Citing the need to curb inflation, Bangladesh Bank has pursued a contractionary monetary policy for nearly four years. Its primary goal was to control demand by raising the cost of borrowing. The public, however, derived no benefit from the strategy. On the contrary, private investment shrank further under the weight of double-digit policy rates.

The central bank over the same four fiscal years posted a record net profit of more than BDT 1.52 trillion. Interest income contributed to this exceptional gain, and a sharp depreciation of the taka over a short period also played a major role.

An analysis of Bangladesh Bank’s financial statements shows that between the 2021-22 and 2024-25 fiscal years it recorded a net profit of BDT 1.52 trillion. Of this sum, BDT 515.12 billion was sent to the government treasury.

A large portion of the central bank’s record profit originated from revaluing foreign currency. As the dollar strengthened over these four years, Bangladesh Bank booked an income of BDT 988.04 billion. Within that total, BDT 530.15 billion was realised by selling dollars from the reserves. A further BDT 457.49 billion remains as unrealised gains from dollar revaluation. Another BDT 503.65 billion came from interest on loans extended to commercial banks. These loans are short-term liquidity facilities provided by the central bank, including repo and special liquidity support, alongside funds disbursed through its refinancing schemes.

Private sector investment in Bangladesh fell to 22.03 percent of GDP in FY 2024-25, its lowest level in a decade. It stood at 23.96 percent the previous year. The figures point to a deteriorating business climate.

Bank lending to small and medium-sized enterprises contracted by 9 percent in the last fiscal year, dropping to a four-year low. The sector is shrinking under the weight of a severe and sustained crisis.

Over the four-year period, the central bank’s total assets and liabilities expanded by nearly 52 percent, propelled by its record earnings. The economy, however, was in turmoil throughout the period. Worsening economic hardship afflicted ordinary people as high inflation took its toll. Private investment ground to an unprecedented halt. Instead of job creation, many workers lost their livelihoods. Consumer spending fell as households depleted their savings. With incomes failing to keep pace with expenditure, surveys suggest the poverty rate has also risen.

The central bank’s performance has drawn sharp criticism from economists. They argue that profit should not be the purpose of a central bank. Its core functions are to supervise the banking sector as a regulatory authority, control inflation, foster private investment and generate employment. The very distress afflicting the economy and the banking system, they say, is what has swollen Bangladesh Bank’s profits. Experts say the institution must not stray from its primary objectives in pursuit of those gains.

“As a regulator, the central bank cannot and does not conduct any activity to make a profit,” said Arif Hossain Khan, a spokesperson for Bangladesh Bank. “But if profit accrues as a result of its operations, there’s no way to avoid it.”

Khan, who is also an executive director at the bank, told Bonik Barta: “Bangladesh Bank has remitted BDT 225.39 billion to the government treasury from its profits last year. This profit was generated in the course of carrying out our daily responsibilities. We’re trying to perform the duties assigned to us under the Bank Companies Act and the Bangladesh Bank Order.”

The central bank’s profits remain contained when the economy and the exchange rate are stable. With the country’s fundamental economic indicators relatively steady in FY 2018-19, Bangladesh Bank posted a profit of BDT 58.91 billion. The following year it was a similarly modest BDT 62.89 billion.

The COVID-19 pandemic swept across the globe from March 2020, bringing unprecedented economic paralysis to Bangladesh. To shield the economy, the central bank announced stimulus packages worth more than BDT 1 trillion. Low-interest refinancing funds were established for various sectors. The support bought a temporary reprieve from a deeper crisis. In FY 2020-21, Bangladesh Bank’s profit stood at BDT 58.24 billion.

The onset of a catastrophe in the country’s economy and the banking sector came in early 2022. After a decade and a half of unchecked irregularities, corruption and capital flight in the banking sector, the wider economy began to buckle. The strains of post-pandemic recovery and the Russia–Ukraine war compounded the damage. A severe dollar shortage took hold. To prop up the market, Bangladesh Bank started selling dollars from its reserves. In FY 2021-22 it sold $7.62 billion. The following year, sales nearly doubled to $13.58 billion. Another $12.79 billion was offloaded in FY 2023-24.

Three consecutive years of such intervention gutted the forex reserves. Gross reserves, which stood at $48 billion in August 2021, fell to $24 billion by mid-2024. Under the IMF’s BPM6 accounting standard, the figure dropped to $18 billion. Over the same period the taka collapsed, crossing BDT 120 to the dollar from BDT 85.

The impact on ordinary people and the broader economy was severe. But on Bangladesh Bank’s books, the currency’s record depreciation fuelled a profit surge — jumping to BDT 293.27 billion in FY 2021-22. Of that amount, BDT 263 billion came from exchange rate revaluation. Another BDT 24.18 billion was realised from dollar sales.

Selling dollars at higher prices not only boosted the central bank’s earnings; it also drained liquidity from the market. A cash crunch gripped the banking system. To ease the strain, banks were forced to borrow from the central bank through repo and assured liquidity support facilities. Interest income climbed accordingly. By 2022-23, the regulatory body’s profit had reached BDT 473.44 billion. Interest contributed BDT 91.43 billion. Gains from dollar sales totalled BDT 170.52 billion. A further BDT 193.45 billion was booked as unrealised gains from the dollar’s appreciation.

