Energy woes, investment slump shake industry base
Reza Mahmud :
Bangladesh’s industrial sector is facing increasing distress due to a convergence of critical challenges, including a persistent energy crisis, record-high default loans, soaring inflation, declining foreign investment, and a drop in private sector credit growth, stakeholders have warned.
A severe liquidity crunch in the banking sector, unchecked non-performing loans, stagnating investment, and rising pressure on foreign exchange reserves have collectively undermined the country’s economic foundation. These structural issues are further compounded by stringent conditions set by the International Monetary Fund (IMF), political uncertainty, and internal policy shortcomings.
Of particular concern is the worsening situation in the ready-made garment (RMG) sector-the country’s largest export industry. Export volumes have declined while production costs have surged. Combined with global geopolitical instability and inadequate government support, the sector is navigating a period of heightened anxiety and financial stress.
Speaking to The New Nation, Dhaka Chamber of Commerce and Industry (DCCI) President Taskeen Ahmad said the ongoing gas supply shortage had placed businesses in an extremely difficult position. “The situation has become critical. Unless these issues are resolved, there will be no significant foreign direct investment (FDI), and even local entrepreneurs will be discouraged from making further investments,” he said.
Mohammad Hatem, President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and Managing Director of MB Knit Fashion Ltd, echoed similar concerns. “The industrial sector has been reeling from a chronic gas crisis, causing repeated delays in shipments and significant financial losses for many businesses,” he said.
Hatem also noted that the situation had deteriorated during the final years of the previous government, citing the discontinuation of the Export Development Fund (EDF), withdrawal of export incentives, and rising interest rates under former Bangladesh Bank Governor Abdur Rouf Talukder.
“Even after the interim government assumed office in August 2024, the problems persisted. In April this year, a Tk 10,000 crore special fund was withdrawn, and a six-month loan rescheduling facility for defaulters was scrapped following IMF recommendations,” he added.
To compound matters, the United States recently imposed an additional 10 per cent tariff on Bangladeshi garment exports. “Buyers have responded by reducing prices by up to 5 per cent, putting further pressure on already strained capital bases,” Hatem said.
BGMEA Director Mohiuddin Rubel told The New Nation that garment manufacturers are now engaged in a “battle for survival,” with little prospect of accessing new export markets.
Experts have voiced similar concerns, particularly over the growing difficulties small and medium-sized enterprises (SMEs) face in accessing finance. Despite their critical role in employment generation, banks are reportedly prioritising large corporations over SMEs due to ongoing liquidity issues.
“SMEs are suffocating due to inadequate loan disbursement,” said Professor Dr Muhammad Mahboob Ali, economist and former banker. “It is essential that authorities prioritise SME funding to safeguard economic growth and preserve jobs.”
Industry insiders reported that power and gas shortages are disrupting production in sectors such as garments, ceramics, pharmaceuticals, and agro-processing. These disruptions are raising fears of cancelled export orders and missed delivery deadlines.
Inflation has also added to the sector’s woes, with general inflation recorded at 9.5 per cent in May 2025. The continued increase in the prices of essential items like rice, lentils, edible oil, and onions is disproportionately affecting low- and middle-income households.
In a bid to contain inflation, the Bangladesh Bank has raised the policy interest rate to 10 per cent – one of the highest in the country’s history. Entrepreneurs are now facing borrowing rates of 15-16 per cent, further discouraging investment and expansion.
Meanwhile, foreign investment continues to slide. According to the World Investment Report 2025 released by UNCTAD, net foreign direct investment in Bangladesh declined for the fourth consecutive year, falling by 13.2 per cent to $1.27 billion in 2024 from $1.47 billion in 2023.
Stakeholders have urged the government to take immediate, targeted measures to support the industrial sector. Without urgent reforms and support, they warn, the current trajectory could endanger both economic stability and employment across the country.