Bangladesh Bank has acknowledged that the immediate financial fears that gripped the country have passed, but the central bank is not entirely satisfied with the progress made in restoring financial stability. Executive Director and Spokesperson HusneAraShikha addressed the media on January 7, stating that while some positive steps have been taken, the financial sector has not yet fully stabilized.
Shikha emphasized that over the past five months, Bangladesh Bank has implemented several initiatives aimed at ensuring long-term stability, including restructuring boards of commercial banks, forming a banking task force, stabilizing the dollar market, and taking measures to control inflation. However, while some of these measures have yielded positive results, many of the desired outcomes are still pending.”We are not completely happy with the achievements so far,” said Shikha, explaining that while the immediate financial risks have been mitigated, a full recovery and stabilization of the financial system will take more time.
When asked about the issue of money laundering, Shikha stated that by the end of 2025, the central bank would have a clearer understanding of how much illicit money has been transferred abroad and through which banks. However, she clarified that the recovery process for such funds is slow, and the relevant agencies are handling this matter with confidentiality for security reasons.
Regarding inflation, Shikha confirmed that Bangladesh Bank had increased the policy interest rate multiple times in an effort to curb rising inflation. Although the central bank hopes to see inflation levels decrease in January, Shikha warned that if the situation does not improve, further interest rate hikes may be necessary. However, such actions are not welcomed by business owners, who face the challenge of higher borrowing costs.
The central bank spokesperson also discussed the troubling slowdown in private sector credit growth, which reached a low of 7.66 percent in November 2024 - the lowest rate in the last three and a half years. This sharp decline is largely attributed to political instability, fraud-related concerns, and the suspension of new loans by weak banks that have undergone board changes.
In response to the decreased demand for credit, many banks have opted to invest in government treasury bills and bonds, which offer more guaranteed returns compared to lending. As a result, several banks have reported record profits in 2024, driven by these less risky investments.
Shikha acknowledged that the central bank’s efforts to stabilize the economy are not enough on their own to boost investment. She pointed out that factors such as infrastructure development, energy supply, and communication systems also play a critical role in fostering a favorable environment for business and investment growth. “The efforts of the central bank alone will not be enough to reduce inflation and stimulate investment,” she concluded.
While Bangladesh Bank had set a credit growth target of 9.8 percent for the first half of the 2024-25 fiscal year, the actual growth in private sector credit came in at just 7.66 percent by November. This represents a significant shortfall and highlights the broader economic challenges that continue to affect the country’s financial stability.
While Bangladesh Bank has managed to alleviate the immediate financial fears that plagued the country, the central bank is not entirely satisfied with the progress made over the past five months. Executive Director and Spokesperson, HusneAraShikha, shared her insights during a press conference on Tuesday, where she discussed the steps taken to stabilize the financial sector and the challenges that remain.
Shikha explained that in the last five months, Bangladesh Bank has taken significant actions, including restructuring commercial bank boards, forming a banking task force, stabilizing the dollar market, and working on controlling inflation. While some benefits have been achieved, the full results of these measures will take more time to materialize. Despite some improvements, she emphasized that the financial sector has not yet fully regained stability, and thus, Bangladesh Bank remains cautious about celebrating its accomplishments.
“We are not very happy with the achievements so far,” said Shikha, adding that while the immediate financial fears have passed, more time is needed for complete stability.
When questioned about the progress on addressing money laundering, Shikha stated that by the end of 2025, there will be clarity on how much money has been laundered and to which countries. However, she noted that recovering laundered funds is a slow process, with designated agencies working on the matter. These agencies do not share such information with the central bank for security reasons.
Regarding inflation, Shikha confirmed that Bangladesh Bank had raised the policy rate multiple times to control inflation. While she expressed hope that inflation would decrease in January, she acknowledged that if it did not, further interest rate hikes might be necessary. However, this strategy is not welcomed by the business community, which is already struggling with higher interest payments on loans.
Shikha also highlighted the ongoing challenges in the credit market, noting that the private sector’s credit growth has dropped to a record low of 7.66 percent in November 2024, the lowest in three and a half years. This decline is attributed to factors such as political unrest, benami fraud, and the suspension of new loans by weak banks that have undergone board changes. As a result, many banks have shifted their focus to investing in government treasury bills and bonds, which offer guaranteed profits without the risks associated with lending.
This shift in investment strategy has led to a significant increase in the operating profits of some banks, reaching record highs in 2024.
Shikha emphasized that controlling inflation and boosting investment requires efforts beyond just adjusting interest rates. Other factors, such as infrastructure development, energy supply, and communication systems, also play a crucial role in fostering a conducive environment for investment growth. “It is not possible to completely reduce inflation with the sole efforts of the central bank,” she concluded.
Despite the central bank’s target of 9.8 percent credit growth for the first half of the 2024-25 fiscal year, the actual growth fell short, reaching only 7.66 percent in November. This performance is below the target and reflects the broader economic challenges facing the country. As Bangladesh Bank works to restore financial stability, the ongoing economic uncertainties continue to pose significant hurdles for both businesses and consumers.
