Global inflation is expected to fall to 3.8% this year and to 3.4% in 2027, helped by softer demand and lower energy prices, the IMF chief said on Monday.

Managing Director Kristalina Georgieva said in a speech in the Annual Arab Fiscal Forum in Dubai that global growth has held up 'remarkably well' amid profound shifts in geopolitics, trade policy, technology, and demographics.

The Capital Market Stabilization Fund (CMSF) will now have to keep all its funds in a bank account and manage them in a risk-free manner, according to a draft of the Capital Market Stabilisation Fund Ordinance published yesterday on the Financial Institutions Division website.

Established by the Bangladesh Securities and Exchange Commission (BSEC) in 2021, the CMSF holds undistributed cash and stock dividends, non-refunded public subscription money, and unallotted rights shares of listed securities.

These assets are intended to be returned to shareholders or investors based on verified claims at any time. Until then, they are to be used to maintain stability in the capital market.

The new draft ordinance specifies that all funds must remain in a bank, while all shares must be held with the fund’s own depository participant. Any costs will be covered from the fund’s profits, keeping both the funds and shares intact.

The fund will be overseen by a seven-member board of governors, with the BSEC chairman serving as the board’s chair
The draft ordinance also protects the government, government officials, the BSEC chairman, commissioners and officials, and the fund’s board of governors and staff from any legal action if losses occur while implementing the rules in good faith.

The fund will be overseen by a seven-member board of governors, with the BSEC chairman serving as the board’s chair. Other members will include a BSEC commissioner, an additional secretary from the Financial Institutions Division, the president of The Institute of Chartered Accountants of Bangladesh, the president of the Bangladesh Association of Publicly Listed Companies, and a managing director of a stock exchange. The fund’s chief executive officer will act as the member secretary.

The fund will act as a custodian for investors, returning money upon proper claims. It will also support financial literacy initiatives and conduct research to raise awareness among investors.

Its financial statements must follow International Financial Reporting Standards, and audits must be completed within 90 days after the end of each financial year.

Under the draft ordinance, any cash dividend announced by a company but unclaimed for more than three years must be transferred to the CMSF.

Saudi Arabia has taken regulatory steps affecting religious tourism and wildlife management in early February 2026, alongside a range of regional and international developments.

The Saudi Ministry of Hajj and Umrah has suspended contracts with around 1,800 foreign Umrah travel agencies, nearly one-third of the approximately 5,800 agencies operating in the sector. The move followed a performance review that found shortcomings in service quality and non-compliance with approved standards, says Arab News.

The affected agencies have been given a 10-day grace period to rectify their status and meet classification requirements in order to have their contracts reinstated. The suspension applies only to the issuance of new visas, while pilgrims who already hold valid visas or confirmed reservations will continue to receive services as planned. The ministry said the measure is intended to protect the rights of Umrah performers and ensure reliable and continuous services.

Separately, Saudi Arabia's National Center for Wildlife announced the conclusion of the 2025–2026 hunting season on 31 January. The season, which began in September 2025, was regulated under updated mechanisms based on research and international best practices. Authorities said the framework was designed to support the sustainable use of natural resources and maintain ecological balance in line with the Kingdom's Environmental Law.

In sports developments, Spain's Carlos Alcaraz defeated Serbia's Novak Djokovic to win his first Australian Open title. Riyadh also hosted a WWE Royal Rumble event, with Roman Reigns and Liv Morgan emerging as winners.

In religious services, the Grand Mosque introduced a dedicated Ramadan plan for women, while Indonesia announced it would deploy a record number of women officers to assist Hajj pilgrims.

On the international front, Pakistan condemned what it described as Israel's latest ceasefire violations and called for advance food imports ahead of Ramadan to reduce pressure on its ports.

In the economic sector, Saudi Arabia's Housing Ministry said it offered more than 21,000 investment opportunities in 2025, with contract values exceeding $3.35 billion.

