As Bangladesh Bank prepares to unveil its monetary policy for the first half of the 2025-26 fiscal year (JulyโDecember) on Thursday, concerns over declining credit growth, sluggish investment, and persistent inflation are mounting.
Experts emphasise the need for a policy that fosters investment while keeping inflation in check, a delicate balance amid political and economic challenges.
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Governor Dr. Ahsan H. Mansur will announce the policy at the central bankโs Motijheel headquarters in Dhaka, joined by the chief economist, the head of the Bangladesh Financial Intelligence Unit (BFIU), and senior officials. The governor will also discuss the impact of the past six monthsโ monetary policy on the economy.
Inflation Down, but Credit Growth Hits Historic Low
A year of tight, contractionary monetary policy has reduced inflation to 8.48% in June 2025, the lowest in 35 months, according to Bangla Tribune. However, private-sector credit growth has plummeted to 6.40%, a record low, down from 7.15% in January, 6.82% in February, 7.57% in March, 7.50% in April, and 7.17% in May. Economists warn that this decline signals reduced investment, impacting employment and production.
Monetary Policy Outlook
Analysts expect Bangladesh Bank to maintain the repo rate at 10%, with a private-sector credit growth target of 9%, lower than the previous 9.8% estimate but higher than recent performance. Public-sector credit growth is projected at 20%. Executive Director and Spokesperson Arif Hossain Khan stated, โWe aim to maintain a contractionary policy until December to control inflation, while prioritising long-term investment-friendly measures.โ
Economistsโ Perspectives
Dr. Zahid Hossain, a prominent economist, argues that lowering the repo rate could risk higher inflation without guaranteeing increased investment. He advocates stabilising the dollar exchange rate and boosting domestic production to manage inflation effectively.
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Conversely, Dr. Mahfuz Kabir suggests reducing the standard lending rate from 11.5% to 10.5% to stimulate production and investment. Former Bangladesh Bank Chief Economist Dr. Mustafa K. Mujeri attributes the investment slowdown to political uncertainty, banking sector irregularities, and a conflict-ridden environment, exacerbated by mob violence and extortion linked to groups like the National Citizen Party (NCP) and Anti-Discrimination Student Movement (ADSM), which have targeted businesses and political figures since July 2024.
Business Communityโs Concerns
Ashraf Ahmed, former president of the Dhaka Chamber of Commerce and Industry, highlighted the strain on businesses due to loan interest rates reaching 15%. โMany businesses are struggling to survive, and repaying loan installments on time has become challenging, leading to rising defaulted loans,โ he said.
Foreign Reserves and Money Supply
Bangladesh Bank reports gross foreign exchange reserves at $31.72 billion as of June 2025. Despite central bank efforts to stabilise the exchange rate at Tk122 by purchasing dollars amid fears of declining exports and remittances, private-sector investment remains stagnant. To maintain stability, the bank continues to provide liquidity support to weaker banks.
Deposit Growth Declines
Deposit growth in the banking sector fell to 8.74% in May 2025, down from 9.51% in March. Deposits have decreased in 16 banks, including Basic, Social Islami, Exim, and National Bank.
A record Tk3,39,000 crore remains outside the banking system due to depositorsโ lack of confidence, further limiting banksโ lending capacity. This crisis is compounded by political instability, deterring investor confidence.
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