Experts at a pre-budget seminar on Tuesday said Bangladesh’s upcoming national budget must prioritize financial sector reforms and banking sector recovery to revive private investment, generate jobs, and restore economic momentum amid persistent inflation and rising non-performing loans (NPLs).
The remarks came at a seminar titled “Budget 2026–27 and Bangladesh’s Financial Sector: Expectations from the New Government,” organized by Unnayan Shamannay at the Khondkar Ibrahim Khaled Conference Room in the capital on June 9.
Presenting the keynote paper, Dr Mahfuz Kabir highlighted the prolonged impact of high inflation, sluggish private investment, weak credit flow, and governance challenges in the banking sector. He said the upcoming budget should prioritize restructuring and rehabilitating the financial sector to reinvigorate economic activity.
He recommended employment generation, support for small entrepreneurs, and a more business-friendly environment for medium and large enterprises to accelerate private sector investment.
Panel discussant Dr Shahidul Islam Zahid stressed the need for a stronger private sector role in GDP growth, arguing that financial intermediation should not remain concentrated in commercial banks alone. He called for expanding alternative financial institutions and emphasised the recovery of illicitly transferred funds from abroad to strengthen public trust in the government. He added that growth momentum could return once governance in the banking sector improves and depositor confidence is restored.
Another discussant, Dr Rumana Haque, said the lingering effects of the Covid-19 pandemic and recent political uncertainties are likely to shape FY2026–27 budget priorities. She noted increased focus may be placed on health, education, social protection, and expanded credit facilities for women entrepreneurs, with the banking sector playing a key enabling role.
Special guest Sohel R K Hussain, Managing Director of Bank Asia, expressed concern over rising NPLs despite improvements in some macroeconomic indicators. He noted that although foreign exchange reserves have strengthened and inflation has shown signs of easing over the past 18–24 months, rising inflation alongside higher interest rates reflects continued economic fragility.
He highlighted structural weaknesses in the banking sector, saying nearly 35% of NPLs are concentrated in 12 banks, raising concerns over the sector’s capacity to support investment and growth. He also said rebuilding corporate capital bases will take time and stressed the need to attract greater foreign direct investment (FDI).
During an open-floor discussion moderated by seminar chair Khondkar Sakhawat Ali, representatives from various organizations and students offered recommendations on financial and economic priorities.
Addressing the seminar as chief guest, Centre for Policy Dialogue Distinguished Fellow Dr Mustafizur Rahman warned that the banking sector will continue to struggle unless NPLs are reduced and political stability is ensured.
He pointed to declining domestic and foreign investment, slowing exports, lower imports of capital machinery, and reduced letters of credit (LCs), indicating broader economic weakness. He stressed the need for refinancing mechanisms to support banking sector recovery and called for broader financial sector diversification.
“There is no alternative to increasing foreign investment to sustain economic growth,” he said.
The seminar concluded with expectations that the recommendations from the keynote and discussions will be compiled into a policy brief for policymakers and stakeholders.
