Bangladesh’s large-scale manufacturing sector has entered unprecedented territory as a compounding mix of severe energy shortages, escalating dollar illiquidity, soaring interest rates, and sluggish domestic demand forces factories across the country to scale back output. According to data from the Bangladesh Bank’s Major Economic Indicators: Monthly Update released for July 2026, the Index of Industrial Production (IIP) for large-scale manufacturing contracted by 0.38 per cent during the July–March period of the 2025–26 financial year compared to the corresponding period of the previous year.
This contraction marks the first time in recent history that large-scale industrial output in Bangladesh has fallen into negative figures. The downturn highlights a sharp trajectory away from the robust growth seen in prior years. In the 2024–25 financial year, the IIP expanded by 6.20 per cent, following growth rates of 4.65 per cent in 2023–24 and 7.37 per cent in 2022–23. Credit growth reflects a similar industrial deceleration: private sector credit grew by just 4.47 per cent at the end of June, falling far short of the central bank’s monetary target of 8.50 per cent.
Widespread Impact Across Key Industrial Sectors
The disruption spans virtually every major manufacturing domain:
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Textiles and Ready-Made Garments (RMG): Gas shortages have hit spinning, dyeing, and washing units hardest. The Bangladesh Textile Mills Association (BTMA) reported that approximately 900 out of its 1,850 member mills suspended production due to inadequate gas supply. In the knitwear segment, the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) noted an average 60 per cent drop in output, leading to temporary factory closures and extended worker leaves.
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Steel and Re-Rolling: Steel producers face falling output alongside dwindling sales. Major hubs in Chattogram report that facilities such as Baizid Steel, Saleh Steel, Golden Ispat, and Peninsula Steel have halted operations entirely, while others like Seema Steel and HM Steel operate at merely 20 to 30 per cent capacity.
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Glass Manufacturing: Unlike other industries, glass factories cannot shut down their furnaces without destroying equipment. Consequently, manufacturers rely heavily on expensive diesel fuel to maintain operations despite plunging market demand, adding severe financial strain.
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Ceramics and Cement: Ceramic manufacturers have endured gas supply and pressure issues for over five years. Meanwhile, cement manufacturers face immense currency pressure. The depreciation of the Bangladeshi Taka—moving from 84 to 122 per US dollar—drastically expanded local debt burdens for importers without bringing a corresponding rise in revenue.
Factory Closures and Structural Challenges
Industrial law enforcement data shows that between January and August, 75 factories permanently closed across eight industrial units—including 26 in Chattogram, 17 in Gazipur, and 15 in Ashulia—resulting in 17,856 workers losing their livelihoods. While energy deficits triggered these shutdowns, insufficient order volumes, working capital distress, and mounting bank liabilities contributed significantly. Furthermore, a major LNG terminal failure in July left 339 factories in critical condition, with 17 unable to run due to zero line pressure.
Addressing the situation, Dr Selim Raihan, Professor of Economics at the University of Dhaka and Executive Director of SANEM, noted that the drop in output reflects deep structural issues rather than a temporary demand deficit. High inflation has eroded consumer purchasing power while rising interest rates have driven up operating costs. He emphasized that resolving the crisis requires comprehensive policy interventions: restoring energy reliability, stabilizing the foreign exchange market, normalizing credit channels, and reducing regulatory unpredictability.
