[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Enabling inflow of fresh FDI

For an economy struggling to stimulate private investment and generate employment, the persistent failure to attract foreign direct investment (FDI) is indeed troubling. And that is despite the generous fiscal incentives and tax holidays being offered to foreign investors. According to the latest B

thefinancialexpress.com.bd

Enabling inflow of fresh FDI

For an economy struggling to stimulate private investment and generate employment, the persistent failure to attract foreign direct investment (FDI) is indeed troubling. And that is despite the generous fiscal incentives and tax holidays being offered to foreign investors. According to the latest Bangladesh Bank (BB) figures, net FDI inflows during the first half of 2026 dropped by about 28 per cent to USD794 million from over USD1.1 billion in the corresponding period last year. More concerning is the fall in fresh equity capital from USD345 million to just USD156 million. Meanwhile, reinvested earnings of multinational companies (MNCs) increased markedly.

Admittedly, their retaining profits is a positive sign. But reinvestment reflected in company accounts should not be confused with new capital being brought from abroad to set up industries or expand businesses. Evidently, potential investors are taking a wait-and-see approach. So, what is holding them back? In fact, foreign investors, who have the option of choosing among competing destinations, look beyond the tax concessions on offer. They also take into cognizance the chronic shortages of gas and electricity, inadequate logistics and port facilities, rising production costs and the bureaucratic hassles involved in obtaining permissions. In addition, there are macroeconomic challenges such as high inflation, volatility in the exchange rate regime and uncertainties arising from global trade disputes and geopolitical tensions. Understandably, investors are reluctant to undertake long-term projects under such conditions. Worse still, the country's financial sector, already weakened by massive non-performing loans (NPLs), poor governance and shortages of credit for productive industries, hardly inspires confidence. The NPL ratio, reportedly, reached 33.2 per cent last June. And international credit-rating agencies' adverse assessments of Bangladesh's sovereign risk do not help matters either. Clearly, fiscal baits cannot compensate for such structural weaknesses in an economy.

However, what is particularly disconcerting is that the government is failing to make the best of the reforms it has already introduced. According to the foreign investors' chambers, as reported in last Monday's exclusive carried by this paper, NBR's field-level officials often interpret tax regulations differently or are insufficiently informed of the changes made at the policy level. The outcome is procedural complexity, uncertain assessments, delayed refunds and sometimes multiple audits of compliant companies. But the revenue authority, rather than widening the tax net, appears more inclined to squeeze additional revenue from those who already pay taxes. In this connection, the Finance Act 2026's withdrawal of the minimum tax provision and announcement of a roadmap for tax rates deserve appreciation. But the increase in turnover tax to 1.0 per cent and reintroduction of monthly VAT returns have raised fresh concerns among businesses. Worse yet, limited understanding of international accounting standards and multinational companies' enterprise resource planning systems often leads to assessments divorced from actual transactions. Can an investor plan confidently when the rules are applied so unpredictably?

In that case, the government's task is not simply to announce another package of tax holidays or hold investment promotion events. It needs to restore discipline in the banking sector, ensure dependable energy supply, upgrade infrastructure and remove layers of official approval. Equally urgent is reforming the tax administration through digitisation, automated refunds, consistent interpretation of regulations and rationalisation of sector-specific taxes. The operational circulars issued on fiscal reforms must reach the field offices and be followed in letter and spirit, not stymied by bureaucratic sloth. In a similar vein, dialogue with foreign investors and domestic businesses should help identify and settle issues before they turn into disputes. Perhaps, the experiences of those already operating here generate the most credible publicity for the country's investment climate. Therefore, until the government translates its declared investor-friendly policies into a predictable and workable business environment, generous incentives alone will not bring the much-needed fresh foreign capital.​

 

[Saif]

Bangladeshis spending nearly four times abroad what foreigners spend here using cards

Bangladeshis continue to spend significantly more using cards abroad than foreign nationals spend within Bangladesh, with outbound card transactions outpacing inbound spending by nearly fourfold, according to the latest central bank data. In August, transactions made by Bangladeshis using cards ab

thefinancialexpress.com.bd

Bangladeshis spending nearly four times abroad what foreigners spend here using cards

Bangladeshis continue to spend significantly more using cards abroad than foreign nationals spend within Bangladesh, with outbound card transactions outpacing inbound spending by nearly fourfold, according to the latest central bank data.

In August, transactions made by Bangladeshis using cards abroad reached approximately Tk 987 crore, a slight increase from Tk 985 crore in July. In contrast, foreign nationals spent about Tk 249 crore using cards inside Bangladesh in August, reflecting a 6.27 percent increase from Tk 234 crore the previous month.

The wide gap between the two figures highlights the growing scale of international card-based expenditures by domestic users.

According to Bangladesh Bank data, outbound expenditures in August comprised Tk 504.60 crore through credit cards, Tk 422.10 crore via debit cards, and Tk 60.10 crore using prepaid cards.

