Rice was the biggest driver of October’s food inflation in Bangladesh: GED

Rice alone contributed about 47% of total food inflation in October while vegetables posted a strong negative impact because of seasonal abundance, according to the  latest Economic Update and Outlook for November 2025 prepared by the General Economics Division (GED).

Protein items including beef, chicken and fish saw steady inflation during the month, driven by feed prices and transport costs, the report said.

Overall inflation dropped to 8.17% in October 2025, from 10.87% a year earlier, driven almost entirely by a sharp fall in food inflation.

Food inflation plunged from 12.66% in October 2024 to 7.08% in October 2025 as rice supply improved due to the Aman harvest, imports and public procurement.

However, non-food inflation inched up to 9.13%, reflecting persistent pressure in housing, transport and healthcare—an indication that inflation remains far from under control.

Election-related spending and possible disruptions during the transition are expected to add further pressure on inflation and the foreign exchange market, complicating stabilisation efforts, said the report.

The report warns that large-scale dollar purchases by the central bank unless sterilised could fuel inflation and distort market-based exchange rate mechanisms.

Bangladesh’s economic recovery depends heavily on political stability following the February national election and the next government’s willingness to carry out meaningful reforms, said the GED report.

The report offers a cautiously optimistic view but warns that deep structural weaknesses along with the political transition period could constrain economic momentum.

According to the analysis, the economy could regain pace if the election produces a clear political direction and the next government decisively undertakes long-delayed reforms, particularly in improving the business climate, stabilising the banking system, and ensuring fiscal and energy security.

Without such reforms, the recovery may be short-lived, it said.

The Asian Development Bank (ADB) has forecast around 5% GDP growth for FY26 following a sluggish period.

Remittances and garment exports continue to provide much-needed resilience but the GED notes that the broader economic environment remains fragile as both investors and entrepreneurs appear to be “waiting” for political stability before committing to new ventures.

While bank deposits grew at nearly double-digit rates through August and September, private-sector credit growth fell to just 6.29%—the lowest in at least four years and well below the Bangladesh Bank’s FY26 target of 7.2%.

High lending rates, cautious bank behaviour and political uncertainty have depressed investment appetite.

Meanwhile, government borrowing from commercial banks surged 24.45% in September, raising concerns about crowding out private borrowers.

Interest rate spreads also exposed deep structural distortions. Foreign commercial banks maintained spreads close to 9%—far higher than state-owned and private banks—highlighting issues such as high operational costs, non-performing loans and market concentration.

Revenue collection in October 2025 fell short of the target by Tk8,324 crore, achieving only 77.37% of the month’s goal.

All major revenue streams—import duties, domestic VAT, and income tax—underperformed.

Although collection was slightly higher than in October 2024, the growth of just 2.2% was described as “pessimistic” given inflationary pressures and increased public spending needs.

ADP utilisation continues to lag despite marginal improvements. Up to October, utilisation stood at 8.33%, only a slight increase from 7.90% last year.

Lower overall allocations and reduced spending under own-financing components indicate financial strain and weak project execution.

The report notes that while utilisation rates improved marginally in some categories, the decline in total expenditure—from Tk8,762 crore last year to Tk7,720 crore this year—reflects ongoing bottlenecks in planning, fund release and implementation.

Foreign exchange reserves improved significantly, rising from $24.35 billion in November 2024 to $32.34 billion in October 2025.

BPM6 reserves also rose sharply, supported by stronger remittances and prudent reserve management.

Remittances surged in the first four months of FY26, with each month outperforming the previous year and September recording the highest inflows.

However, export earnings remained volatile. Exports peaked in July at $4.77 billion but suffered sharp declines in April and June.

RMG exports mirrored these fluctuations, while non-RMG exports also experienced mid-year downturns.

Imports, especially capital machinery, saw steep contractions year-on-year, signalling depressed investment demand.

A slight month-on-month recovery in August and September suggests only tentative stabilisation.

The real effective exchange rate (REER) appreciated notably, indicating eroding external competitiveness.