Our economy is grappling with deep-seated challenges. We have made some progress in macroeconomic management, which is reflected in our foreign currency reserves. Our primary goal was to maintain a stable exchange rate, and we have largely succeeded. From the start, we argued that curbing inflation first requires stabilising the exchange rate. We are not talking about rigidly fixing the rate—just keeping it steady. On this, we can claim success.
Previously, foreign banks were reducing our credit limits, and in some cases, even shutting them altogether. Now, all those limits have been restored. Our banks no longer face issues in reinsurance or other areas; in some cases, they are even receiving more credit. Nearly $3.5 billion in outstanding foreign payments has been settled. Complaints like “Why aren’t you providing money?” have vanished.
Our current account is now in surplus. Last year, our financial account also saw a modest surplus. Taken together, I believe our external sector is stable, with no visible weaknesses. Imports can proceed as needed. If someone claims they cannot import, that is their own issue—there is no shortage of dollars. Dollars can be purchased freely. There are no mandatory margins. Bangladesh Bank has removed all such margins and allowed conducting business freely based on the bank-client relationship. In this sense, we have some breathing room.
The day I assumed office as governor, the dollar was trading at BDT 120; it now stands at BDT 122. The exchange rate appears unusually stable. Over the same period, the dollar in India rose from 84 to 89 rupees, an increase of 5 rupees. Over the past 15 months, we have devalued the dollar for two reasons. But it is important not to over-stabilise the rate (artificially). We have fully marketised the dollar rate. Bangladesh Bank does not intervene in setting the exchange rate. Dollar rate is being determined based on supply and demand.
Last Ramadan was challenging. We managed to maintain supply by providing adequate foreign currency. Looking ahead to this Ramadan, we see no signs of risk so far. Letters of credit for all essential goods have already been opened. In many cases, the rate of LC openings is 15–20 percent higher than last year. As a result, even with increased imports, there is no pressure on the dollar. Have our imports risen? Certainly. They have grown in double digits this year. Still, the exchange rate remains unaffected.
While there is some room for relief, we still face significant challenges, and these will not be resolved overnight. In some cases, we are still identifying the problems. One major issue is non-performing loans. With new policies and regular updates from each branch, we can now see the true state of NPLs. When the previous government claimed the NPL rate was 8 percent, I estimated the real figure at three times that, around 25 percent. In reality, it is now 35 percent. This is not a minor problem. Running banks on the remaining two-thirds of performing loans while over a third is non-performing creates enormous pressure. Our banking and financial sectors have struggled with this issue for years. Repairing this damage will take at least five to ten years.
It cannot be denied that interest rates are somewhat high. But the context is important. When I assumed office in August 2024, inflation was 12.5 percent. Compared with that, the policy interest rate of 10 percent is not higher. In countries such as India and the United States, the gap between inflation and policy rates is typically two-and-a-half to three percent. It does not go below that. Our target is similar. By that standard, our interest rate gap is not excessive. Currently, inflation stands at 8.2 percent. Had it fallen to 7 percent or lower, we could have reduced the policy rate. Perhaps we could have reached around 7 percent. But due to certain policy failures, we did not achieve that. In August–September this year, rice prices rose by 18 percent. That’s why inflation was pushed up by 1.4 percentage points. Rice prices did not rise anywhere else in the world, not even in India. We had initially restricted imports, which created pressure. Although we eventually resumed imports, it was just before the Aman harvest season, and by then the delay had already had an impact. Bureaucratic monitoring of markets often produces limited results. Instead, we should focus on market monitoring and ways to make markets more efficient. Supply chains and commodity prices can be actively monitored. It is essential to ensure the supply remains uninterrupted. We see a similar pattern with edible oil. While the government sets prices, the product is often not available in the market at those rates. Sometimes, after temporary withdrawal, oil is reintroduced through government channels at higher prices to restore supply. Fixing prices in this way is counterproductive. Would it not be better to let the market operate freely? If supply is maintained, price volatility in the edible oil market will naturally decrease. I believe the government needs to introduce certain policy changes. That will stabilise the market more effectively.
Our deposit growth rate had fallen to 6 percent but has now risen to 10 percent and is expected to increase further. However, the government must explore alternative funding sources instead of relying solely on banks. If the government takes BDT 1 trillion out of a 6 percent deposit growth, what will the private sector do? Unless the government reduces its borrowing from banks, pressure on the money market will persist. If we can raise deposit growth to 14 percent, we could bring BDT 400 billion into the market, entirely available to the private sector. The government will borrow around BDT 1 trillion, and the private sector will also need money. That will come from increased deposits.
One major reason for historically low deposit growth was capital flight. Some argue imports have fallen, but in reality, volumes have not decreased. Chittagong Port saw record import volumes in FY 2024–25, measured by quantity rather than value. In FY 2025–26, from July to October, import volumes have grown in double digits. And container shipments have risen by 8.6 percent. Yet import bills have declined because capital flight has reduced. Over-invoicing has decreased. That’s why statistics alone can be misleading.
The core problem in our banking sector is structural weakness. We essentially lack a bond market, the stock market is weak, and the insurance sector is in poor shape. Everyone relies on banks. Globally, bond and stock markets dwarf banking sectors: the global bond market is valued at $130 trillion, stocks at $90 trillion, and banks or money markets at $60 trillion. In Bangladesh, the opposite is true: everyone depends on banks, increasing sectoral risk. All economic pressure falls on the banking sector, which is unsustainable. We must change this structure. Our industrial sector cannot develop if we remain bank-dependent. Since other sectors are lagging, we are being overly dependent on the banking sector. We need to develop our bond market. Bangladesh Bank has adopted policies for this, and discussions have been held with BSEC and the finance ministry. Implementation will begin soon.
