The new fiscal year 2025-26 has begun, but rather than optimism and momentum, it has opened with trepidation. Across Bangladesh, businesses are bracing themselves against a perfect storm of old and new challenges - political tension, energy crises, high interest rates, and declining investor confidence.
While each of these issues is significant on its own, their convergence is creating an environment of uncertainty that is weighing heavily on the private sector. Business leaders, economists, and policy analysts agree that unless swift corrective measures are taken, the economic recovery may not just stall - it may unravel.
Business and Trade Enter New Year in Crisis Mode: The previous fiscal year, 2024-25, closed on a weak note. GDP growth was provisionally estimated at 3.97%, a decline from 4.22% the year before. Key drivers of the economy - the garment industry, small enterprises, and construction - were hit hard by political disruptions, policy inconsistency, and a deteriorating energy supply.
Now, just days into FY 2025-26, indicators suggest that the challenges have not only persisted but are deepening. “There is little sense of relief or renewal,” said Dr. Nazneen Ahmed, Country Economist at UNDP Bangladesh. “The new fiscal year is supposed to be a time of fresh planning, new investments, and forward movement. But instead, businesses are anxious - they are delaying decisions, hoarding cash, and holding their breath for what lies ahead.”
Old Problems Persist: Energy Shortages, Inflation, and Credit Crunch: At the heart of current business troubles is a worsening energy crisis. Industrial areas around Dhaka, Chattogram, and Narayanganj are facing frequent gas outages and low pressure, leading to production delays and increased operational costs. In late May, multiple industry bodies including the Bangladesh Textile Mills Association (BTMA) warned that their factories had been forced to cut output by nearly 40% due to inadequate gas supply.
“The energy crisis is strangling our capacity to operate,” said Khorshed Alam, Director of BTMA. “Yes, we hear promises that LNG imports will help, but what we need is a long-term solution. We cannot run multi-million-dollar operations on weekly assurances.”
Simultaneously, inflation remains high. Essential goods and services have become costlier, squeezing household budgets and shrinking consumer demand - a trend that directly impacts domestic trade and retail businesses.
“Inflation is eating into our margins,” said Nasima Akter, owner of a medium-sized grocery distribution company in Jessore. “We have fewer customers, smaller orders, and rising costs. It’s a losing battle.”
Compounding the problem is the ongoing credit squeeze. The Bangladesh Bank has raised the policy interest rate multiple times since early 2025 to combat inflation and stabilize the banking sector. While this was welcomed in financial circles, it has made borrowing more expensive.
“We understand the need for monetary discipline,” said Sadiq Rahman, a commercial banker in Dhaka. “But the cost has been high - many businesses, especially SMEs, are finding themselves locked out of the credit market altogether.”
Political Uncertainty Overshadows Investment Climate: Perhaps the most daunting challenge facing businesses is political uncertainty ahead of the upcoming national elections. Memories of violent protests, shutdowns, and blockades during the 2014 and 2018 elections remain fresh in the minds of business owners. “We are approaching a potential flashpoint,” said Fazlul Haque, former President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). “The business community is deeply concerned about what lies ahead. If political tension escalates, it will severely damage both domestic confidence and our global reputation.” Foreign investors have already begun to exercise caution. Several proposed joint ventures in sectors like textiles, logistics, and agri-processing have reportedly been put on hold pending political clarity. A recent report by the Japan External Trade Organization (JETRO) highlighted “political instability” as one of the top five risks for Japanese companies operating in Bangladesh.
Exports Under Pressure Amid Global Headwinds: Adding to the domestic troubles are international uncertainties. With the return of Donald Trump to the U.S. presidency, fears have grown about potential tariffs on Bangladeshi exports. As the U.S. remains Bangladesh’s largest single export destination - particularly for ready-made garments - this could deal a heavy blow to trade.
“While countries like Vietnam and India have already begun formal negotiations with Washington, Bangladesh is lagging,” said Dr. Ahsan H. Mansur, Executive Director of the Policy Research Institute (PRI). “We need to move fast, or risk being left behind in the global supply chain reshuffle.”
Meanwhile, in Europe, inflation and recession fears have led to reduced demand for non-essential goods. Export orders for knitwear, leather, and home textiles have declined significantly over the past two quarters.
According to Export Promotion Bureau (EPB) data, exports fell short of targets by 8.2% in FY 2024-25 - a worrying sign for a country where over 85% of foreign earnings come from merchandise exports.
Business Confidence Declining Across the Board: A recent survey by the Dhaka Chamber of Commerce and Industry (DCCI) revealed that 68% of member businesses are “uncertain or pessimistic” about their prospects in the current fiscal year. Over 50% have postponed expansion plans, while 35% are considering reducing their workforce to cut costs. “We are not seeing the green shoots of recovery,” said Ashraf Ali Khan, President of DCCI. “Instead, we are seeing survival strategies. And that’s alarming.”
Small and medium enterprises (SMEs) - which account for nearly 25% of GDP and employ about 7.8 million people - are especially vulnerable. Without access to affordable credit, stable power, or policy support, many SMEs are on the brink of collapse. “If this continues, we could see thousands of SMEs go under in the next 12 months,” warned Professor Selim Raihan, Executive Director of the South Asian Network on Economic Modeling (SANEM). “That would not only increase unemployment but also undo years of progress in rural industrialization.”
What Business Leaders Want: Stability, Reforms, and Dialogue: The business community is not just identifying problems - they are also offering solutions. In a joint statement last week, the FBCCI, MCCI, and DCCI proposed a six-point policy roadmap for economic stabilization. Their recommendations include: A national dialogue on election-time business protection, Immediate reforms in gas and electricity distribution, A partial interest rate subsidy for SMEs in key sectors, Accelerated trade negotiations with the U.S. and EU, Streamlined licensing and customs procedures, An independent business confidence task force. “It’s not too late to course correct,” said Mohammad Jashim Uddin, current President of FBCCI. “But we need political leadership and economic vision to come together. Otherwise, we are headed for a crisis of confidence.”
Central Bank Stands Firm - For Now: In response to criticism, the Bangladesh Bank maintains that its current policy stance is necessary for long-term economic health. “Our goal is to bring inflation within manageable limits, ensure financial discipline, and strengthen the taka,” said a spokesperson. “Short-term pain may be necessary for long-term gain.” Still, the central bank has hinted that it may review interest rates and liquidity policies in the third quarter, depending on inflation trends and global market behavior.
Storm Clouds, But Hope Remains: While the opening of the 2025-26 fiscal year has not brought relief to the business sector, many experts believe that with the right mix of policy coordination, political maturity, and structural reform, Bangladesh can still avoid the worst. “The country has resilience - there’s no doubt about that,” said Dr. Nazneen Ahmed. “But resilience is not infinite. Without stability, the risk is not just economic slowdown - it’s economic regression.” In the coming months, all eyes will be on political developments, energy reforms, and export policy. For now, however, businesses remain cautious - and the mood across commercial Bangladesh is one of guarded survival rather than growth.
As Fazlul Haque aptly noted: “We need stability, not just for the sake of business, but for the future of the country. Business is not just about profit. It’s about jobs, it’s about hope, and it’s about national confidence. That’s what’s really at stake.” The new fiscal year 2025-26 has begun under a cloud of growing uncertainty, as the country’s business and trade sectors continue to struggle with a range of longstanding and emerging challenges. From political instability to energy shortages, interest rate hikes to global trade disruptions, the business community is bracing for a difficult year ahead. Unless swift and decisive steps are taken to restore stability and investor confidence, business leaders warn that the situation could deteriorate further, potentially dragging down the broader economy.
