Private sector credit growth in Bangladesh has experienced a decline for the fourth consecutive month, reaching a growth rate of 11.28% in April, the lowest in 13 months. This slowdown reflects a slump in business activities caused by import curbs. Despite sufficient liquidity in the banking system, loan demand from private sector businesses has slowed down significantly. This credit growth falls below the monetary target set for the current fiscal year. The decline in private sector activities comes at a time when the government aims to achieve a GDP growth rate of 7.5% for the upcoming fiscal year, while the current year’s GDP growth rate has been revised down to 6.5%.
The banking sector has been witnessing a decline in loan demand since December 2022, impacted by foreign currency pressure and the global economic crisis. The limited import options and global uncertainties have deterred businesses from expanding and seeking loans, affecting employment generation and banks’ profitability. Meanwhile, the government borrowing from banks has increased, driven by a fall in revenue income and high-interest payment burden. The government’s borrowing may surpass the target for the fiscal year, considering the remaining months and the usual rise in borrowing during this period. The shortfall in revenue collection against the target further adds to the financial challenges faced by the government.
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