The combination of economic stress and a weakening exchange rate stoked inflation since mid-2022. To contain it, Bangladesh Bank began raising its policy rate in FY 2023-24. The move added to its interest income. For the year, profit came in at BDT 405.66 billion. Interest accounted for BDT 158.5 billion and dollar sales yielded BDT 228.78 billion.

After the student-led mass uprising in 2024, the then governor, Abdur Rouf Talukder, left his post. Economist Dr Ahsan H Mansur then took charge on August 17, 2024. One of his first acts was to raise the policy rate to 10 percent, a move he said was necessary to curb inflation. This further increased the central bank’s interest income. Earnings from this source in FY 2024-25 hit a record BDT 225.39 billion. Dollar sales contributed another BDT 106.67 billion. For the year, Bangladesh Bank posted a profit of BDT 349.62 billion.

The surge in profit is structural, according to Syed Mahbubur Rahman, managing director of Mutual Trust Bank. “The central bank raised the policy rate to control inflation,” he said. “Commercial banks are now borrowing from the central bank at this higher rate. When we lend to a customer, there’s a risk the loan will turn bad. But there’s no such risk with a central bank loan.”

The veteran banker argued that the former leadership bears responsibility for allowing inflation and the exchange rate to spiral. “If policy rates had been raised at the right time, the damage from inflation might have been contained,” he said. “And if the exchange rate had been gradually left to market forces instead of being held artificially, the dollar might not have climbed so high. The cost has been magnified by over-control and pressure tactics.”

From last year’s profit, Bangladesh Bank paid a record BDT 226.2 billion into the government treasury. In FY 2023-24 it handed over BDT 153.91 billion; in 2022-23, BDT 106.53 billion; and in 2021-22, BDT 28.48 billion. In total, over just four fiscal years, the central bank has paid BDT 515.12 billion into the government treasury from its profits.

Meanwhile, high interest rates have left the private sector struggling for an extended period, said Anwar-Ul Alam Chowdhury Parvez, president of the Bangladesh Chamber of Industries. “The situation for entrepreneurs and business people is very precarious,” he told Bonik Barta. “It’s impossible to make a profit with interest rates this high. Most entrepreneurs have been simply trying to stay afloat. All business associations including FBCCI and BCI have long been demanding a reduction in interest rates. I hope the new government will put a mechanism in place that can help us navigate these adverse conditions.”

The flood of profits has rapidly inflated Bangladesh Bank’s balance sheet. The central bank’s total assets and liabilities stood at BDT 4.68 trillion in June 2021. By June 2025, just four years later, that figure climbed to BDT 7.10 trillion. The increase of BDT 2.42 trillion represents growth of 51.79 percent over the period.

The rapid expansion has drawn warnings from economists. Dr Fahmida Khatun, an executive director at the Centre for Policy Dialogue (CPD) who now also sits on the central bank’s board, said Bangladesh Bank must be careful not to lose sight of its core mandate in pursuit of profit. “The central bank’s primary duty is to control inflation, but it also has a responsibility to foster private investment and thereby generate employment,” she said. “For nearly four years, the people of Bangladesh have been suffering high inflation. Investment in the economy has ground to a halt. The central bank must find a way to boost investment while keeping inflation in check. It may earn profits from its legally permitted activities, but it must ensure not to conduct any programme for the purpose of realising profits.”

Bangladesh Bank has handed over more than BDT 510 billion to the government treasury from its profits in just four years. The state-owned commercial banks, however, have been an utter failure on this front. Sonali, Janata, Agrani, Rupali, Basic and the Bangladesh Development Bank were created to make a profit. Yet with the sole exception of Sonali, they are now struggling to survive, let alone contribute to the treasury.

The scale of that failure is stark. Despite being rescheduled under a policy facility, the six state-owned banks had BDT 1.43 trillion in non-performing loans at the end of last December, representing 44.44 percent of their total disbursed lending. At the same time, they faced a total provisioning shortfall of nearly BDT 710 billion. Their capital shortfall is now even larger than the provisioning deficit. For the banking sector as a whole, the figure exceeds BDT 5.57 trillion. More than half of the banks licensed by the central bank are now ailing. Over a dozen are failing to return customer deposits.

Inside Bangladesh Bank itself, the record profits have fuelled growing demands for bonuses. All staff received at least six bonuses last year, equivalent to six months’ salary. There have been allegations of pressure on the governor and the board to secure these payouts. The bank spent more than BDT 1 billion on bonuses alone. Sources indicate similar pressure may be applied this year.

Dr Mustafa K Mujeri, a former chief economist at Bangladesh Bank, said no central bank formulates monetary policy in pursuit of profit. He told Bonik Barta: “Raising the policy rate is one of several tools to control inflation. The central bank has been raising it for three years. For more than 18 months it has stood at 10 percent. This has inflated the central bank’s profits. But in a country like Bangladesh, trying to control inflation by only raising the policy rate is naive. The main reason inflation remains stubbornly high is syndicates and extortion. The interim government has failed to break the syndicates. It has failed to bring extortion under control. I haven’t heard of the BNP government taking any steps to break syndicates or stop extortion since it took office.”

Mujeri, now executive director at the Institute for Inclusive Finance and Development, further said, “Bank staff have no reason to celebrate the profit surge. They played no part in generating it. The incidents that have occurred at Bangladesh Bank in recent years, the ‘mob’ behaviour, are in no way desirable. Before anything else, the central bank needs good governance in the interest of economic and banking sector discipline.”