Inflation easing, but tight monetary policy wreaking havoc on credit growth, investment: Govt report
Inflation inches up in September
Highlights
- Deposits rising due to restored public confidence, lower savings certificate rates, and increased e-money and agent banking use
- Inflation edged up to 8.36% in September from 8.29% in August
- Forex reserves improved to $31.4 billion in September
- Exports dipped to $3.63 billion in September
- Taka stable between Tk121–122 per dollar, reflecting prudent central bank management
- Rice prices fell in September
While inflation is easing up, a continued tight monetary stance wreaks havoc on credit growth vis a vis investment, according to the Economic Update & Outlook (October 2025) published today (21 October).
The report published by the General Economics Division (GED) of the Bangladesh Planning Commission presents a cautious optimism for the coming months.
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Significant deposit growth in the last few months is driven by restoring public confidence through government and central bank reforms, reducing savings certificate interest rates to make bank deposits more attractive and increasing e-money and agent banking, reads the report.
Strong remittance inflows and efforts to channel government cash transfers through banks also contribute to the increase in deposits, the report adds.
Overall inflation inched up slightly to 8.36% in September from 8.29%in August. Both food and non-food inflation saw modest increases of 0.04 and 0.08 percentage points, respectively.
The GED report states Inflation has remained persistently high since August 2022, averaging 9.56% over the past 38 months. That month marked a major turning point, as the government raised fuel prices by more than 50% following the onset of the Russia-Ukraine war, causing a sudden 2-percentage-point spike in inflation.
Steady growth in foreign exchange reserves
According to the Economic Update Bangladesh's foreign exchange reserves showed steady improvement in the first quarter of FY2025-26, signaling stronger external stability and renewed investor confidence.
Gross reserves increased from $25.5 billion in March 2025 to $31.4 billion in September 2025, while BPM6-compliant reserves rose from $20.4 billion to $26.6 billion. The rise was supported by higher export earnings, stable remittance inflows, and moderated import payments. The central bank's policy measures have also helped maintain exchange rate stability.
Export earnings ease after strong run
After several months of strong performance, Bangladesh's export earnings fell to $3.63 billion in September, down from $3.91 billion in August and $4.77 billion in July.
The decline was mainly due to reduced shipments in the ready-made garment (RMG) sector, which continues to account for more than 80% of total exports. However, non-RMG sectors, including jute goods, leather, and light engineering, maintained stable growth, cushioning the overall slowdown.
Despite the monthly dip, total export earnings for July-September 2025 remained higher than the same period last year, reflecting Bangladesh's increasing competitiveness and improved logistic efficiency.
Taka remains stable against the US dollar
The exchange rate remained largely stable during the third quarter of 2025, with the taka trading between Tk121 and 122 per dollar. The Real Effective Exchange Rate (REER) rose modestly from 121.2 in June to 127.2 in September, indicating a slight real appreciation of the taka.
Analysts noted that the stability reflects productivity gains, moderate inflation differentials, and prudent management of the foreign exchange market by the central bank.
Rice prices decline
Rice prices in Bangladesh began to fall in September, dropping by about one percentage point from August levels, according to the Economic Update & Outlook (October 2025) published today by the General Economics Division (GED) of the Bangladesh Planning Commission. While inflation eased across all rice varieties, coarse and fine rice still registered relatively high inflation of around 15%.
The report said, To ensure food supply stability, the government on 8 October approved the import of 50,000 tonnes of rice from India and 220,000 tonnes of wheat from the United States. It also plans to import an additional 400,000 tonnes of rice by November to maintain sufficient reserves until the new paddy harvest arrives in December.
In a bid to accelerate emergency procurement, the international tender period was reduced from 27 days to 15 days. As of 15 October, government-held food grain stocks stood at 1.55 million tonnes. Food distribution during the current fiscal year up to 2 October increased by 24% compared to the same period last year, reaching 816,343 tonnes. These measures are expected to help stabilise rice prices further in the coming months.
Within the food category, rice's contribution to overall inflation declined to 45% in September from 48.37% in August. Other key contributors included fish (28.11%), meat (10.55%), fruits (9.76%), and edible oils (5.51%). Price declines in root crops, vegetables, potatoes, and onions helped ease food inflationary pressure.
