Bangladesh’s private sector credit growth has plunged to the lowest level in the country’s history, exposing deep cracks in investment confidence and signalling mounting stress across the economy.

Latest data from Bangladesh Bank shows that private sector credit growth fell to just 4.72 percent in March 2026 — the weakest level since the central bank began publishing records in 2003.

The collapse in lending reflects a broader economic slowdown driven by high borrowing costs, rising bad loans, energy shortages, exchange-rate instability and weak business confidence.

Economists say the sharp contraction in credit demand is alarming for a country where private-sector activity remains the principal engine of growth, employment and industrial production.

The latest figure marks a dramatic fall from 10.13 percent credit growth recorded in July 2024, before political unrest and prolonged economic uncertainty began weighing heavily on business activity.

Since August 2024, private-sector credit growth has remained in single digits, indicating sustained weakness in investment appetite across industries.

Bangladesh Bank has maintained a tight monetary policy stance in an attempt to tame persistently high inflation, keeping the policy interest rate at 10 percent.

While the central bank argues that contractionary measures are necessary to stabilize prices, businesses say high lending rates have made expansion nearly impossible.

Commercial bank loans are currently being offered at rates ranging between 14 and 16 percent in many cases, significantly increasing financing costs for manufacturers and traders.

Bankers also point to a worsening non-performing loan crisis that has weakened the financial sector’s capacity to lend.

According to industry estimates, defaulted loans climbed to a record Tk 5.57 lakh crore by the end of 2025, forcing banks to become increasingly cautious about approving fresh loans.

At the same time, government borrowing from commercial banks has intensified pressure on liquidity in the banking system.

Between July 2025 and March 2026, net government borrowing from banks reportedly reached Tk 98,000 crore — nearly 95 percent of the revised annual target — effectively crowding out private borrowers.

Energy shortages have emerged as another major obstacle to investment. Industrial operators say many factories are unable to run at full capacity because of inadequate gas and electricity supplies.

Business leaders argue that investors are unwilling to undertake new projects in an environment where production costs continue to rise while infrastructure bottlenecks remain unresolved.

External pressures have compounded the crisis. Rising geopolitical tensions in the Middle East have pushed global fuel prices higher, increasing Bangladesh’s import costs and creating fresh uncertainty over inflation and exchange-rate stability.

Economists warn that as an energy-importing nation, Bangladesh remains highly vulnerable to prolonged global disruptions.

The consequences of weak credit growth are already becoming visible across the economy. Imports of capital machinery have declined sharply, many factories are operating below capacity, and private-sector job creation has slowed.

Analysts fear that unless lending recovers soon, industrial output and export competitiveness could weaken further in the coming months.

Economists say restoring investor confidence will require more than lower interest rates.

They argue that Bangladesh must address structural weaknesses in the banking sector, improve energy security, stabilize the exchange rate and create a more predictable business environment to revive private investment and prevent deeper economic stagnation.

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