflation held steady at 7.6 per cent, supported mainly by stable rice, pangas fish, and edible-oil prices, while lower potato and onion prices helped ease household pressures.
The moderation in non-food inflation was the main driver of the overall decline, offering some relief for households and businesses, the GED explained.
BBN/SSR/AD