In the months preceding the national election, the Planning Commission’s General Economics Division (GED) has provided a cautious prognosis on Bangladesh’s economy, alerting that the country’s continuous contractionary monetary policy has negatively impacted private sector credit and investment.
In its latest Economic Update and Outlook (October 2025), the GED noted that although inflation has shown a downward trend recently, the tight monetary stance has led to a sharp slowdown in lending and investment in the private sector.
However, it said election-related activities are expected to intensify in the coming months, which could help restore confidence amongst investors and business communities.
However, the study also included worries from economists who think that the election’s ongoing uncertainty is causing business and investment activity to stagnate. They warned that before the polls, social and economic unrest would get worse.
Four current socioeconomic trends were noted by the GED in its Economic Update section: Government action has caused (a) rice prices to start lowering; (b) the exchange rate is stable but exports have slowed; (c) bank deposits are increasing but private sector lending is decreasing; and (d) revenue collection has improved after administrative reforms.
The Outlook section said that private sector lending and investment have fallen while bank deposits have increased dramatically due to reform initiatives, reduced interest rates on savings certificates and an increase in remittance inflow. The Bangladesh Bank’s contractionary strategy, which has deterred commercial banks from lending to businesses despite reducing inflation, was blamed by the report for this.
Commercial banks park money with Bangladesh Bank rather than lending to the private sector when the central bank hikes policy interest rates under the contractionary monetary policy. Credit flow and total money circulation consequently decrease. According to data, private sector loan growth in August dropped to 6.35%, the lowest level in 22 years.
Former BIDS Director General and former Chief Economist of Bangladesh Bank Dr. MK Mujeri commented on the GED study, stating that political disputes over the July certificate problem had caused the initial euphoria about the February election to dissipate, increasing uncertainty. He stated that “economic and social instability may intensify if the national election takes place amid such uncertainty.”