When using credit cards abroad, the United States remained the top destination for Bangladeshis, accounting for 17.16 percent of total foreign credit card transactions. The US was followed by Thailand, the United Kingdom, India, and Singapore.

For debit cards, the UK topped the list with 14.19 percent of total transactions, while India accounted for the highest share of prepaid card usage at 18.71 percent.

Domestic Credit Card Spending Dips:

While spending abroad increased, domestic credit card transactions within the country experienced a decline. Domestic transactions dropped by 5.44 percent, falling from Tk 4,324.80 crore in July to Tk 4,089.30 crore in August.

Department stores accounted for the largest share of domestic credit card transactions at 48.14 percent. This was followed by retail outlets at 12.67 percent, utility bill payments at 10.80 percent, pharmacies and drug stores at 6.94 percent, and cash withdrawals at 6.43 percent.

Despite the overall dip in domestic credit card turnover, spending in specific categories saw growth; transactions at retail outlets rose from Tk 477.90 crore to Tk 518.30 crore, alongside increases in utility payments, pharmaceuticals, clothing, and transportation sectors.

Data from the central bank reveals a substantial surge in plastic money adoption over the past five years. At the end of September 2021, the country had 2.42 crore debit cards, 17.63 lakh credit cards, and 10.27 lakh prepaid cards.

By August 2026, those numbers expanded to roughly 4 crore debit cards, 28.05 lakh credit cards, and 92.71 lakh prepaid cards. Overall, the total number of cards surged by 96 percent over five years, while transaction volumes grew by 103 percent, with prepaid cards witnessing the fastest growth rate.

By the end of August, the total approved credit limit against credit cards stood at Tk 43,108 crore, with outstanding loans amounting to Tk 14,482 crore.

Commenting on the trends, Bangladesh Bank Executive Director and Spokesperson Arif Hossain Khan told the press that the central bank has been implementing various initiatives to discourage cash transactions and promote digital payments. Alongside card usage, ongoing efforts include expanding interoperable digital payment methods such as the Bangla QR code system.​

 

[Saif]

Money supply beating output growth pace fuels inflation

Money supply outpacing production growth in the economy ignites inflation in Bangladesh as government borrowing creates liquidity splurge while private-sector-credit flow slows amid production deceleration. Such is the latest evaluation of the country's macroeconomic main features by the Wor

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Money supply beating output growth pace fuels inflation
WB finds broad money circulation in economy double in a year to last May, adding fuel to inflation flames

Money supply outpacing production growth in the economy ignites inflation in Bangladesh as government borrowing creates liquidity splurge while private-sector-credit flow slows amid production deceleration.

Such is the latest evaluation of the country's macroeconomic main features by the World Bank, as inflationary pressures remain waywardly high, pushed by broad money supply in excess.

The monetary expansion is becoming more closely associated with the inflationary pressures following the increased supply of broad money, it says.

Broad money, encapsulated M2, growth accelerated from 6.5 per cent in June 2025 to 12.4 per cent in May 2026, while inflation remained elevated through FY2025-26, the latest World Bank (WB) report on Bangladesh has said.

The development financier has predicted that the link (between broad money and inflation) may be strengthening, as monetary expansion increasingly coincides with persistent price pressures.

Broad money or M2 consists of M1 or all currency plus checkable deposits plus small-time and-savings deposits.

It is believed that if the total money supply grows faster than the actual production of goods and services, inflation goes up.

The Bank report says the recent trend suggests that monetary expansion may be contributing more directly to price pressures than in previous years, when the relationship between money-supply growth and inflation was "less pronounced", the report reads.

The moderation in money-supply growth in earlier periods was partly driven by substantial foreign-exchange sales by Bangladesh Bank (BB).

Recent developments, however, point to a shift in the relationship between liquidity and prices.

Understanding the change requires examining the composition of broad- money expansion.

Growth in M2 has been driven by increases in both net domestic assets (NDA) and net foreign assets (NFA), according to the World Bank.

On the domestic front, the expansion was concentrated in public-sector borrowing, which grew more than 20 per cent.

"Much of the borrowing financed current expenditure, including subsidies and interest payments, rather than productive investment."

At the same time, private-sector credit growth fell to a multi-decade low, limiting the flow of funds into businesses and constraining economic activity.

On the external side, rising remittance inflows and associated foreign- exchange purchases by the central bank provided an additional source of monetary stimulus.

Consequently, monetary expansion became increasingly detached from productive activity, contributing relatively little to real gross domestic product (GDP) growth.

In earlier periods, money-supply growth was supported by investment capable of expanding production as the private-sector credit growth that period was good.

But the recent increases in M2 have largely reflected fiscal deficits and central bank operations.

With structural bottlenecks constraining output, additional liquidity has increasingly fed into price pressures rather than generating a commensurate increase in production. The relationship between money-supply growth and inflation has also evolved over time.

