Private sector investment in Bangladesh remained stagnant for a long period. Reflecting this prolonged slowdown, the bank credit flow to the private sector has now fallen to its lowest level on record. Despite the target for private sector credit growth being 8.5 percent even after the central bank’s contractionary monetary policy, the credit growth stood just 4.47 percent at the end of June 2026, according to the Bangladesh Bank’s latest data, meaning actual growth reached only about half of the target.
The prolonged credit slowdown is also having a visible impact on the country’s overall investment climate. The investment-to-GDP ratio has continued to decline. Citing data from the Bangladesh Bureau of Statistics (BBS), the Bangladesh Bank reported that the country’s investment-to-GDP ratio stood at 30.95 percent at the end of FY 2022–23. After three consecutive years of decline, the ratio fell to 27.93 percent in the recently concluded fiscal year 2025–26.
The sharpest contraction has occurred in private sector investment. The private investment-to-GDP ratio declined from 24.18 percent in FY 2022–23 to 21.53 percent at the end of the last fiscal year. During the same period, the public investment-to-GDP ratio also decreased, falling to 6.40 percent.
In a private sector-driven economy like Bangladesh, the investment-to-GDP ratio should ideally be close to 50 percent, according to economists, entrepreneurs and bankers. But the continued decline in this ratio, rather than an increase, indicates that the pace of new industrialisation, production expansion and job creation has slowed significantly. They warn that if this trend persists, it could place further pressure on GDP growth and overall economic activity. They attribute the decline in investment to high interest rates, the energy crisis, limited access to credit, policy uncertainty, political instability and the deterioration of the law and order situation.
The sharp decline in private sector credit is largely a reflection of the country’s broader economic slowdown, according to Bangladesh Bank Spokesperson and Executive Director Arif Hossain Khan. Speaking to Bonik Barta, he said, “The economy is currently experiencing stagnation. Both the government and the central bank have undertaken various initiatives to overcome this slowdown. But it’ll take time for these measures to produce tangible results. One of the newly elected government’s key political commitments was to create employment and accelerate the economy.”
He added, “The central bank is doing everything within its mandate to stimulate credit demand. Despite persistently high inflation, we’ve recently reduced the policy interest rate. It’s now the government’s responsibility to ensure the availability of gas, electricity, water, port facilities and transport infrastructure. Once the obstacles to investment are removed, private sector credit growth will recover.”
Private sector credit growth exceeded 15 percent before the COVID-19 pandemic in 2020, according to Bangladesh Bank data. But it has declined steadily since then. Even after the government announced a stimulus package worth nearly BDT 1 trillion during FY 2021–22, private sector credit growth stood at 13.66 percent. It subsequently fell to 10.58 percent in fiscal year 2022–23 and further declined to 9.84 percent in fiscal year 2023–24.
On 5 August 2024, the mass uprising ousted the Sheikh Hasina government, after which the banking sector saw a series of reforms. The departure of several oligarchs and influential business figures from the country also contributed to a slowdown in bank lending. Private sector credit growth consequently dropped to 6.5 percent in FY 2024–25, falling further to just 4.47 percent by the end of FY 2025–26 (June), according to Bangladesh Bank sources yesterday.
The central bank has private sector credit growth data dating back to 2003, according to a current official of the relevant department at the Bangladesh Bank. Based on those records, the credit growth rate in June is the lowest on record. He noted that the country’s economy has never experienced such a severe credit drought before.
But several chief executives of commercial banks told Bonik Barta that a significant portion of the private-sector credit growth recorded over the past two years has been driven by the capitalisation of unpaid interest rather than fresh lending. They said the volume of non-performing loans (NPLs) in the banking sector has now exceeded BDT 6 trillion. Moreover, many loans under court injunctions or those that have been rescheduled have generated little recovery. Unpaid interest has increased outstanding loan balances at financially weak banks, which is then reflected as private sector credit growth. They added that over the past two years, lending for new industrial ventures or the establishment of new factories has been negligible.
Mosleh Uddin Ahmed, managing director of Shahjalal Islami Bank, said the gas and electricity shortages have also played a major role in slowing private sector credit growth. Speaking to Bonik Barta, he said, “Despite Bangladesh having an installed power generation capacity of 29,000 megawatts, it’s not possible to generate more than 14,000 megawatts. The government has accumulated unpaid bills to private power producers, creating financial stress for the banks that lend those power companies. Entrepreneurs are also reluctant to make new investments due to persistent gas and electricity shortages. Without resolving the energy crisis, it would be unrealistic to expect a recovery in private sector credit growth.”
The gas shortage facing the industrial sector is no longer a temporary problem, according to Petrobangla data, bankers and business leaders. Instead, it has become one of the most significant risks to industrial production, investment and export competitiveness. With a daily supply shortfall exceeding 1,000 million cubic feet of gas compared with demand, industrial zones are unable to receive adequate gas pressure. Many factories are consequently operating below full capacity, while in some cases production has been cut by half. Gas connections to new factories are completely closed.
Bangladesh’s daily gas demand stands at around 3,800 million cubic feet per day (MMCFD). In contrast, domestic gas fields and imported liquefied natural gas (LNG) together are supplying only about 2,670 MMCFD. This leaves a daily shortfall of more than 1,130 MMCFD. In other words, the country’s economy and day-to-day activities are operating with a gas deficit exceeding 30 percent of total demand.
When electricity demand rises during the summer months, a portion of the gas allocated for industrial use is diverted to power generation and fertiliser factories. Gas pressure in industrial zones consequently declines even further. One of the two floating LNG terminals at Moheshkhali in Cox’s Bazar has remained out of operation for more than two weeks due to a fire and technical faults. Daily gas supply to the national grid has consequently fallen by around 450 MMCFD, intensifying the nationwide gas shortage and power outages.
To stimulate lending to the private sector, the Bangladesh Bank recently announced a BDT 600 billion stimulus package. The package includes financing for reopening closed factories, revitalising the rural economy and boosting agricultural production. One month after unveiling its monetary policy, the central bank also reduced the policy interest rate from 10 percent to 9.5 percent last Thursday. The decision was taken to encourage investment despite persistently high inflation, according to the Bangladesh Bank.
But concerns remain over the distribution of these low-interest loans due to the ongoing energy crisis, particularly the shortage of gas. Commenting on the issue, Ahsan Zaman Chowdhury, managing director of Trust Bank, told Bonik Barta, “At this moment, the energy crisis is the single biggest factor behind the stagnation in the industrial sector. Many of the textile factories we’ve financed are unable to operate at full capacity because of gas shortages, alongside heavy industries. Even if lending rates come down, no one will invest in new industrial facilities without a reliable gas supply. And if factories can’t be operated after they are built, there’s no benefit. They will become a burden on the economy. Ensuring energy security must be the top priority if we want to increase investment and create employment.”