Policy imbalance widens as public credit jumps 26pc, private lending crawls at 5pc

Bangladesh’s credit market is witnessing a striking divergence, with government-sector credit growth accelerating to nearly 26 per cent while private-sector lending crawls at just 5 per cent, raising concerns over the growing squeeze on businesses and investment.

The 21-percentage-point gap between public and private credit growth has emerged as a major concern for the economy, as stronger government borrowing contrasts sharply with subdued lending to entrepreneurs and businesses.

Dhaka Chamber of Commerce and Industry (DCCI) President Taskeen Ahmed highlighted the widening gap on Saturday, warning that weak private-sector credit growth was becoming a significant barrier to investment and business expansion.

He made the remarks while presenting the keynote paper at a seminar titled “Bi-annual Economic State of FY2026: Perspective Revenue and Monetary Policy and Expectations of Private Sector” at the DCCI Auditorium in Motijheel on Saturday.

Finance and Planning Minister Amir Khosru Mahmud Chowdhury, MP, attended the event as the chief guest. Dr. Zaidi Sattar, Chairman of the Policy Research Institute of Bangladesh (PRI), was present as the special guest. Other prominent speakers included Mahbubur Rahman, President of the International Chamber of Commerce (ICC) Bangladesh, and Dr. Hossain Zillur Rahman, Chairman of the Power and Participation Research Centre (PPRC) and BRAC.

The sharp divergence means credit is expanding far more rapidly towards the public sector than towards businesses, potentially intensifying pressure on the private sector at a time when investment is already being restrained by high inflation, economic uncertainty and weak business confidence.

Economists, business leaders and policy experts in the discussion called for coordinated fiscal and monetary reforms, stronger private-sector confidence and a predictable business environment to revive investment and economic growth in the country.

Taskeen said sluggish private-sector credit growth, coupled with high inflation and rising poverty, had surfaced as fresh concerns for Bangladesh’s economy.

The widening gap also underscores the challenge of ensuring that the banking system supports productive private investment while meeting the government’s financing requirements.

Finance and Planning Minister Amir Khosru Mahmud Chowdhury, said the government was working relentlessly to create a business-friendly environment.

He stressed that Bangladesh would not be able to attract foreign investment without first expanding domestic investment.

“The government is shifting the country’s economic paradigm from a patronage-based economy to a democratic economy,” he said.

Meanwhile, Taskeen welcomed several measures in the proposed FY2026 national budget to facilitate business, including digital registration of new companies within 48 hours and permission to repatriate profits of up to Tk 100 crore without prior approval from Bangladesh Bank.

Professor Mustafizur Rahman said a "revolution" in tax collection was essential for implementing the Annual Development Programme, while there was little possibility of achieving the revenue collection target set in the national budget.

The seminar, attended by leading business and economic policymakers, highlighted a central challenge facing Bangladesh’s recovery: while public-sector credit is expanding at a rapid pace, private businesses are struggling to secure the financing needed to invest, expand and create jobs.