Bangladesh’s large-scale manufacturing sector is facing a multidimensional crisis, with unreliable gas and electricity supply disrupting production year after year. The gas shortfall has worsened in recent months. Some manufacturers are scaling back capacity as sales and order books shrink. Elsewhere, the burden of bank debt is deterring entrepreneurs from investing. Rising energy costs, dollar shortages, weak demand and tight bank liquidity have left the industrial sector in an increasingly precarious position.

The Index of Industrial Production (IIP) for large-scale manufacturing fell by 0.38 percent year on year in the July to March period of the 2025–26 fiscal year, according to Bangladesh Bank’s Major Economic Indicators: Monthly Update for July 2026.

Industry officials say this is the first time the index has fallen into negative territory. It recorded growth of 6.2 percent in the same period of fiscal 2024–25, 4.65 percent in 2023–24 and 7.37 percent in 2022–23.

Large-scale manufacturing output has therefore swung from growth of more than 7 percent within a few years to outright contraction.

Credit flows tell a similar story. Private-sector credit growth stood at just 4.47 percent at the end of June 2026, Bangladesh Bank data show, against a target of 8.5 percent under its contractionary monetary policy. That is barely more than half the target.

Industry figures suggest new investment is a distant prospect, with maintaining existing production now the main challenge. Heavy-industry entrepreneurs paint much the same picture.

Energy shortages have hampered Bangladesh’s heavy industries for years, with glassmakers among the hardest hit. Glass factories cannot simply shut down their furnaces when gas and power supplies run short, leaving owners to spend more to maintain production rather than cut output.

“Due to the nature of the glass industry, government production figures don’t fully reflect the sector’s reality. Even during the COVID-19 lockdowns, the furnaces had to stay on. But some companies have cut production capacity as sales have fallen in the market,” said Nasim Biswas, president of the Glass Manufacturers and Exporters Association of Bangladesh and managing director of Nasir Float Glass Industries.

Biswas added: “Output hasn’t been cut because of fuel — nor can it be. Maintaining production requires huge volumes of diesel every day. This has placed a heavy financial burden on the industry.”

The strain is even more pronounced in the steel rod sector. Executives say some companies are managing to keep their mills operational by whatever means they can, but warn that a serious crisis could develop unless conditions normalise soon.

“Production is still down, and so are sales,” said Alihussain Akberali, chairman of Bangladesh Steel Re-Rolling Mills (BSRM) Limited.

Output at his company has remained broadly steady, he said, but problems could mount if the wider business environment does not normalise. Akberali added that many businesses that took on large loans to sustain operations now risk default, putting further pressure on the banking sector.

The BSRM chairman was nonetheless optimistic that the crisis would pass soon.

Ceramic producers say the official production index reflects what they are seeing on the ground. The prolonged gas shortage, they argue, is now feeding through into actual output.

“The ceramic sector has been suffering from gas shortages for more than five years. When gas prices were raised, uninterrupted supply was assured, but after the increase the required volume was not delivered,” Moynul Islam, president of the Bangladesh Ceramic Manufacturers and Exporters Association and chairman of Monno Ceramic, told Bonik Barta.

Gas supply has increased at some factories, but not enough to provide the required pressure.

In cement, another major industry, dollar shortages and tight credit have compounded the production crisis. Mohammed Amirul Haque, a leading sector entrepreneur and president of the Chittagong Chamber of Commerce and Industry, said: “Large-scale manufacturing has borne the biggest shock of the dollar’s appreciation.”

Importers had no control over the taka’s slide from BDT 84 to BDT 122 to the dollar, Haque said, but the depreciation sharply increased their debt burdens. He added that domestic industry was on the brink of collapse as companies struggled to service loan interest, with the dollar shortage and mounting debt pressures together eroding the sector’s capacity.

The textile sector is also one of the biggest casualties of the latest gas shortage. Showkat Aziz Russell, president of the Bangladesh Textile Mills Association, told Bonik Barta on August 20 that production had halted at about 900 of the association’s 1,850 member factories because of gas shortages. “If this continues, the industry will be hard to sustain,” he said.

Within the garment industry, dyeing, washing and spinning units have borne the brunt of the gas crisis, while woven units have been less affected, according to industry executives.

BGMEA Senior Vice President Inamul Haq Khan told Bonik Barta: “The gas problem hasn’t gone away. Pressure has risen slightly, but the situation can’t be called normal. Power cuts have also eased somewhat.”

