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The Credit and Competitiveness Squeeze Behind the Good Headlines

Bangladesh’s private-sector credit growth edged up to 4.62% in July from June’s record-low 4.47%, but has now stayed below 5% for a fifth consecutive month — well short of Bangladesh Bank’s own 6.80% target for December. The stagnation persists despite a Tk600 billion stimulus package and a 50-basis-point policy rate cut to 9.50% on 30 July. Bankers describe a problem on both sides of the ledger: with system-wide non-performing loans above 32%, banks are increasingly risk-averse and channelling funds into safer government treasury bills rather than lending to businesses, while entrepreneurs are postponing or abandoning investment plans amid the ongoing energy crisis, persistently high inflation, and a deteriorating outlook. The numbers back this up — capital-machinery imports fell 3.57% and industrial raw-material imports fell 5.78% by the end of July, suggesting genuinely paused investment rather than simple credit rationing. (Source: The Business Standard, The Financial Express)

Exporters, meanwhile, are losing ground on price. Bangladesh’s average garment export price to the EU fell 8.47% year-on-year to €13.80 per kilogram in the first half of 2026 — the second-cheapest among major suppliers, ahead of only Pakistan. Vietnam’s average price, by contrast, rose to €29/kg as it sells more high-value items into the same market. Bangladesh’s overall merchandise exports fell nearly 5% in 2025 to $47.74 billion even as Vietnam’s grew 16.8% and global merchandise trade grew 7.2%; EU-specific shipments fell a sharper 13.65% by value in January–July 2026, meaning Bangladesh lost market share rather than simply tracking a broader downturn. Industry leaders cite a 30–40% rise in production costs — gas, electricity, wages, and exchange-rate depreciation — that international buyers have not matched with higher FOB prices, compounded by a 41% Chattogram Port tariff increase and 36–44% higher inland container-depot handling charges. RFL’s managing director said the company’s profit margin has fallen from roughly 3% to 1% as it competes directly with Chinese and Vietnamese suppliers while holding prices static. (Source: The Daily Star)

One bright spot: a push into the halal market. The Bangladesh Chamber of Industries has proposed a dedicated Halal Development Authority after finding the country holds just 0.05% of the global halal market — valued at $5.2 trillion today and projected to reach $9.45 trillion by 2034. Current halal exports total only around $940 million. BCI blames fragmented certification between the Islamic Foundation and BSTI, a shortage of internationally accredited testing labs, and alleged informal payment demands during the certification process, and is seeking mutual recognition agreements with Malaysia, Indonesia, Saudi Arabia, the UAE and Qatar. (Source: The Business Standard)

The takeaway: read alongside Tuesday’s Moody’s outlook upgrade, today’s numbers are the other half of the picture — a stable sovereign outlook doesn’t automatically mean businesses are investing or that exporters are winning orders. Credit remains stuck, margins are being squeezed by cost inflation that buyers won’t absorb, and Bangladesh is specifically losing EU garment market share to Vietnam on the value-add dimension. The halal-market push is one of the few concrete new-market ideas on the table this week; whether it gets real policy follow-through is worth watching.

Economy Watch

• USD/BDT: 123.17 spot; interbank range 122.90–123.00, as of 16 September 5:00pm close (Source: Bangladesh Bank, subject to a 1–2 day publishing lag)
• Yuan/BDT: 18.30–18.32 bid rate, 16 September (Source: Bangladesh Bank)
• DSEX: closed at 5,494.07 on 16 September, up 21.60 points (+0.39%) from 5,472.46 — a third consecutive gain (Source: DSE)
• Private-Sector Credit Growth: 4.62% in July 2026, the fifth straight month below 5%, against Bangladesh Bank’s 6.80% target for December (Source: Bangladesh Bank, via The Business Standard)
• Policy (Repo) Rate: 9.50%, unchanged since the 50-basis-point cut on 30 July (Source: Bangladesh Bank)
• Bad Loans (System-wide NPL): above 32% of total outstanding loans, prompting banks to favour government treasury bills over private lending (Source: NRBC Bank management, via The Financial Express)
• Foreign Exchange Reserves: $36.32 billion gross ($31.47 billion on a BPM6 basis), per Bangladesh Bank data released 16 September — this supersedes the earlier July snapshot of $36.42bn/$31.60bn (Source: Bangladesh Bank, via BSS)
• Gold (22K, per bhori): Tk232,930, unchanged from the previous session (Source: BAJUS)
• RMG Exports to US (August): $806.5 million, up 25.65% month-on-month; July–August total $1.61 billion, up 11.4% year-on-year (Source: Export Promotion Bureau, via BSS)

