SALEKEEN IBRAHIM

In recent years, Bangladesh has faced political uncertainty, macroeconomic stress and structural weaknesses in the financial sector, compounded by the ongoing crisis in the Middle East. These challenges have slowed the engine that drives our national economy, the private sector. Private investment has fallen to nearly 22.03 percent of GDP in FY2025, one of the lowest levels in the past decade. At the same time, credit flow to businesses has dried up. Private sector credit growth fell to a record low of 6.10 percent in December 2025 and is still hovering around 6 percent in early 2026, well below the central bank’s target.

This slowdown is not just a statistic. It reflects deteriorating business confidence, weakening investment appetite and troubling signals for employment and growth. If Bangladesh is to regain its momentum, reviving private sector dynamism must become a national priority.

The lethargy in private sector credit growth is caused by both demand and supply constraints. Political uncertainty and weak law and order have discouraged investment. Businesses tend to delay expansion during periods of instability.

At the same time, persistently high inflation and rising lending rates have increased the cost of borrowing. Many entrepreneurs find it difficult to justify new investments when financing costs are elevated, and consumer demand remains uncertain. Research by the Planning Commission suggests high interest rates and macroeconomic uncertainty are major reasons for weak credit demand. The banking sector is also under strain. Non-performing loans have climbed to around Tk 3.45 lakh crore, weakening banks’ capital positions and limiting their capacity to lend.

Government borrowing from banks has increased as well. When the state absorbs a large share of liquidity to finance fiscal deficits, fewer funds remain available for private enterprise. Bangladesh remains overly dependent on banks for financing, while alternative sources such as corporate bonds, venture capital and equity markets are underdeveloped. This structural weakness restricts access to capital, particularly for start-ups and small and medium-sized enterprises (SMEs).

To secure quick relief from this suffocating situation, the government must focus on restoring confidence and liquidity. Controlling inflation should be the first priority of the newly appointed governor. Stable prices would help ease interest rates and restore purchasing power, encouraging consumption and investment.

Business confidence depends on predictability. Investors need assurance that factories will operate smoothly, supply chains will remain secure, and contracts will be honoured. In the context of the Middle East crisis, a consistent energy supply will play a crucial role in strengthening investor confidence.

Small and medium-sized enterprises, which generate around 80 percent of employment, require special attention in access to finance. Targeted stimulus funds, lower-rate refinancing and credit guarantee schemes could provide support. Infrastructure investment can create immediate economic activity and crowd in private investment in logistics, manufacturing and services. Export diversification must also remain central to our strategy.

Over the longer-term, governance and reform in the banking sector must continue. Reducing non-performing loans would restore lending capacity and rebuild client confidence. Frequent policy shifts discourage investors. Clear long-term policies on taxation, energy pricing and industrial incentives are essential to attract both domestic and foreign investment. In addition, a vibrant corporate bond market and venture capital ecosystem could reduce dependence on banks. Businesses need multiple financing channels to grow.

The next phase of Bangladesh’s growth must be driven by productivity. Investment in technical education, automation and digital infrastructure will strengthen competitiveness. A new generation of innovators can create jobs if supported by incubators, innovation funds and simplified regulation. Private investment does not grow because of speeches or slogans. It grows when investors trust that the rules of the game will remain stable.

The writer is a senior banker