Bangladesh Economy Daily Brief (5 pm Dhaka)
Inflation cooled slightly in September while financing pressures deepened, as Dhaka moved to secure more multilateral support and project pipelines faced fresh delays. Trade finance remains subdued and power shortages continue to weigh on industry, even as a bumper potato crop delivers short-term food price relief.
– Inflation: Headline CPI eased to 9.92% in September, down marginally from August. A sharp drop in potato prices—now below Tk20/kg amid oversupply—should help temper food inflation near term, though energy and utility costs keep core pressures elevated.
– Growth outlook: The latest projections point to a soft patch. FY2025 growth is seen slowing to around 3.9% before a rebound in FY2026, implying a muted recovery as domestic demand and external earnings remain under strain.
– External financing: The government has sought an additional $3 billion from the IMF to stabilize the economy, with the Fund signaling openness to higher budgetary support. Separately, the ADB plans to cancel or redirect about $408 million from delayed projects, tightening near-term funding for development spending.
– Debt dynamics: Bangladesh’s external debt has risen by roughly $80 billion over the past 15 years. Even so, international lenders say the debt profile is not yet a concern, provided reforms continue and concessional financing remains available.
– Trade and imports: Letters of credit openings fell in the first two months of FY25, underscoring ongoing import compression and currency-saving measures. This keeps pressure on supply chains and industrial input availability.
– Banking and liquidity: Banks reopened to heavy queues for cash withdrawals and bill payments, reflecting pent-up demand after closures and lingering cash preference despite a push toward digital payments.
– Infrastructure financing: With several Indian Line of Credit projects stalling, authorities are exploring alternative financiers to keep key infrastructure works on track—an important swing factor for medium-term growth.
– Power and industry: Years of capacity additions still have not resolved supply gaps. Unmet electricity demand and load-shedding continue to disrupt factories, constraining output and export competitiveness.
– Trade policy watch: Dhaka faces a tariff-balancing act amid rising US trade scrutiny. Adjustments to tariff structures will be central to safeguarding export market access as global demand slows.
What to watch
– IMF program talks and any augmentation of budget support
– October inflation print and the breadth of food price easing
– LC openings/import trends and remittance flows into Q2 FY25
– Progress on stalled projects and replacement financing
– Power supply stability heading into peak seasonal demand
