In a single 24-hour window, Bangladesh’s economic landscape was reshaped by three powerful forces: record-breaking foreign investment, a massive state-backed industrial revival scheme, and a sudden escalation of geopolitical tensions in the Middle East. Together, they paint a picture of an economy at a critical inflection point — one where domestic policy ambition meets global volatility head-on.

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FDI Surges 44%: Bangladesh’s Comeback Story

Bangladesh recorded its strongest foreign direct investment (FDI) performance in five years in 2025, with inflows surging 44% to $1.78 billion** — up from $1.23 billion in 2024 — according to the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2026, released on 7 July.

The rebound, which ended two consecutive years of decline, positions Bangladesh as the fastest-growing FDI destination in South Asia and the third-largest recipient of overseas capital in the region after India and Pakistan. This achievement is particularly notable given the challenging global investment environment marked by geopolitical tensions, trade uncertainties, and high financing costs.

Key metrics from the UNCTAD report include:

Source: UNCTAD World Investment Report 2026

“Bangladesh’s strong growth rate stands out within the South Asian region,” UNCTAD noted, highlighting that the country “continues to rely heavily on domestic investment, which remains a key strength of Bangladesh’s growth model”.

The global context is equally telling: worldwide FDI rose to $1.62 trillion in 2025 from $1.53 trillion in 2024, though UNCTAD cautioned that “the recovery remains narrow, fragile and uneven”. Developing Asia remained the largest recipient region, attracting $644 billion in FDI.

What this means for Bangladesh: The FDI surge reflects growing international investor confidence, driven by the country’s large domestic market, competitive workforce, strategic geographic location, and ongoing economic reforms. With GDP exceeding half a trillion dollars, Bangladesh is increasingly viewed as a long-term investment destination with significant untapped potential. However, experts note that Bangladesh’s FDI-to-GDP ratio of just 4.0% still lags far behind regional peers like Cambodia (11%), Indonesia (22%), and Vietnam (54%) — suggesting substantial room for further expansion.

BB’s Tk 20,000cr Pre-Finance Scheme: Reviving Closed Industries

On the same day UNCTAD released its FDI report, Bangladesh Bank launched a Tk 20,000 crore (approximately $1.63 billion) revolving pre-finance scheme to revive closed and underutilized large-scale industrial and service sector enterprises.

The “Closed Industry and Service Sector Facilitation Pre-finance Scheme” aims to restore production, create employment, and strengthen the country’s industrial base in line with the National Industry Policy.

Key Features of the Scheme:

Source: Bangladesh Bank Circular BRPD-1 No. 13

Funds may be used for:

• Procurement of raw materials

• Payment of utility bills

• Execution of export orders

• Payment of up to four months’ salaries and wages (through bank accounts or MFS only)

Strong governance measures include: borrowers must obtain certification from trade associations (FBCCI, BGMEA, or BKMEA); defaulted borrowers are ineligible; and banks may appoint representatives to borrower boards to ensure proper fund utilization.

Strategic Significance

This scheme arrives at a critical moment. With market interest rates across commercial banks exceeding 14% following recent monetary tightening, the 7% cap represents a significant subsidy. The Tk 20,000 crore fund is part of a broader Tk 60,000 crore stimulus package announced by the government.

The scheme specifically targets enterprises that have either shut down or are operating below full capacity due to working capital shortages — a problem that has plagued Bangladesh’s industrial sector, particularly SMEs. By providing working capital at concessional rates, the central bank aims to bring idle industrial assets back into productive operation.

What this means for business: For eligible enterprises, this is a lifeline. For the broader economy, it represents a bet that reviving closed factories — rather than building new ones — is the most efficient path to industrial recovery. The scheme’s success will depend on rigorous implementation and the ability to distinguish genuinely viable businesses from those beyond rescue.

PMI Slows to 52.9: Manufacturing and Construction Contract

Bangladesh’s Purchasing Managers’ Index (PMI) fell sharply by 9.9 points in June to 52.9 — down from 62.8 in May — signaling a significant slowdown in private-sector business activity.

While any reading above 50 still indicates expansion, the decline reversed the previous month’s jump to a 15-month high. The June reading matched April 2025’s 52.9, after May posted the strongest reading since February 2025.

