Bangladesh economy broadly remained stable in Q1FY26: BB

The Bangladesh economy broadly remained stable in Q1FY26, supported by exchange rate stability, a resilient external sector, and continued policy tightening, according to the latest quarterly report of Bangladesh Bank.

The central bank's report yesterday said prudent monetary and fiscal measures helped restore macroeconomic stability, even as stress in the banking sector persisted.

The report highlighted notable improvement in the external sector. Although the trade deficit widened to $5.7 billion during the quarter, the current account deficit remained modest at $0.597 billion, largely supported by steady remittance inflows.

"Stronger financial account performance more than offset the current account gap, with net inflows of $1.7 billion in Q1FY26. Net medium- and long-term external loans amounted to $1.0 billion, reflecting continued access to foreign financing."

The report said that, following the adoption of a market-based exchange rate regime, the taka remained broadly stable against the US dollar, fluctuating between Tk121.80 and Tk122.62 during the quarter.

"Gross official reserves declined only marginally to $31.43 billion ($26.60 billion under BPM6), mainly due to valuation effects and reduced foreign liabilities. The central bank assessed the near-term external outlook as stable, citing resilient exports, steady remittance flows, and sustained access to external financing."

"Inflationary pressures eased gradually during the quarter due to sustained monetary tightening, though food prices showed some upward movement. Overall, the inflation outlook remains contained, supported by exchange rate stability and softer global commodity prices."

On the policy front, Bangladesh Bank maintained its contractionary stance, keeping the policy rate unchanged at 10% while adjusting liquidity management tools within the interest rate corridor. Fiscal consolidation also strengthened, with revenue collection posting robust growth and expenditure rising at a slower pace.

The government recorded a fiscal surplus in Q1FY26 and experienced negative net domestic and foreign financing flows, indicating net repayments rather than new borrowing.

However, the banking sector remained under strain. The gross non-performing loan ratio climbed to 35.73% by September 2025, weighing on profitability and capital positions. The central bank said ongoing reforms and corrective measures are aimed at strengthening governance and restoring stability in the financial system.

Overall, the Bangladesh Bank noted that the economy has weathered recent structural shocks relatively well. While risks remain, particularly from global trade tensions and domestic political developments, the external position and policy discipline provide a stable foundation for the months ahead.