The Bangladesh Bank on the direction from a member of the central bank's board of directors has sent letters to banks, seeking information on agricultural loans of up to Tk10,000.

"As per an urgent direction of honourable member of the Bangladesh Bank's board of director [conveyed by director (ACD-1) sir], you are requested to send the total principal, interest/profit and outstanding figure (as on 31 December 2025) of the agricultural and rural loan/investments amounting up to Tk10,000," the letter said.

The letter, sent through email on Thursday after office hours, instructed banks to submit the information by 12 noon on Sunday.

Arief Hossain Khan, spokesperson and Executive Director of Bangladesh Bank, confirmed that the request for data on loans was made at the demand of a board member.

A senior official from the relevant BB's Agricultural Credit Department told The Business Standard, "I was ordered by a director to request information on agricultural loans below Tk10,000, and I sent emails to the banks accordingly."

When asked who the letter referred to as a member of the board, the official. Requesting anonymity, identified him as Rashed Al Mahmud Titumir.

Titumir is a professor at Dhaka University's Development Studies Department and chairperson of the private research organisation, Unnayan Onneshan.

Multiple attempts to contact Titumir for comment were unsuccessful.

Bangladesh Bank Governor Ahsan H Mansur told TBS: "I am not aware whether banks were asked for such data; I will look into the matter."

Several managing directors of several public and private banks said that while the Bangladesh Bank routinely seeks information, the process in this instance was unusual.

An MD of a private bank told TBS, "Typically, the central bank requests data in a standard procedure, but this time the request came by email on very short notice."

Sources say the normal protocol for requesting data from banks was not followed. Senior officials of the central bank or the Board did not discuss the request in any meetings. Usually, such requests are accompanied by a note presented by the relevant department to the executive director, deputy governor, or sometimes the governor. This process was not observed in this case.

An MD of a state-owned bank said, "Our bank has over 30,000 such borrowers, with nearly Tk50 crore currently outstanding. We already face difficulties in collecting repayments. If a political decision is imposed to waive these loans, it will be extremely challenging, as these are depositors' funds and cannot be written off arbitrarily."

An MD of a first-generation private bank, speaking on condition of anonymity, said: "If the practice of loan waivers continues, ignoring subsidies and other agricultural support, it is worth considering how much marginal farmers will actually benefit. Bangladesh Bank has long displayed such unprofessional behaviour, and especially since 5 August, its bias towards a particular political party has repeatedly emerged."

The interim government is preparing to finalise two significant trade agreements with the United States and Japan before the national polls, aimed at securing greater market access and protecting export revenue following its upcoming graduation from least developed country (LDC) status.

Speaking to The Daily Star yesterday, Commerce Secretary Mahbubur Rahman confirmed that the Economic Partnership Agreement (EPA) with Japan will be signed on February 6 in Tokyo, while discussions continue regarding the format of the US trade deal originally scheduled for February 9 in Washington.

Given that the 13th general election is set for February 12, leaving minimal working days, the US agreement may proceed virtually instead.

The anticipated US deal centres on duty-free market access for Bangladeshi garments manufactured using American cotton. Under the proposed terms, garment exporters who can demonstrate that 60-70 percent of their products are made with US-sourced materials such as cotton will be exempt from the 20 percent tariff on those components.

Secretary Rahman also suggested that the Donald Trump administration is considering reducing the reciprocal tariff rate from its current 20 percent level, though the exact reduction percentage remains undetermined. This concession follows months of bilateral negotiations.

Meanwhile, Commerce Adviser Sk Bashir Uddin and the ministry’s trade negotiation team are travelling to Tokyo this week to sign what will be Bangladesh’s first full-fledged trade agreement with a major partner.

The advisory council approved the EPA on January 22, establishing a framework for preferential trade benefits after Bangladesh transitions from LDC status in November.

“We are ready to sign the EPA with Japan on February 6, according to our previous announcement,” Rahman said.

