Private-sector borrowing in Bangladesh has stagnated for five consecutive months, reflecting a deepening investment freeze as businesses grapple with high interest rates, chronic power shortages, a fragile banking sector and rising political uncertainty.
Economists warn that the slowdown is now clearly visible in production, employment and broader economic activity. Bangladesh Bank data show private-sector credit growth at 6.49% in June last year, inching up to 6.52% in July before slipping steadily to 6.35% in August, 6.29% in September and 6.23% in October. A year earlier, the October rate stood at 8.30%, underscoring a sharp annual decline of more than two percentage points.
Analysts describe the investment environment as a “dead zone”, with virtually no loan demand, halted factory expansions, job freezes and falling business confidence. Banks, facing heightened default risks, have pushed average lending rates up from 10.28% a year ago to 11.77% in October, making credit even less accessible. The rising cost of borrowing has piled further pressure on households already struggling with persistent inflation and escalating living costs.
Business leaders say fresh investment has become “practically impossible” under current conditions. Shams Mahmud, President of the Bangladesh Thai Chamber of Commerce and Industry, said that firms are focused solely on survival, saying that operators are “only trying to keep existing operations alive” and that “nobody is thinking of expansion”. He added that high borrowing costs and VAT–tax burdens have made starting new ventures “extremely difficult”.
Anwar-ul-Alam Chowdhury Parvez, President of the Bangladesh Chamber of Industries, said the economy is “bleeding”, arguing that expectations for improvement have not been met, with law-and-order issues, energy shortages and private-sector needs still unaddressed. He noted that companies are under “immense pressure” from elevated interest rates, inflation and unreliable energy supplies.
Investor sentiment remains weak despite the government unveiling its electoral roadmap. Former Bangladesh Bank chief economist Dr Mustafa K. Mujeri said the economy is “limping”, observing that even major industrial players are unwilling to expand. He attributed the slowdown to high interest rates, rising non-performing loans, a lack of lending appetite among banks, and political and policy volatility, compounded by erratic gas and electricity supplies that are driving up production costs.
The Bangladesh Bank has signalled that it is likely to maintain the policy rate in the next monetary policy announcement. Only 6.4% of the central bank’s target of 9.8% private-sector credit growth for January–June 2025 has been achieved. In response, the goal for July–December has been revised down to 7.2%, reflecting the persistence of its contractionary stance.
