Trade bodies flag BB's monetary policy 'dampening' pvt investment

Leading trade bodies in Bangladesh have expressed concern over Bangladesh Bank's (BB) continued contractionary monetary policy, warning that it is dampening private investment and hurting business confidence across sectors.

In a statement issued on Thursday, the Dhaka Chamber of Commerce and Industry (DCCI) noted that private sector credit growth fell to just 6.4 per cent in June 2025 -- the lowest in 22 years -- signalling a sharp decline in investment and industrial activity.

DCCI attributed the slowdown not only to the tightened monetary stance but also to broader uncertainties in the business environment, including unstable law and order, limited energy supply, and overall policy rigidity.

Meanwhile, the alarming surge in non-performing loans (NPLs), which have now reached Tk 5.3 trillion and account for 27.09 per cent of total outstanding loans, poses a significant risk to financial sector stability and investor confidence.

Despite these pressures on the economy, the policy rate was kept unchanged at 10 per cent in the latest monetary policy statement.

DCCI observed that while inflation has eased only slightly, the high policy rate continues to raise borrowing costs, especially for cottage, micro, small and medium enterprises (CMSMEs) and other productive sectors.

The central bank has also lowered the private sector credit growth target to 7.2 per cent for the next six months, down from 9.8 per cent in the previous policy -- further tightening credit flow to businesses.

At the same time, the public sector credit growth target has been raised to 20.4 per cent, which DCCI says could create a fiscal burden on the economy and taxpayers, while squeezing credit availability for the private sector and exacerbating the economic slowdown.

In response, DCCI has urged the central bank to adopt a more supportive approach by easing credit conditions, lowering interest rates, and simplifying loan terms. It also recommended a six-month extension of the loan classification timeline to allow genuine borrowers more room for recovery without being pushed into default.

The chamber stressed the need for urgent structural reforms in the financial sector, enhanced transparency in credit allocation, and stricter oversight to ensure adequate liquidity for the productive economy.

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), voiced concern over the central bank's contractionary policy, saying it is hurting the business community, particularly exporters.

"As businessmen, we understand our own situation -- and right now, things are not going well," Hatem said. "Our businesses are being negatively affected by the central bank's policies."

He pointed out that key facilities such as export incentives, the Export Development Fund (EDF), and the Tk 100 billion pre-shipment credit scheme have been reduced.

Also, interest rates remain high and the definition of loan default has been revised, placing exporters under increased and unequal pressure. "We are simply seeking fair treatment from the central bank," Mr Hatem added.

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