To businesses with heavy exposure, my advice is: stop relying solely on banks. Raise funds from the market through bonds. Banks are not suited for 15–20 year loans. We will encourage you to turn to bonds. We also need to revive the stock market and restore confidence. Any new scandal in the capital market could harm the economy.
To establish good governance in the banking sector, we have replaced the boards of 14 banks, and the results are visible. Islamic Bank, which was in distress, has now recovered. We had extended a BDT 100 billion loan to the Islamic Bank. That fund has been fully repaid. This has been possible because governance has been strengthened in the banking sector. Our banking sector has not collapsed; rather, it has split into two segments: well-managed banks and poorly managed banks. Where problems exist, intervention is necessary. We have drafted several laws to ensure governance in the sector. Some have been issued as ordinances, while others are in the pipeline. I appeal to politicians to pass these laws in parliament to provide permanence.
We are amending the Bank Companies Act: at least 50 percent of board members must be independent directors, tenure is reduced from 12 years to 6 years (renewable in 3-year terms), family ownership cannot exceed 10 percent (except for foreign and institutional investors), etc. Banks must act as caretakers, not owners.
The politicisation of the Bangladesh Bank has contributed significantly to the sector’s weaknesses. The central bank must be de-politicised. No country aligns central bank salaries with the government. Professionalism in the central bank requires autonomy.
The deposit protection scheme has been increased from BDT 100,000 to 200,000, and non-bank financial institutions (NBFIs) are now covered. An asset management company is being established to deal with bad asset valuations. Steps are being taken to make financial courts more effective, avoiding years-long litigation. A bankruptcy law is being introduced to allow businesses to exit the market in an orderly, legal manner rather than through disputes or confrontations.
We had to address weak and non-performing banks and financial institutions. Using the Bank Resolution Ordinance, we are merging five struggling banks into a strong new institution, which is expected to be formally launched next week. It will have BDT 350 billion in paid-up capital, making it the largest capitalised bank in the country. The government is contributing BDT 200 billion.
We have also introduced several measures for small businesses. Rules have been amended to make guarantee schemes more flexible, encouraging banks to use them and support the SME sector more robustly. Banks will be able to work with NGOs to provide agricultural or SME loans if needed. Currently, BDT 250 billion intended for the SME sector has not been disbursed. We are working to ensure this funding reaches agriculture and SMEs.
We have seen that agricultural lending has been minimal—only 2 percent of bank and financial sector loans—despite agriculture contributing around 14 percent to the economy. Bangladesh Bank must play a significant role in correcting this imbalance.
Non-resident Bangladeshis (NRBs) play a vital role in the country’s economy. Beyond remittances, they contribute directly and indirectly through investment. Having been an expatriate myself for 32 years, I understand this perspective. Living abroad does not mean one must remain there forever. NRBs can play many constructive roles in Bangladesh.
Political leaders have expressed a clear ambition: they want to elevate Bangladesh to a $1 trillion economy. We are currently approaching $500 billion. Reaching the full trillion-dollar target is something we fully support. However, this growth must be inclusive, with emphasis on job creation and environmental sustainability.
Everyone agrees that bureaucratic complexity and inefficiency hinder economic productivity and encourage corruption. Politicians have identified these problems but have not proposed solutions. It is ultimately their responsibility to address this bureaucratic crisis.
Discussion has also highlighted the importance of institutional capacity and independence. Ensuring autonomy for institutions like Bangladesh Bank, the Anti-Corruption Commission, and the Election Commission is the government’s responsibility. Past governments’ misuse of these institutions has eroded their effectiveness, limiting the country’s ability to develop properly. Quality services cannot reach citizens without strong institutions. Reform has yet to reach the administration or police. Without meaningful reform, delivering services effectively is impossible. To achieve this, we must focus on the digital economy and digital governance. Individual interference weakens accountability, creates opportunities for corruption.
The discussion also focused on a just economy. Both inclusive growth and equity are essential. We at Bangladesh Bank have treated financial inclusion as a driving force. Currently, around 66 percent of the population is connected to the formal financial system. The remaining 34 percent must also be brought in. We are pursuing various strategies to achieve this. Over the next five to ten years, we hope every household will participate in the formal economy in some way. Agent banking, microcredit, and automation will help deliver financial services to people’s doorsteps. We are also making smartphones more affordable and targeting a price range of BDT 5,000–6,000 per device. We are collaborating with the National Board of Revenue (NBR) and the Bangladesh Telecommunication Regulatory Commission (BTRC) for this. Discussions with banks are ongoing to ensure widespread formal financial engagement.
Significant progress has been made in addressing those who looted billions from the country and transferred it abroad. Future governments must continue this work. Political compromise on these issues would harm national interests and set a dangerous precedent. As citizens, we demand that no one who has embezzled public resources be spared.
As part of institutional development and to prevent future capital flight or financial crimes, we are establishing a new agency modelled after the United Kingdom’s National Crime Agency. Its mandate will be to hold perpetrators accountable and recover laundered funds through international cooperation. Meanwhile, forensic auditing has already begun. Training is underway. We will soon complete audits.
Throughout our lifetime, we have witnessed numerous protests and uprisings. But recovery from these situations is essential. The reforms undertaken by the current government, even if partial, must be continued by the next administration. The goal is to embed a culture of accountability, transparency, balanced authority, and institutional development. We cannot afford repeated upheavals. Let the inspiration of the 2024 uprising become a permanent framework for the future.
Dr. Ahsan H Mansur: Governor, Bangladesh Bank
[Originally delivered in Bangla as the chairperson’s address at the 4th Bangladesh Economic Summit on the theme “Economic Roadmap and Political Commitment.” The speech has since been translated for the English edition.]