“But a temporary factory closure caused by gas shortages shouldn’t be mistaken for a permanent shutdown or layoff. Many companies are continuing to pay workers while pausing production or letting them leave partway through the day,” he added.

Khan noted that BGMEA records showed 38 garment factories had closed in the past seven months, while 51 new ones had registered during the same period. “The number of closures alone therefore doesn’t capture the industry’s true condition.”

Fazlee Shamim Ehsan, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, said the gas situation had barely improved and that dyeing units were unable to operate effectively. Output has fallen by at least 60 percent on average due to the gas shortage, he said. Factories are being forced to pause as raw materials run short, with workers sent on leave, sometimes for extended periods. Some units have closed for up to nine consecutive days.

Ehsan said factories that use imported fabric, as well as those in the woven sector, faced comparatively fewer problems. Knitwear factories that depend on locally dyed fabric, meanwhile, have been hit hardest. About 16 to 18 factories have closed in the past six months, he said.

The same pattern is evident beyond individual sectors, with major industrial belts also grappling with shortages. In Savar and Dhamrai, pipeline gas pressure remains close to zero for much of the day, while electricity is also in short supply.

Production at Fashion Globe Group’s washing plant has fallen by about 75 percent. Running the plant on externally supplied gas costs an additional BDT 30,000 an hour.

Little Star Spinning Mills in Jamgora has kept only two of its six sections operational. An official there, Khorshed Alam, said the workforce could be cut by 30 percent if the gas and power crisis persists.

In Gazipur, daily gas demand is about 600 million cubic feet, against supply of just 260 million cubic feet. Salauddin Chowdhury, chairman of Stylish Garments, said output had fallen 30 to 40 percent as the factory relied on diesel generators to maintain production. The additional cost is making it difficult to deliver orders on time.

Gas supply in Chattogram has improved somewhat, but power shortages are again disrupting industrial production. Production has stopped at Baizid Steel, Saleh Steel, Golden Ispat and Peninsula Steel, while mills such as Sheema Steel and HM Steel are operating at just 20 to 30 percent of capacity.

Data from the government agency responsible for law and order in industrial zones show that 75 factories closed permanently across the eight units under its jurisdiction between January and August 2026.

Ashulia accounted for 15 closures, Gazipur 17, Chattogram 26, Narayanganj nine, Mymensingh two, and Khulna and Cumilla six combined. No closures were recorded in Sylhet. The factory closures left 17,856 workers out of work.

Sources say the closures were not caused solely by gas and power shortages. Insufficient work or orders, owners’ financial distress and pressure from bank loans were also major factors. Of the factories that shut, 23 cited insufficient work, nine financial distress, 12 both, and 15 bank loans. The rest closed for reasons including labour unrest, political factors, raw material shortages, relocation and other causes.

Meanwhile, 339 factories remain under acute strain because of the severe gas shortage that followed the accident at an LNG terminal in July. A further 17 factories cannot utilise any production capacity because they have no gas pressure.

The crisis is taking different forms across industries. Glassmakers are burning diesel to maintain production. Steel rod makers are seeing both output and sales fall. Cement producers are being squeezed by the taka’s depreciation and debt burdens. Ceramic manufacturers are grappling with a gas shortage that has persisted for years. Many textile factories are idle, while dyeing, washing and spinning units in the garment industry are under particular strain.

Dr Selim Raihan, professor of economics at the University of Dhaka and executive director of SANEM, said the decline in large-scale industrial output could not be explained by temporary weakness in demand alone. The causes, he said, were multiple and long-standing.

“These include high interest rates, uncertainty over energy and power, dollar shortages for raw material imports, rising import costs and weak domestic demand. High inflation has weakened demand in the consumer goods market, while the cost of working capital has risen for industrial firms. In effect, entrepreneurs are absorbing production cost pressures on one side while having no certainty of sales on the other. In such conditions, cutting production rather than running at full capacity is the natural response,” he told Bonik Barta.

Raihan said the sector also faced a deeper structural crisis. “Bangladesh’s industrial sector remains import-dependent; even a slight disruption to the supply of raw materials, fuel, machinery or intermediate goods disrupts output. This is compounded by policy uncertainty, weak infrastructure, high logistics costs, a crisis of confidence in the banking sector and an adverse investment climate. The current production decline should not be seen merely as a ‘recession’; it is also a symptom of weakening industrial competitiveness.”

“Coping with the situation will require more than incentives or cheap credit,” Raihan stressed. “Reliable energy supply, stability in the foreign exchange market, normalisation of interest rates and credit flows, predictability in the import regime, and restoration of confidence in the business policy environment are essential.”