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Rice was the single largest contributor to food inflation in October, accounting for about 47% of the total, according to the General Economics Division’s latest Economic Update and Outlook. In contrast, vegetables exerted a strong negative impact on prices thanks to seasonal supply gluts.

Inflation Eases — But Only Because Food Prices Fell

Overall inflation dropped to 8.17% in October 2025, down from 10.87% a year earlier. The improvement came almost entirely from food inflation, which fell to 7.08% as Aman harvests, imports and public procurement boosted rice supply.

Non-food inflation told a different story — rising to 9.13% — driven by higher costs in housing, transport and healthcare, suggesting underlying price pressures remain unresolved.

Protein prices, including beef, chicken and fish, rose steadily due to increased feed and transport costs.

Election Spending and FX Pressure Add Risks

The GED cautioned that upcoming election-related spending and possible disruptions during the political transition could push inflation higher and strain the foreign exchange market.
It warned that large-scale dollar purchases by the central bank, unless sterilised, may distort the exchange-rate mechanism and stoke inflation.

Economy Hinges on Political Stability and Reforms

The report said economic recovery now depends heavily on political stability following February’s national election and the next government’s willingness to pursue long-delayed reforms — especially in improving the business climate, stabilising banks and addressing fiscal and energy vulnerabilities.

ADB expects GDP to grow around 5% in FY26, but the GED noted that structural weaknesses and uncertainty could weigh heavily on momentum.

Investment Slows as Credit Growth Falls

Despite steady remittance inflows and resilient garment shipments, investment appetite remains weak.

• Bank deposits grew near double digits in August–September.
• Private-sector credit growth slipped to 6.29%, the lowest in at least four years and below the central bank’s 7.2% target.

High lending rates, cautious banks and political uncertainty are keeping borrowers on the sidelines.

Government borrowing from commercial banks jumped 24.45% in September, raising concerns about private-sector crowding-out.

Interest rate spreads revealed deep distortions — foreign banks maintained spreads near 9%, much higher than state-owned or private banks, reflecting high operating costs, NPL burdens and market concentration.

Revenue Misses Target, ADP Spending Slows

Revenue collection underperformed sharply in October. The National Board of Revenue achieved 77.37% of its monthly target, falling short by Tk 83.24 billion. Import duties, domestic VAT and income tax all came in below expectations.
Year-on-year revenue growth was just 2.2%, described as “pessimistic” given rising public spending needs.

ADP implementation remained sluggish despite marginal improvement.

• Utilisation stood at 8.33%, up from 7.90% a year earlier.
• ADP spending fell to Tk 77.20 billion, down from Tk 87.62 billion — reflecting funding shortages and slow project execution.

Reserves Strengthen, but Exports Remain Volatile

Foreign exchange reserves climbed from USD 24.35 billion in November 2024 to USD 32.34 billion by October 2025, supported by stronger remittances.
Remittances grew every month in the first four months of FY26, with September posting the highest inflow.

Export earnings, however, remained volatile — peaking in July at USD 4.77 billion, but falling sharply in April and June.
Non-RMG exports dipped mid-year, while capital machinery imports dropped significantly, signalling weak investment demand. Slight rebounds in August and September suggest only tentative stabilisation.

The real effective exchange rate (REER) appreciated notably, indicating a loss of external competitiveness.