Private-sector credit growth hit a historic low of 6.49 per cent as of June 2025 by official count, signalling deep slowdown in business investment and stoking concerns about Bangladesh's long-term economic momentum.
General Economics Division (GED) of the Planning Commission shows the situation in its September report titled 'Economic Update and Outlook', released Wednesday.
The report carries a note of warning that industrial expansion, employment generation and overall growth could face significant headwinds unless the flow of credits to private enterprises improves.
Quoting data from Bangladesh Bank, the report highlights that the domestic credit growth decelerated to 7.97 per cent at the end of June, down from 9.8 per cent a year earlier.
The slowdown is particularly pronounced in the private sector, reflecting weak investment demand, high lending rates, political and economic uncertainty, and cautious bank lending.
By a contrast, public-sector credits surged to 13.09 per cent, from 9.66 per cent a year earlier, driven largely by government borrowings to finance its fiscal deficits, reads the report.
Heavy public-sector reliance on bank loans is effectively "crowding out" private investment, leaving businesses with limited access to funds, the GED alerts.
Deposit growth in the banking system also moderated, standing at 7.77 per cent at the end of June, down from 9.25 per cent a year earlier.
While remittance inflows and improved public confidence temporarily boosted deposits in March, this momentum did not carry into July and August, the report notes.
High inflation, reduced liquidity, and a preference for time deposits have contributed to the subdued growth in savings, limiting funds available for lending, it states further.
Development expenditure has also been slow, says the report, adding that implementation of the Annual Development Programme (ADP) stood at just 2.39 per cent in the first two months of FY2025-26 (July-August), slightly lower than 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."
Revenue mobilisation is another weak spot the report highlights. The government collected Tk 271.62 billion in August against a target of Tk 308.89 billion, leaving a shortfall of Tk 37.27 billion.
While year-on-year revenue rose 17.63 per cent, the gap underscores ongoing fiscal challenges and reliance on bank borrowing, which, in turn, contributes to the crowding-out effect on the private credit market.
The GED in its report says inflation offered some respite while overall consumer-price indices eased to 8.29 per cent in August-the lowest in two years.
Food inflation held steady at 7.6 per cent, supported mainly by rice, pangas fish and edible-oil prices, while falling potato and onion prices helped reduce pressure on people's pocket.
The moderation in non-food inflation has been a key factor in the overall decline, providing some breathing space for households and businesses, GED concludes.
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