Despite government measures to curb inflation, the contractionary monetary policy has inadvertently stifled private sector expansion.
Prominent industrialists assert that the economic and investment climate has remained precarious over the past six months, prompting entrepreneurs to refrain from committing to new ventures.
Business leaders highlight that those with substantial bank loans are increasingly anxious due to rising interest rates.
The interim government appears disconnected from the challenges faced by both local and foreign investors, deterring fresh investments.
Even entrepreneurs who had initiated expansion plans now face heightened apprehension, leading to a contraction in production and trade growth by an estimated 15 to 25%.
In response to inflationary pressures, the interim government has consistently raised interest rates since the onset of the 2023-24 fiscal year, with the policy rate (repo rate) doubling from 5-10%.
Bangladesh Bank is formulating its monetary policy for the second half of the 2024-25 fiscal year, with indications that interest rates may rise further.
Private sector credit growth has decelerated markedly, rising by only 1.41% in the first five months (July to November) of the current fiscal year, compared to 3.46% during the same period last year.
According to Bangladesh Bank, outstanding private sector loans stood at Tk16.41 lakh crore in June 2024, increasing to Tk16.64 lakh crore by November—a modest growth of Tk23,095 crore.
Speaking to a national daily, East Coast Group Chairman Azam J Chowdhury observed, "Business conditions are deteriorating, with production and trade growth shrinking by up to 25%. There is no new investment, and existing operations are contracting."
Bangladesh's inflation rate is currently the highest in South Asia.
According to the Bangladesh Bureau of Statistics, overall inflation in January stood at 9.94%, with food inflation persistently in double digits, reaching 10.72% in January compared to 12.92% in December.
"Political stability often facilitates swift decision-making, which benefits business," said PRAN-RFL Group CEO and Chairman Ahsan Khan Chowdhury.
Since June 2023, liquidity shortages and increased policy rates have driven lending rates from a maximum of 9% to nearly 16%.
Despite these hikes, the intended benefits have not materialised, with inflation remaining unbridled even as private-sector credit growth languishes.
The average inflation rate rose from 9.72% in June 2024 to 11.66% in July, with persistently high figures in subsequent months.
As the economic challenges mount, stakeholders call for decisive policy interventions to restore investor confidence and revitalise Bangladesh's growth trajectory.
