Structural Weaknesses Conceal the True Extent of Non-Performing Loans

The Bangladeshi economy has been grappling with multifaceted crises for several consecutive years, with domestic and global pressures further exacerbating the situation. Although recent data indicates a minor reprieve in specific economic indicators, the Centre for Policy Dialogue (CPD) has cautioned that these improvements are unsustainable. The think-tank emphasised that temporary signs of relief mask deep-seated, unresolved structural weaknesses, making comprehensive economic reforms imperative to achieve long-term stability.

These observations were shared during a media briefing organised by the CPD at its office in Dhanmondi, Dhaka. The briefing, titled “Bangladesh Economy in FY2025-26: Multidimensional Challenges in a Period of Transition”, featured insights from Dr Fahmida Khatun, Executive Director of CPD, and Dr Mustafizur Rahman, Distinguished Fellow, among other experts. They collectively noted that revenue collection targets for the current fiscal year have become highly unrealistic.

Banking Sector Weaknesses and Hidden Non-Performing Loans

According to the CPD, a marginal decline in the official non-performing loan (NPL) ratio does not reflect a genuine improvement in asset quality. Instead, accounting mechanisms such as loan rescheduling, restructuring, and write-offs have obscured the true extent of the banking sector’s distress.

Statistically, the total NPL ratio in the banking sector fell from 35.7% in September 2025 to 32.26% in March 2026. However, an ongoing Asset Quality Review (AQR) covering 17 banks has already revealed significant discrepancies. Of the six banks reviewed so far, actual distressed assets are substantially higher than previously reported, pointing to a severe mismatch between published financial statements and reality.

Furthermore, banking liquidity trends indicate cautious commercial lending alongside weak credit demand in the private sector. The excess liquidity ratio relative to total liquid assets rose from 43% in May 2025 to 55% in March 2026. Concurrently, the Advance-to-Deposit Ratio (ADR) declined from 0.89 to 0.84, demonstrating that commercial banks are withholding credit despite possessing investable funds.

Unrealistic Revenue Targets and NBR Deficits

The CPD report highlighted that the national revenue collection targets set for the fiscal year are detached from current economic realities. Between July and March, revenue collection grew by a modest 6.9%. To achieve the year-end target, an unattainable growth rate of 84.6% is required in the final quarter.

Despite minor improvements in tax collection by the National Board of Revenue (NBR), the total revenue shortfall for the July–April period reached 104,533 crore BDT. This significant deficit raises serious doubts regarding Bangladesh’s capability to meet the stringent revenue mobilisation conditions mandated by the International Monetary Fund (IMF).

Persistent Inflation and Diminishing Purchasing Power

Inflationary pressures show no signs of abating, driven primarily by upward adjustments in fuel prices, transport costs, and service tariffs. In April 2026, the headline inflation rate stood at 9.04%, with food inflation recorded at 8.39% and non-food inflation peaking at 9.57%. Although nominal wages grew by 8.16%, this rate remains below the prevailing inflation rate, resulting in a net reduction in real purchasing power for citizens.

Key Economic Indicators

The following table provides a precise summary of the statistical data presented by the CPD regarding the performance of the banking sector, revenue collection, and inflation:

The CPD concluded that weak institutional accountability, inadequate enforcement of financial regulations, and domestic and international political-economic factors continue to intensify these systematic vulnerabilities. Genuine, transparent policy interventions and deep structural reforms remain the only viable route to economic recovery.