The ongoing economic recovery remains fragile as investment appetite stays weak, private credit growth is on decline, and political uncertainty continues to weigh on business confidence despite good performances of exports and remittances, moderating inflation and strengthening foreign exchange reserve.
Local think-tank Policy Research Institute said this on Thursday while releasing its Monthly Macroeconomic Insights for the September–October of 2025 at a discussion meeting at office in the capital.
The report has been prepared by the Policy Research Institute in partnership with the Department of Foreign Affairs and Trade of the Australian government.
Highlighting the financial-sector vulnerabilities, the report said that the non-performing loan has reached around Tk 6.4 trillion, 35.7 per cent of the Tk 18.04 trillion loans despite slowing down its growth during the first quarter the current financial year of 2025-26.
The distressed assets of the banking sector stood at Tk 9.5 trillion, said the Policy Research Institute on Thursday.
Anwar-ul-Alam Chowdhury, president of the Bangladesh Chamber of Industries attended the event as the chief guest.
PRI chair Dr Zaidi Sattar presided over the event that was also participated, among others, by Dr Nasiruddin Ahmed, former chair of the National Board of Revenue, Dr AKM Atiqur Rahman, Professor of North South University, and Dr Wasel Bin Shadat, research director of the Business Initiative Leading Development (BUILD)?.
Anwar-ul-Alam Chowdhury emphasised the importance of prioritising local development supported by a stable political environment.
Ensuring regular and credible elections is essential for sustained progress, he said.
Atiqur Rahman noted that without the July mass uprising, the true scale of rising NPLs would have remained hidden, raising doubts about the economy’s ability to sustain itself.
Underscoring the need for strong governance reforms and a comprehensive NPL resolution system not only as an imperative for the banking sector but also for the macroeconomy, PRI principal economist Ashikur Rahman delivered the keynote.
Ashikur Rahman said that keeping an estimated Tk 6.4 trillion in NPLs on the financial sector balance sheet had profound macroeconomic consequences.
Such a massive volume of bad loans forces banks to maintain high lending rates, to repeatedly seek liquidity support from the central bank, and to curtail the flow of credit to productive sectors, he commented.
The result is a toxic cycle: investment slows, inflationary pressures rise, and growth weakens, he added.
Though the growth of NPL has slowed down to 6 per cent in the July-September period of FY26, compared to 42.75 per cent growth in the April-June period of FY2025, the overall NPLs stood at the highest level in 25 years, said PRI.
Previously, NPLs volume stood at 41.1 per cent in 1999, declined steadily to an all-time low of 6.1 per cent in 2011, and have been rising since then, PRI said.
With the distressed assets standing at around Tk 9.5 trillion, the deteriorating asset quality threatened credit flows and economic recovery, said the report.
In his remarks, Dr Sattar highlighted that the rising Real Effective Exchange Rate index since May should be concerning to the exporter community as it indicates erosion of competitiveness.
The Bangladesh Bank can no longer purchase dollars from the market to depreciate the taka. Therefore, loosening import restrictions is the only viable option, he said, adding that this would also benefit exporters.
He said that more vibrant imports would support better exchange-rate management under the current flexible regime and contribute to a more dynamic export environment.