During FY2017-FY2021, the two variables showed little consistent association.

In FY2022-FY2025, however, inflation surged above 9.0 per cent and remained persistently elevated, even as M2 growth moderated.

The World Bank has attributed much of the inflation surge, however, to supply-side shocks, particularly sharp increases in fuel prices and a significant depreciation of the local currency.​

 

[Saif]

Govt moves to ease capital repatriation to boost investor confidence

The government has planned to introduce a 30-day deadline for processing applications to repatriate profits from lawful foreign investments, alongside a series of financial reforms aimed at reducing business costs and strengthening investor confidence. The proposed measures, outlined in a budget d

thefinancialexpress.com.bd

Govt moves to ease capital repatriation to boost investor confidence

The government has planned to introduce a 30-day deadline for processing applications to repatriate profits from lawful foreign investments, alongside a series of financial reforms aimed at reducing business costs and strengthening investor confidence.

The proposed measures, outlined in a budget document, seek to address administrative bottlenecks affecting foreign investors while making banking services, foreign trade transactions and access to financing more efficient.

The document says coordination among banking verification, tax-related documents and approval processes will be strengthened to ensure timely processing of profit repatriation applications.

The government has also simplified the repatriation and reinvestment of proceeds from shares or securities purchased through a Non-Resident Investors’ Taka Account (NITA).

The requirement for an auditor’s certificate has been withdrawn, allowing such proceeds to be credited directly to the relevant NITA. This will enable repatriation and reinvestment within one working day and reduce compliance costs.

Share transfers and capital repatriation involving unlisted companies will also become easier. No valuation report will be required for transactions worth up to Tk 10 million (Tk 1 crore), while repatriation of transaction proceeds of up to Tk 1.0 billion (Tk 100 crore) will be allowed without prior approval from Bangladesh Bank.

For larger transactions, licensed valuation firms will be introduced to ensure more neutral and acceptable share valuations.

The government is also considering a certification board comprising representatives from Bangladesh Bank, the Bangladesh Investment Development Authority (BIDA), the Bangladesh Securities and Exchange Commission (BSEC), the National Board of Revenue and the private sector.

Acceptance of reports from approved valuation firms could reduce repeated verification and delays in capital repatriation.

To cut the time and cost of foreign trade, the government will consider gradually relaxing the mandatory use of letters of credit for reliable importers and low-risk goods. The use of Documents against Payment (D/P) and Telegraphic Transfer (TT) will be expanded where appropriate.

Companies registered in Bangladesh will also be able to obtain loans in taka against foreign bank guarantees or Standby Letters of Credit (SBLC), regardless of their ownership or control structure, subject to applicable rules.

The requirement for separate prior approval for each loan from an Offshore Banking Unit (OBU) will be reviewed. However, existing provisions on Credit Information Bureau reporting, single-borrower limits, loan classification and provisioning will remain in force.

The approval process for renting, leasing, renewing and relocating bank branches and business centres has also been simplified. Within prescribed region-wise rent ceilings, banks may take such decisions with approval from their boards of directors.

The government has further simplified the process of obtaining a Sukuk Investor ID (SIID) for investment in government Sukuk by determining the required application forms, documents and fee structures.

To expand digital financial services, Real Time Gross Settlement (RTGS) will be made more effective, with faster payment and settlement arrangements among banks, mobile financial service providers and other payment platforms.

The document says the introduction of digital small loans, or e-Loans, has been permitted. Loans of up to Tk 500,000 (Tk 5 lakh) may be provided for 12 months through a fully digital process to improve access to credit and reduce customers’ time and operational costs.

Pre-suit mediation has also been encouraged for recovering defaulted loans to reduce court-related delays and expenses and improve recovery efficiency.

The government has relaxed lending rules for environment-friendly vehicles and personal financing.

The maximum auto loan for electric and hybrid vehicles has been increased from Tk 6.0 million (Tk 60 lakh) to Tk 8.0 million (Tk 80 lakh), while the debt-equity ratio has been raised from 60:40 to 80:20.

The ceiling for unsecured personal loans has been doubled from Tk 500,000 (Tk 5 lakh) to Tk 1.0 million (Tk 10 lakh), while secured personal loans may now be provided up to Tk 4.0 million (Tk 40 lakh).

Credit card limits have also been increased. The maximum limit for unsecured credit cards has risen from Tk 1.0 million (Tk 10 lakh) to Tk 2.0 million (Tk 20 lakh), while the limit against securities has increased from Tk 2.0 million (Tk 20 lakh) to Tk 4.0 million (Tk 40 lakh).

Banks may introduce new credit cards with approval from their boards of directors without obtaining prior approval from Bangladesh Bank.

The document says the measures are intended to reduce administrative complexity and costs across investment, foreign trade, banking and lending, while strengthening investor confidence, financial inclusion and the growth of the digital economy.​