The agreement provides substantial market access benefits. Once it comes into effect, Japan will grant duty-free entry to 7,379 products representing 97 percent of Bangladesh’s export basket, including key garment items. Bangladesh will reciprocate by offering duty-free access to 1,039 Japanese products, phased in over 18 years.

Beyond goods, the EPA includes provisions for trade in services. Bangladesh has committed to opening 97 sub-sectors across 12 service categories to Japan, while Japan will open 120 sub-sectors to Bangladesh. This framework is expected to encourage Japanese investment and facilitate technology transfer.

Japan currently stands as Bangladesh’s largest Asian export market, with shipments approaching $2 billion annually, predominantly driven by garment demand. Last month, Japan confirmed it would extend duty-free market access for Bangladesh for three additional years through 2029.

These trade agreements represent critical components of Bangladesh’s strategy to maintain export competitiveness after losing LDC privileges.

Research estimates suggest the country could face export losses of up to $8 billion annually once LDC-related benefits expire, making preferential trade arrangements with major partners essential for sustaining economic growth.

Bitcoin, the world’s largest cryptocurrency by market value, was down by 6.53 percent at $78,719.63 at ​12:48 p.m. ET (1748 GMT) on Saturday, continuing its decline from the ‌previous session.

On Friday, bitcoin fell to as low as $81,104, the lowest since November 21, while the US dollar gained after former Federal Reserve Governor Kevin Warsh was selected as the next Fed chair. Some investors and ‌traders are concerned he might tighten up on cash in the ​financial system.

Warsh has called for regime change at the central bank and wants, among other things, a smaller Fed balance sheet.

Bitcoin and other ‍cryptocurrencies have been regarded as beneficiaries of a large balance sheet, ‍having tended to rally while the Fed greased money markets with liquidity - a support for ‌speculative ‌assets.

Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, said the Fed’s “bloated ‍balance sheet combined with heavy-handed bank regulation” had kept liquidity trapped on Wall Street instead ‌of ‌flowing to Main Street, helping fuel bubbles in assets such as bonds, crypto, metals and meme stocks.

Ether also fell 11.76 percent to $2,387.77 on Saturday afternoon. Cryptocurrencies have been struggling for direction since tumbling last year, having been left behind by big rallies in gold and stocks.

“Sometimes these ​price adjustments feed on themselves,” Jacobsen said, adding that Friday’s abrupt drop had reminded people of the risks. He said it was “possible, if not likely, that we see more ‍selling over the next few days.”

Cryptos are having a rough time in what was once hoped to be a golden era of flows and friendly regulation under President ​Donald Trump. Market-leading bitcoin has lost a third ‍of its value since striking record highs in October last year.

Bangladeshis living abroad sent home a record $3.17 billion in remittances in January this year, posting a 45 percent year-on-year jump.

Bankers credited this surge to various factors, including the national election scheduled to be held on February 12.

They said relatives of candidates normally send money for election campaigning.

Moreover, Ramadan, the holy month of fasting for Muslims, is set to begin a few days after the national polls, when migrant workers typically send more money home compared to other months.

They also added that more expatriates are now using formal banking channels, while informal routes have siphoned off less money since the political changeover in August 2024.

Cumulatively, remittance inflows in the first seven months of the current fiscal year (July–January) stood at $19.44 billion, up from $15.96 billion during the same period of the previous fiscal year, representing a year-on-year growth of 21.8 percent.

Despite a slowdown in the broader economy, value-added tax collection from large companies, particularly in tobacco and beverages, recorded strong growth in the first half of the 2025-26 fiscal year.

By contrast, VAT from sectors such as banking, mobile phone operators, certain construction materials and consumer goods remained modest, while revenue from the cement sector fell by nearly 20%.

VAT growth is measured between corresponding periods of two fiscal years. In FY25, collections were subdued amid mass uprisings and political instability, creating a low base for comparison.

