The government has reduced its bank borrowing target by 28% to Tk 990 billion for FY2024-25, down from Tk 1,375 billion, due to lower expenditures and slow ADP implementation, which stood at 18% in the first half of the fiscal year. The Bangladesh Bank estimates actual borrowing may reach Tk 900 billion. Private sector credit growth remained at 7.28% in December 2024, below the 9.80% target. The government borrowed Tk 689.31 billion from banks in the first seven months of FY2024-25, but after repayments, net borrowing stood at Tk 136 billion. Comparatively lower operational expenses of the interim government also contributed to the borrowing cut. The move is expected to increase market liquidity, potentially reducing interest rates on loans and deposits. The government can borrow up to Tk 120 billion from the central bank under the Ways-and-Means Advances (WMA) facility for short-term spending.

The government has reduced its bank borrowing target by 28% to Tk 990 billion for FY2024-25, down from Tk 1,375 billion, due to lower expenditures and slow ADP implementation, which stood at 18% in the first half of the fiscal year. The Bangladesh Bank estimates actual borrowing may reach Tk 900 billion. Private sector credit growth remained at 7.28% in December 2024, below the 9.80% target. The government borrowed Tk 689.31 billion from banks in the first seven months of FY2024-25, but after repayments, net borrowing stood at Tk 136 billion. Comparatively lower operational expenses of the interim government also contributed to the borrowing cut. The move is expected to increase market liquidity, potentially reducing interest rates on loans and deposits. The government can borrow up to Tk 120 billion from the central bank under the Ways-and-Means Advances (WMA) facility for short-term spending.

Fitch Solutions forecasts Bangladesh’s inflation to average 8.5% in FY2024-25, exceeding Bangladesh Bank’s 7.0-8.0% target. Despite maintaining a 10% policy rate, inflation remains high due to political unrest and economic uncertainties. The agency expects another 15% taka depreciation in 2025, driven by a shift to a market-based exchange rate and a weaker-than-expected US Federal Reserve rate cut. Private-sector credit growth dropped to 7.3% in December 2024, the lowest since 2015, while real wages stagnate, weakening consumer spending. Consequently, Fitch plans to revise down its 5.5% GDP growth forecast for FY2025-26. The upcoming general election, now expected in FY2025-26, could exacerbate economic disruptions, historically driving inflation up post-elections. Additionally, potential US policy shifts under a Trump administration may further strain Bangladesh’s currency and economic stability. While agricultural output and lower oil prices may help, they likely won’t offset inflationary pressures from currency depreciation.