By Asif Showkat Kallol (Dhaka Bureau)
Bangladesh, long considered one of South Asia’s emerging economic powerhouses, is currently grappling with a deep structural crisis. Bank credit flow to the private sector- the traditional engine of the country’s economic growth- has plummeted to its lowest level in modern history. According to recent data from Bangladesh Bank, private sector credit growth dropped to a mere 6.82% in February 2025. Historical data over the past 21 years show no comparable decline.
For ordinary citizens, this statistic flashes a warning sign for job creation, livelihood security, and sustainable social development.
A Continuous Decline: The Human Crisis Behind the Numbers
The downward trajectory over the last seven months paints a sobering picture of a prolonged economic slowdown:
* July 2024: 10.13%
* September 2024: 9.20%
* November 2024: 7.66%
* January 2025: 7.15%
* February 2025: 6.82% (Historic Low)
These figures represent more than just dry statistics. A shrinking credit flow to the private sector directly translates into stalled factory expansions, a capital crunch for small and medium enterprises (SMEs), and, most critically, a freeze on new employment opportunities for the youth. The performance missed the central bank’s monetary policy target of 9.8% by a staggering 2.98 percentage points.
The Policy Trap: Inflation Control vs. Public Livelihoods
In alignment with conventional remedies often prescribed by global financial frameworks, Bangladesh Bank has maintained a strict contractionary monetary policy. In an effort to curb inflation, policy rates have been repeatedly hiked, pushing commercial lending rates well above 15%.
These exorbitant borrowing costs hit small and mid-sized entrepreneurs much harder than large conglomerates. Complicated by a climate of institutional uncertainty and law-and-order concerns following the political transition in August 2024, entrepreneurs are increasingly hesitant to undertake fresh investment risks.
Highlighting the severity of the situation, Zahid Hussain, former lead economist at the World Bank’s Dhaka office, noted, ‘Many entrepreneurs- from small traders to large industrial groups- struggle to make investment decisions amid concerns over stability and security.’
Global Pressures and Geopolitical Clouds
Domestic vulnerabilities are further compounded by international geopolitical pressures. If the United States proceeds with retaliatory tariffs on Bangladeshi exports, the fragile economy could face severe blows. Any disruption to labor-intensive sectors like Ready-Made Garments (RMG) would hit ordinary working-class families- particularly women workers- the hardest.
A Call for Alternative, Human-Centered Pathways
Bangladesh’s private sector is currently caught in a triple bind of soaring borrowing costs, political uncertainty, and global market vulnerabilities. Relying solely on mechanical macroeconomic indicators or contractionary measures will not rescue the economy from this gridlock.
Economists argue that artificially squeezing the money supply to fight inflation is ineffective unless public confidence, security, and political stability are restored. The current crisis demonstrates that prioritizing contractionary policies at the expense of ordinary citizens’ livelihoods yields no long-term benefits. To revitalize its economy, Bangladesh must prioritize peace, institutional stability, and a human-centered economic framework that safeguards public purchasing power and employment.
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The Writer:
Asif Showkat Kallol: Works for a German-based online outlet, The Mirror Asia, as Head of News and is a Contributor at Pressenza- Dhaka Bureau.