Sectoral Breakdown:

Source: MCCI & Policy Exchange Bangladesh PMI Report

Manufacturing: Back in Contraction

Manufacturing led the slowdown, with its sector index falling to 48.8 from 64.1 — returning to contraction after just two months of expansion. New orders, export orders, employment, supplier deliveries, and order backlogs all weakened. While factory output, imports, and input purchases continued to grow, they did so at a slower pace.

Construction: Sharp Reversal

Construction dropped to 40.2 from 52.9, ending a month of expansion. New business, construction activity, and employment all contracted.

Agriculture and Services: Still Growing, But Slowing

Agriculture remained the strongest-performing sector, easing to 64.8 from 70.0, marking its tenth consecutive month of expansion. Services stayed in growth territory for a 21st straight month, although its index slowed to 54.6 from 62.3.

What’s Driving the Slowdown?

Survey respondents across major economic sectors cited multiple headwinds:

• Higher LPG and fuel prices increasing operating costs

• Rising transport and labour expenses squeezing profit margins

• Financial constraints limiting business activity

• Disruptions from road construction projects

• The recently imposed 15% VAT, which businesses say has raised the cost of doing business

• Long Eid holidays and fading pre-Eid demand

• Onset of the monsoon season

• Weather-related uncertainties affecting agricultural production

Expert Assessment

“The June PMI suggests Bangladesh’s economy remained in expansion, but with clear sectoral divergence,” said M Masrur Reaz, Chairman and CEO of Policy Exchange Bangladesh. He noted that “agriculture and services continued to expand, albeit more slowly, while manufacturing returned to contraction because of weaker orders, exports, employment and supplier deliveries. Construction also contracted amid softer business activity and weaker new orders. The long Eid holidays, the onset of the monsoon and fading pre-Eid demand weighed on business conditions in June”.

Future Outlook

Despite the June slowdown, businesses remained cautiously optimistic. The survey’s Future Business Index points to continued expansion in agriculture, construction, and services. Manufacturers also expect activity to return to growth in the coming months.

What this means for business: The PMI data suggests that while the overall economy remains in expansion, the industrial core — manufacturing and construction — is under significant pressure. The timing is notable: the PMI slowdown coincides with the launch of the Tk 20,000cr revival scheme, suggesting that policy support is arriving just as industrial activity is faltering.

US Strikes Iran: Oil Prices Surge, Regional Tensions Escalate

The United States launched a series of military strikes against Iran on 7 July, in response to Iranian attacks on three commercial vessels transiting the Strait of Hormuz. In a parallel move, Washington revoked the general licence that had allowed Tehran to sell crude oil and petrochemical products on international markets.

The Attacks

According to Reuters, citing US officials, the strikes targeted:

• Iranian air defence systems

• Coastal surveillance installations

• Surface-to-air missile batteries

• Anti-ship cruise missiles

• Drone launch sites

Explosions were reported at Iran’s main oil export hub on Kharg Island, as well as on Qeshm Island and in the southern port cities of Sirik and Bandar Abbas. Kharg Island is strategically significant, with nearly 90% of Iran’s crude oil exports passing through the facility.

The US Central Command (CENTCOM) stated: “Iran’s demonstrated aggression was unwarranted, dangerous, and a clear violation of the ceasefire”.

The Vessel Attacks

Three commercial vessels were hit by projectiles in the Strait of Hormuz:

• A Qatari LNG carrier (Al Rekayyat) was struck by a drone, causing a fire in its engine room

• A Saudi-flagged crude oil tanker (believed to be the supertanker Wedyan) was damaged off Oman

• A third vessel was also targeted

Iran did not claim responsibility, but Qatar blamed Iran for the incidents.

Oil Prices Surge

Global oil prices climbed sharply in response:

Source: Economic Times, Channel NewsAsia, 8 July 2026

Both benchmarks had already advanced about 3% on Tuesday after the US withdrew the general licence. In total, crude oil topped 5% in two days.

“The current conflagration is a reminder to the market of how fragile passage through the Strait still is,” said Saul Kavonic, head of research at MST Marquee.

Iran’s Response

Iran’s Ministry of Foreign Affairs strongly condemned both the military strikes and the revocation of the licence, calling the US actions a “clear violation” of Article 10 of the Islamabad Memorandum of Understanding signed on 18 June. The ministry said Iran “will take any measure it deems necessary” to safeguard its national interests and security.

