Private sector credit growth in Bangladesh has slowed steadily for years, falling from nearly 14 percent four years ago to below 5 percent. While the government and central bank have offered incentives and policy support to stimulate lending, bankers and entrepreneurs warn that cheaper credit and regulatory relief cannot revive investment without sufficient fuel supplies to meet industrial demand.
Data from state-run energy company Petrobangla and industry reports show the gas shortfall has become a structural threat to production, investment and export competitiveness. Daily demand stands at approximately 3,800 million cubic feet (mmcfd), against a combined output of 2,670 mmcfd from domestic fields and imported liquefied natural gas. The resulting deficit of over 1,130 mmcfd — exceeding 30 percent of national requirements — has degraded gas pressure across industrial zones, forcing many factories to operate at reduced capacity and cutting output by up to half in some areas. Authorities have suspended new gas connections entirely. The shortfall intensifies during summer, when surging electricity demand forces the diversion of industrial gas allocations to power generation and fertiliser plants.
“Ensuring energy security is the only way to boost investment,” said Enamul Huque, interim chief executive of Standard Chartered Bangladesh. “Private sector credit growth has been sluggish for quite some time. Framing it merely as the result of high interest rates, tight monetary policy or entrepreneurs’ reluctance hides a large part of the reality. Bangladesh Bank and the government are taking policy measures to increase credit flow, but if industry can’t expand output because of the energy crisis, these monetary-policy-driven steps alone won’t deliver the momentum credit growth needs.”
Resolving the ongoing crisis requires placing energy at the core of national economic planning, Huque added. “We must prioritise gas supply to high-productivity industry, accelerate domestic gas exploration and renewable energy development, and stabilise fuel import supply chains,” he said. “There’s no alternative to energy security if we want to reduce investment risk. Incentives and stimulus policies can offer temporary relief, but energy stability is the single most critical precondition for sustainable, quality credit growth.”
The energy shortage has hit gas-intensive manufacturing the hardest, including garments, textiles, ceramics, glass, steel, cement, paper, chemicals and food processing. Industry associations report that nearly 400 gas-dependent plants are operating below full capacity, with output down 30 to 50 percent and several units forced to close. This operational disruption is translating into financial distress and expanding non-performing loan portfolios across the banking sector.
The impact is evident at major industrial groups, including City Group, one of the country’s largest conglomerates, which has nearly BDT 250 billion in loans at risk of default. The group has formally requested central bank policy support to avoid default on investments in six factories built in the Hosendi Economic Zone in Munshiganj since 2020. The facilities, constructed at a cost of nearly BDT 140 billion, remain idle due to a lack of gas connections.
The supply gap was evident nearly a decade ago as domestic gas fields failed to match industrial expansion, prompting the former Awami League administration to begin importing LNG in April 2018. Daily grid supply currently comprises 1,640 mmcfd from domestic production and 950 mmcfd from imported LNG. The gas deficit also restricts electricity generation, leaving much of the country’s 29,000 MW installed capacity — 42 percent of which is gas-fired — unable to operate at full output and triggering widespread load-shedding.
The energy crisis is a primary driver of the deceleration in private sector credit growth, according to Mosleh Uddin Ahmed, managing director of Shahjalal Islami Bank. “Our generation capacity stands at 29,000 megawatts, but in reality we can’t produce more than 14,000,” he told Bonik Barta. “The government has fallen behind on payments for electricity purchased from private power plants. That, in turn, has increased pressure on the banks that financed those power companies. At the same time, persistent gas and electricity shortages are deterring new private investment. It’s unrealistic to expect stronger credit growth in the private sector without resolving the energy crisis.”
Banking data underscores the scale of the contraction. Private sector credit expansion, which exceeded 15 percent prior to the pandemic in 2020, has weakened continuously. Liquidity injection through a stimulus package of BDT 1 trillion in the 2021–22 fiscal year failed to arrest the decline, with growth moderating to 13.66 percent, before slowing to 10.58 percent in FY 2022–23 and 9.84 percent in FY 2023–24.
The Awami League government was ousted on August 5, 2024, through a mass uprising. Subsequent governance overhauls and the departure of key political figures and oligarchs who controlled over two dozen banks further constrained lending. Growth fell to 6.5 percent in FY 2024–25, with central bank figures indicating a further deceleration to below 5 percent in FY 2025–26.
Senior executives noted that current growth figures largely reflect the capitalisation of accrued interest rather than new credit, with fresh industrial financing remaining negligible.
The central bank recently announced a BDT 600 billion stimulus framework to encourage lending, though market participants question its effectiveness amid ongoing energy deficits. “In Bangladesh, every crisis lands on the banks’ shoulders,” said Ahsan Zaman Chowdhury, managing director of Trust Bank. “We as bankers are confronting enormous challenges. If the capital market were vibrant, this risk and crisis would ease a little.”
Chowdhury added: “The energy crisis is the single biggest cause of industrial stagnation. Many textile factories we invested in can’t run at full capacity because of the gas shortage, and heavy industry is in the same position. Lower borrowing costs won’t drive capital expenditure while basic fuel supplies remain constrained. A plant that can’t be commissioned offers no return and becomes a burden. Energy security must come first if we want to boost investment and create jobs.”
Several entrepreneurs report that operational survival has superseded expansion, undermining official targets for private sector-led industrial development.
“The energy crisis, including gas, is the single biggest challenge the industrial sector is facing,” said Kamran T Rahman, president of the Metropolitan Chamber of Commerce and Industry. “Reducing high interest rates alone isn’t enough; uninterrupted energy supply must be the priority. Higher international energy prices threaten to escalate production costs and erode the competitiveness of export-oriented industries. This highlights the imperative to rationalise energy-sector duties, establish targeted support mechanisms where required, and execute coordinated, forward-looking policy decisions. Bangladesh must also diversify its energy import sources to reduce reliance on any single supplier.”