A PERSISTENT decline in private-sector credit growth is concerning as it has direct, adverse impact on industrial expansion, investment and job creation. Bangladesh Bank data show that private-sector credit growth fell to 6.40 per cent in June 2025, the lowest level in 22 years. The downturn, which began to accelerate sharply in November 2022, has worsened amid the political uncertainty after the August 2024 political changeover. This reflects a deepening crisis in the banking and business sectors. The monetary policy that the Bangladesh Bank announced in January projected a credit growth target of 9.8 per cent until July 2025. However, the actual growth has remained well below the target, raising concern about the underlying momentum and the business environment. Monthly Bangladesh Bank data indicate a consistent downward trend in credit growth: 7.28 per cent in December 2024, 7.15 per cent in January, 6.82 per cent in February, 7.57 per cent in March, 7.5 per cent in April and 7.17 per cent in May. The decline points to systemic weaknesses and growing apprehension within the business community.
Economists attribute this sluggish performance to multiple inter-related factors, including a stagnant business climate, political instability, weak law and order, surging lending rates and excessive government borrowing from commercial banks. The recent monetary policy statement notes that the credit slowdown is not solely the result of policy rate increase, which has driven lending rates close to 15 per cent, but also of slower deposit growth and heightened government borrowing, which has further crowded out the private sector. The decline in credit growth is additionally attributed to a reduction in import, particularly of capital machinery, signalling a broader downturn in industrial activity and investment. Strikingly, despite an overall slower deposit growth in the banking sector, there has been a notable increase in the number of high-value accounts. This concentration of wealth suggests that affluent individuals, retaining capital though, are reluctant to channel their funds into productive investments. Their hesitation to explore investment avenues that could generate employment opportunities reflects a lack of confidence and points to a stagnant business environment. Businesses appear to have adopted a cautious 鈥榳ait-and-see鈥� approach, deferring investments amid uncertainty.
Given that the private sector accounts for around 90 per cent of the employment, the decline in credit growth and the stagnant business environment are alarming. The government should, therefore, address the root causes that undermine the private-sector credit growth. It should take decisive steps to improve business climate and restore investor confidence.