Amid ongoing economic uncertainty in Bangladesh, private sector loan growth has dropped below 7%, according to a report by the central bank. The data shows that in June, private sector credit growth fell below the 7% threshold, reflecting a sharp slowdown in lending caused by high interest rates and post-election economic instability.
According to the latest data from Bangladesh Bank, private sector credit growth in June was recorded at just 6.40% — a figure not seen in recent years.
This marks the second time this year that loan growth has dipped below 7%. Although it hovered around that level in previous months, it never consistently exceeded it.
Speaking to UNB, Dr. Mustafa K Mujeri, Executive Director of the Institute for Inclusive Finance and Development (InM), attributed the decline to several factors. “Political uncertainty, a conflict-ridden environment, and disruptions in law and order are discouraging entrepreneurs from taking investment risks. The banking sector also plays a role in this downturn,” he said.
Dr. Mujeri, a former chief economist of Bangladesh Bank, added, “Widespread financial irregularities in recent years have left many banks facing liquidity shortages, reducing their capacity to lend. Additionally, rising non-performing loans (NPLs) have made banks more cautious in disbursing loans.”
Dr. Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD), said, “The persistent decline in private sector credit growth signals a potentially serious economic crisis on the horizon.”
This continued downturn suggests deepening crises in both the banking sector and the broader business environment. As credit growth shrinks, new industrial ventures and business expansions have decreased, directly impacting employment generation.
Economists believe that a significant turnaround is unlikely before the upcoming national elections. If, for any reason, the elections are delayed, the situation could worsen further.
The lack of an acceptable resolution regarding the imposition of reciprocal tariffs on Bangladeshi products by the United States may also negatively affect the country's economic outlook.
Monthly data from Bangladesh Bank reflects a downward trend in private sector loan growth: 7.17% in May, 7.5% in April, 7.57% in March, 6.82% in February, 7.15% in January, and 7.28% in December of the previous year.