What This Means for Bangladesh

The escalation has direct implications for Bangladesh’s energy security:

1. Higher oil import bills: Bangladesh imports nearly all of its crude and refined petroleum products. Brent at $76/bbl adds significant pressure to the import bill, which had been easing after the earlier truce.

2. Elevated shipping costs: The Strait of Hormuz carried cargoes equivalent to about one-fifth of global energy supply before the war began in February. Any disruption to traffic through this chokepoint will raise freight and insurance costs for Bangladesh’s imports.

3. Refined fuel import dependence: Eastern Refinery currently meets only 20% of local petroleum demand. The remaining 80% must be imported as pre-refined fuel at a premium — a vulnerability the $1 billion IsDB loan for refinery expansion aims to address.

4. Supply chain uncertainty: The escalation threatens to reverse the oil price decline that followed the US-Iran truce, just as Bangladesh’s economy was beginning to benefit from lower energy costs.

Additional Policy Developments

$1 Billion IsDB Loan for Eastern Refinery Expansion

The government has approved a $1,004 million hard-term loan from the Islamic Development Bank (IsDB) to finance the construction of the second unit of Eastern Refinery Limited (ERL). The loan will add 3.0 million tonnes per year of refining capacity, tripling ERL’s total capacity to 4.5 million tonnes annually.

Key loan terms:

Source: TBS News, 8 July 2026

The loan will help reduce Bangladesh’s dependence on imported refined petroleum products, which currently account for 80% of demand. However, officials noted that the loan “exposes the treasury to international market volatility” due to its floating SOFR-based rate.

Investment Agency Merger: Four Agencies to Become One

The government is planning to merge four investment promotion agencies into a single authority — the Unified Investment Development Authority (UniDA) — under a draft law. The agencies to be merged are:

• Bangladesh Investment Development Authority (Bida)

• Bangladesh Economic Zones Authority (Beza)

• Bangladesh Hi-Tech Park Authority (BHTPA)

• Public-Private Partnership Authority (PPPA)

The objective is to create a single point of contact for investors, reducing bureaucratic hurdles and improving coordination. However, the proposal has drawn concern from PPP specialists who warn that folding the PPP Authority into a broader agency could undermine investor confidence in infrastructure projects.

Forex Reserves: $36.52 Billion After ACU Payment

Bangladesh’s foreign exchange reserves remained above the **$36.5 billion mark** after settling $1.48 billion in import payments to Asian Clearing Union (ACU) member countries. Gross reserves fell to **$36.52 billion** on 7 July from $37.85 billion on the previous working day. Under IMF’s BPM6 methodology, reserves declined to **$31.87 billion** from $33.20 billion.

Bangladesh Bank separately reported that net foreign exchange reserves stood at $27.93 billion.

Conclusion: An Economy at the Crossroads

The events of 7-8 July 2026 illustrate the complex forces shaping Bangladesh’s economic trajectory:

On the positive side:

• FDI at $1.78 billion — the highest in five years — signals growing international investor confidence.

• The Tk 20,000cr revival scheme provides a targeted policy response to industrial distress.

• The $1 billion IsDB loan for Eastern Refinery addresses a critical energy security vulnerability.

• The investment agency merger aims to simplify the business environment.

On the challenging side:

• The PMI slowdown, with manufacturing and construction back in contraction, suggests underlying economic fragility.

• The US-Iran escalation threatens to reverse recent gains in oil price stability.

• The hard-term IsDB loan exposes Bangladesh to international market volatility.

• The merger of investment agencies, while well-intentioned, may not address deeper institutional issues.

The connection between these forces is clear: the more unstable the world becomes, the more expensive it is to import what Bangladesh doesn’t produce domestically. And the more expensive imports become, the more valuable it is to have functioning domestic industries — which is exactly what the Tk 20,000cr revival scheme aims to restore.

For Bangladesh’s business community, policymakers, and professionals, the message is clear: domestic resilience is the best hedge against global volatility. The question is whether the policy tools being deployed — the revival scheme, the refinery expansion, the investment agency merger — will be implemented effectively enough to build that resilience before the next global shock arrives.