Central Bank: Bangladesh Economy Stable in First Quarter

The Bangladeshi economy maintained a posture of broad stability during the first quarter of the 2026 fiscal year (Q1FY26). According to the latest quarterly bulletin from Bangladesh Bank, this resilience was underpinned by a steady exchange rate, a robust external sector, and a disciplined adherence to contractionary policy measures.

The report suggests that a combination of prudent monetary and fiscal interventions has been instrumental in restoring macroeconomic equilibrium. While the domestic banking sector continues to grapple with systemic pressures, the broader economic indicators signal a successful navigation of recent structural shocks.

External Sector Resilience and Remittance Support

A standout feature of the quarter was the significant improvement in the external sector. Despite a trade deficit that widened to $5.7 billion, the current account deficit was kept to a modest $0.597 billion. This was largely facilitated by the consistency of remittance inflows from the Bangladeshi diaspora.

Furthermore, the financial account demonstrated remarkable strength. Net inflows reached $1.7 billion, effectively offsetting the current account gap. The nation also maintained reliable access to international credit markets, securing $1.0 billion in net medium- and long-term external loans.

Key Macroeconomic Indicators (Q1FY26)

Monetary Policy and Inflationary Trends

In a bid to curb persistent inflationary pressures, the central bank has remained steadfast in its contractionary orientation. The policy rate was held at 10%, with liquidity management tools being finely tuned within the established interest rate corridor.

While food prices experienced some upward volatility, overall inflation began to ease gradually. This disinflationary trend has been supported by the stability of the Taka and a softening of global commodity prices. The transition to a market-based exchange rate appears to have paid dividends, as the Taka remained remarkably stable against the US Dollar throughout the period.

Fiscal Strength Amidst Banking Vulnerabilities

On the fiscal front, the government recorded a surplus in Q1FY26. Revenue collection showed robust growth, while expenditure was managed with notable restraint. Interestingly, the government experienced negative net domestic and foreign financing flows, indicating that it focused on net repayments rather than accruing new debt.

However, the "Achilles' heel" of the economy remains the banking sector. The ratio of gross non-performing loans (NPLs) climbed to a staggering 35.73% by September 2025. This high volume of bad debt continues to erode profitability and deplete capital buffers. Bangladesh Bank noted that while the foundation is stable, the success of the fiscal year will depend heavily on the efficacy of ongoing governance reforms within financial institutions.