Published : 01 Jul 2026, 05:03 AM
Updated : 08 Sep 2026, 09:20 AM
Bangladesh Bank has announced a contractionary monetary policy for the July-December period, keeping the policy rate unchanged at 10 percent as it grapples with runaway inflation.Governor Mostaqur Rahman unveiled the first-half monetary policy for the 2026-27 fiscal year at a press conference at the central bank on Tuesday.
Deputy Governor Habibur Rahman outlined the policy targets through a PowerPoint presentation, saying the central bank would continue with a "contractionary stance" and leave the policy rate unchanged at 10 percent.
Reflecting weaker demand, the central bank has significantly lowered the private sector credit growth target.
Credit growth is now projected at 6.8 percent by December, down from the previous target of 8.5 percent by the end of June.
Private sector credit had grown by 4.75 percent as of the end of April.
The new policy sets overall domestic credit growth at 10.5 percent over the next six months, compared with 11.5 percent in the outgoing monetary policy.
Domestic credit growth stood at 9.65 percent at the end of April.
Government credit growth has been targeted at 21.8 percent, slightly higher than the previous target of 21.6 percent.
Government borrowing had expanded by 30.37 percent by the end of April.
Other policy rates have also remained unchanged, with the Standing Lending Facility (SLF) rate staying at 11.5 percent and the Standing Deposit Facility (SDF) rate at 7.5 percent.
The monetary policy notes that private sector lending has become increasingly concentrated in the services sector, while industrial lending has not grown as expected.
The governor said the central bank would prioritise industrial lending, alongside agriculture and small and medium-sized enterprises (SMEs), under different incentive initiatives during the next six months.
Referring to the recently announced Tk 600 billion special loan package aimed at reviving closed factories and supporting economic activity, Mostaqur said not all companies would qualify.
"We have imposed many conditions this time. Not every closed factory will be eligible for loans," he said.
"Companies facing electricity, gas or energy supply problems will not receive loans because they will not be able to recover. Banks will lend only to companies that are financially distressed but have the potential to become viable again."
Responding to concerns over repeated concessions for defaulters, the governor said previous loan packages had been criticised and those shortcomings had been reviewed.
"There may have been weaknesses before, which is why the expected results were not achieved," he said.
"If a factory has closed for reasons such as energy shortages, marketing problems or management failure, banks must first address those issues before extending loans under the incentive package. It is not a case of simply giving money to every factory that has shut down."
This is the first monetary policy announced since Governor Mostaqur assumed office as governor. It is designed to manage liquidity in support of the government's economic objectives.
Bangladesh Bank announces its monetary policy every six months to guide money supply, inflation control, credit growth and overall economic activity.
The previous monetary policy, announced in February, also maintained a contractionary stance with the policy rate unchanged at 10 percent.
The central bank began raising the policy rate in late 2022 to combat inflation. Despite those measures, inflation climbed into double digits in 2024, reaching a record 11.66 percent in July.
The Anti-discrimination Student Movement that began in July evolved into a mass uprising in August, leading to the fall of the Awami League government on Aug 5, 2024.
The Muhammad Yunus-led interim government subsequently adopted a fully contractionary monetary policy, helping inflation gradually ease, although it remains above 9 percent.
Deputy Governor Habibur said, "The budget has projected GDP growth of 6.5 percent. To achieve that target, inflation must also come down to at least 6.5 percent."
