Bangladesh’s industrial sector-a backbone of its economic aspirations-is collapsing under pressure from an unfolding energy crisis, rampant inflation, currency volatility, and a credit crunch. Industry insiders now say production has fallen as much as 50%, with widespread factory shutdowns threatening livelihoods, export earnings, and investor confidence.
A broad consensus has emerged among business leaders and independent economists: without swift, decisive action, the transition from middle-income ambition to actual advancement could unravel-and fast.
The Energy Crisis: A Critical Breaking Point: Industrial hubs across the country-from Dhaka and Gazipur to Narayanganj, Narsindi, and Savar-are experiencing unprecedented gas shortages. Facilities requiring sustained pressure of 15 PSI, particularly in textiles, ceramics, steel, and captive power plants, are operating at drastically reduced levels-often between 2-3 PSI, or outright shutdowns.
Showkat Aziz Russell, President of the Bangladesh Textile Mills Association (BTMA), warns: “Around 50 percent of textile mills have shut down due to the gas shortage.”
Ceramic factories-reliant on gas not just for power but as a raw material-have also seen output halve, with many temporarily offline or operating far below capacity.
BTMA Vice President Saleud Zaman Khan cautions that half of the country’s factories may close in the next two to three months if the energy squeeze continues.
Output Down 50-60%, Default Risk Rising: A report from February 2025 highlights that manufacturing across key industrial sectors has dived 50-60% due to the gas crisis. The domino effect is taking a financial toll: low or halted output triggers revenue loss, triggers delayed loan installments, and worsens non-performing loan (NPL) ratios-fueling a cycle of economic fragility. The Inflation Paradox: Stagnant Output and Squeezed Wallets: Bangladesh has endured persistent inflation above 9% since March 2024. Consumer spending has dropped-amid rising living costs, lower disposable incomes, and shrinking confidence-compounding the pain on factory production. Md Fazlul Hoque, former BGMEA president, observes: “The local currency has weakened… prices of gas and electricity have gone up… consumers buy less because their purchasing power has eroded.”
Zaved Akhtar, Unilever Bangladesh MD, adds: “Inflation… along with economic headwinds… impacted consumers.” Soaps, detergents, and other non-essentials are now seeing demand slump.
Currency Depreciation and Elevated Costs: The taka has depreciated sharply, now hovering around Tk?120 per US$, compared to Tk?85 previously. The exchange-rate hit has inflated the cost of imported raw materials, increased operational expenditure for exporters, and worsened debt-service burdens. Fazle Shamim Ehsan, BKMEA executive president, warns that borrowers approved for $1 LCs at Tk?85 now face payment obligations at much higher rates-far beyond their margins.
Financial Crunch: Rising Defaults, Restricted Credit: Non-performing loans across Bangladesh’s banking system now exceed 24%, with some weaker banks surpassing 40%, while stable institutions maintain NPLs between 5-7%. To tighten liquidity, Bangladesh Bank has raised interest rates above 14%, with Commercial Loan Rates at 16% or higher. Bangladesh Chamber of Commerce Survey (Nov 2024) reports industrial production in some sectors hit zero, due to LC delays and energy shortfalls.
Business Leaders Sound the Alarm: Abdul Awal Mintoo, ex-FBCCI president warns fourfold crisis: security instability, high costs, tightening loans, and unemployment. He says job creation has been choked off.
Mohammad Hatem, BKMEA President highlights banking sector’s failure to support raw-material imports; cites 18-day delay on a $700k LC application.
Ahsan Khan Chowdhury, Pran-RFL Group CEO notes fragile law-and-order, causing factory closures and undermining investor trust; safety now a top concern. Kamran T Rahman, MCCI President mentions liquidity squeeze, high interest rates, and shifting buyer commitments abroad as a response to uncertainty.
M Masrur Reaz, Policy Exchange Chairman identifies inflation + rate hikes + supply chain disruption as fatal combination; monetary policy alone insufficient.
Economists’ Perspective: Dr. Zahid Hussain, ex?World Bank economist, highlights investor flight due to political instability and poor energy conditions.
Dr. Mashrur Riaz, Policy Exchange, warns: stagnating industrial output suppresses jobs; political uncertainty worsens investment climate. Dr. Mustafizur Rahman, CPD Fellow, attributes low industrial growth (6.66% in FY24 vs 10.29% in FY21) to policy shortcomings, weak investment, high interest-calling for efficiency reforms.
Economic Ripple Effects: Bangladesh’s export competitiveness is under siege. The ready-made garment sector has seen decline-exports grew only 3.93% in July-April FY24 versus 5.38% last year. U.S. buyers are shifting supply to Cambodia, Indonesia-worrying signals for Bangladesh.
Small entrepreneurs and informal sector workers are facing mass job losses, fueling poverty and social anxiety. Capital machinery imports dropped 43.7%, raw material imports down 9.8% in early FY25-a sign of tightened production capacity.
Proposed Fixes & Reforms: Diversify energy sources: ramp gas recovery, invest in LNG infrastructure, rooftop solar, coal plants, offshore energy-ambitious targets to close supply gap. Public-Private Asset Management Company: to deal with NPL recovery and rehabilitate good loans into performing assets. Interest rate rationalization: freeze or lower lending rates to aid SMEs and exporters; manage inflation via supply-side interventions, not purely monetary tools.
Strengthen policy coordination: between financial, industrial, energy, and investor-safety segments; a whole-of-government approach is essential. Enhanced regulatory oversight: cap default rates, increase bank accountability, shield depositors and borrowers alike.
Positive Signs, But Risks Remain: According to Bangladesh Bank, reserves have stabilized recently after mid-year devaluations; market-based currency mechanism has restored some entrepreneurial trust. Still, inflation at near double digits and energy instability continue to choke recovery. Resilience lies in fast reform and execution. Business leaders emphasize that relying on monetary policy alone is insufficient; government must coordinate structural reforms.
The Road Ahead: At Risk: Bangladesh once boasted industrial expansion of over 10% annually in early 2020s. Now growth rates hover at 3-6%, the lowest in a decade. Gas shortages, loan defaults, inflation, credit freeze-together, these pose a systemic threat. The message is urgent: without unified action to secure energy, stabilize currency, mobilize credit, and end default spirals, the risk is not just stagnation but regression. As BTMA Vice President puts it, half of Bangladesh’s industries are at brink, and closure within months is real. Policymakers must act-now.