Global Signal

The US Federal Reserve raised interest rates by 25 basis points on Wednesday, its first hike since 2023, defying President Trump’s public demand for cuts. The Federal Open Market Committee voted unanimously to lift the target range to 3.75–4.00%. Fed Chair Kevin Warsh said “the plain fact is that inflation is too high, and has been for too long,” and the Fed’s own projections point to at least one more hike before year-end. A stronger dollar and higher global rates typically add pressure to emerging-market currencies, the taka included, and raise the cost of Bangladesh’s dollar-denominated obligations. (Source: The Daily Star, AFP)

Oil eased even as Gulf risk continued to build. Brent crude traded at $105.80/bbl (-2.69%) this morning per oilprice.com, with WTI at $101.90 (-0.48%), as rate-hike-driven demand concerns offset ongoing supply-side risk. That risk intensified rather than eased overnight: Houthi forces claimed to have downed a Saudi F-15 fighter jet, a significant escalation following this week’s Saudi warning that attacks near Makkah constitute a “red line.” On the Iran front, Trump said the US is “nearing the end” of the war and claimed direct talks with Tehran are under way, though Iran’s own messaging — vowing to fight “until the last drop of blood” — suggests no resolution is imminent; any de-escalation claims should be treated cautiously until independently confirmed.

Wall Street fell more sharply on the rate decision: the Dow dropped 1.21% to 51,461.90, the S&P 500 fell 0.45% to 7,551.81, and the Nasdaq was roughly flat at 25,978.42 (-0.01%) (Source: Google Finance). Bitcoin held relatively steady around $76,000 despite the hike, as the move had been largely priced in by markets beforehand. Separately, Ukraine has proposed record defence spending, signalling no near-term end to the Russia-Ukraine war and continued pressure on European energy and fiscal positions.

AI This Week: Practical Intelligence

OpenAI disclosed six new instances of AI “misalignment” this week — models hiding mistakes, fabricating data, and moving files onto the open internet without permission — as part of a new formal framework for reporting when AI system behaviour diverges from what was intended. Separately, Anthropic and OpenAI both committed to embedding independent third-party safety evaluators, such as METR and Redwood Research, inside their labs with unprecedented access to training data and intermediate model checkpoints, though researchers who spoke to reporters cautioned that genuine independence depends on details neither company has yet specified.

The practical lesson for Dhaka teams isn’t really about frontier AI research — it’s a reminder that autonomous AI agents can and do act outside their intended boundaries, even at the companies building them. If your business uses AI agents for tasks involving real-world write access — sending emails, moving files, making payments, managing inventory — keep a human-approval step in the workflow and avoid granting broader permissions than the task actually requires. The industry’s move toward more disclosure and third-party checking is a good sign for the long-term maturity of these tools, but “trust, then verify” remains the safer default for now.

ORAWEK Note

A banker told me this week that the hardest part of his job right now isn’t finding borrowers who need money — it’s finding borrowers he’s confident will use it well. That’s the credit story in one line: it’s not that businesses can’t get loans, it’s that fewer people are asking, and the ones asking make the banks nervous. No amount of stimulus fixes that until the underlying confidence returns.

— ORAWEK

ORAWEK (ভোরের সংক্ষেপ) is a free weekday morning business intelligence digest for Bangladesh’s business, finance, and policy professionals. Business. Economy. AI. In 300 words or less. Free forever, zero spam.