Private sector credit grew by 6.1% in December, which was the lowest in four years due to political uncertainty and an economic slowdown, signalling stagnant investment, as reported by The Daily Star quoting Bangladesh Bank.
The growth was achieved against Bangladesh Bank’s target of 7.2% set in July-December monetary policy.
The slowing credit growth caused mainly by political uncertainty, slow implementation of public sector development projects and tightening monetary policy to control prevailing inflation that hover above 8% during last few months.
The International Monetary Fund (IMF) expressed in its latest report published on 30 January 2026 on Bangladesh that unresolved banking issues would further limit credit, reduce investment, and slow growth. High non-performing loans and undercapitalisation in the banking sector restrict banks’ ability to provide credit for private sector development.
For starters, Private sector credit growth refers to the rate at which loans and other forms of financing are extended to households and non-financial businesses. It is a crucial indicator of economic activity and financial health, as increasing credit often signals rising consumer confidence and business investment, fueling economic expansion. However, sustained high growth can also lead to elevated debt levels, potentially creating vulnerabilities in the financial system if asset bubbles form or if borrowers become overleveraged. Central banks and policymakers closely monitor this metric, as it influences monetary policy decisions aimed at balancing the need for economic growth with the imperative of maintaining financial stability.