Experts said higher tax rates, particularly on tobacco and beverages, combined with the low base, largely explain the strong growth. They added that the low base should have produced broader-based gains. The fact that this has not happened across most sectors suggests the economic slowdown has not yet eased.

Business leaders echoed that view, saying investment and consumption remain cautious as they wait for an elected government and greater political stability to restore confidence.

26% VAT growth from 109 LTUs

According to the Large Taxpayers Unit–VAT (LTU-VAT) under the National Board of Revenue (NBR), VAT collection from 109 LTU-listed companies rose by around 26% year-on-year during July-December. During the period, total VAT collection stood at Tk59,000 crore, of which just over Tk40,000 crore came from these 109 companies.

This means more than two-thirds of total revenue came from LTUs, with over half generated by three tobacco firms, almost entirely from two British American Tobacco Bangladesh entities.

LTU data show that VAT collected from three cigarette companies stood at Tk21,231 crore between July and December, up Tk6,783 crore, or 47%, from the same period a year earlier.

A senior NBR VAT official, speaking on condition of anonymity, told The Business Standard that the cigarette sector was a key driver of revenue growth, aided by increased monitoring by the LTU-VAT office.

The official said the rise was driven by increases in tobacco prices and supplementary duty, along with policy changes. The same factors applied to the beverage sector, he added.

However, the official said this pace of growth is unlikely to continue in the coming months.

British American Tobacco Bangladesh did not respond to requests for comment. However, its latest financial statements show cigarette stick sales fell by about 28% year-on-year between July and September, even as VAT payments increased.

Pharma 23%, beverage 34% growth

According to LTU-VAT data, the top VAT-paying sectors after tobacco include four mobile phone operators, five gas distributors, 18 pharmaceutical firms, 17 banks, electricity distributors, and companies in soap, water supply, print and varnish, and nine cement firms.

VAT collection from four beverage companies rose by 34% in the first half of the fiscal year, while the pharmaceutical sector recorded growth of about 23%.

Md Zakir Hossain, secretary general of the Bangladesh Association of Pharmaceutical Industries, said July to December is typically a strong growth period for pharmaceutical companies, describing the rise as normal, but added that the rate would not be sustained in the coming months.

Cement VAT drops 20%

Sectors with weaker growth blamed the continued economic slowdown. VAT collection from the cement sector has been declining for the past 18 months and fell by 20% year-on-year in the first half.

Md Shahidullah, former vice-president of the Bangladesh Cement Manufacturers Association, said falling demand was the main reason, citing a sharp slowdown in infrastructure development that also reduced demand for steel.

He said momentum could return after elections and the formation of a new government, but meaningful recovery is unlikely within the next six months and may only materialise in the next fiscal year.

3.46% VAT rise from banks

VAT collection from the banking sector rose by just 3.46% during the period.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said the low growth reflected service disruptions at several banks and declining deposits.

"While a few banks are doing well, most are not," he said, adding that economic recovery would depend on a credible election and a smooth political transition.

"Once momentum returns to the economy, revenue collection will also rise," he said.

Snehasish Barua, a chartered accountant and director of SMAC Advisory Limited, told TBS that because last year's VAT collection was weak, stronger growth should have been recorded under normal conditions.

"The absence of that growth in several sectors shows the economy has not regained the expected momentum, while growth in some sectors is largely driven by higher taxes," he said.

Private sector credit growth fell to a record low in December 2025 due to political uncertainty and an economic slowdown, signalling stagnant investment.

Last month, business credit growth dropped to 6.10 percent, the lowest in at least four years, down from 6.58 percent in November, according to Bangladesh Bank data.

The central bank had set a credit growth target of 7.2 percent for private businesses in December 2025 in its July–December 2025 monetary policy, after growth reached 6.5 percent by the end of June 2025.

Two leading bankers said loan demand remains weak because entrepreneurs are hesitant to make new investments or expand their businesses.

“All are waiting for a peaceful political transition. A free and fair election is needed for credit demand to pick up,” said Mati Ul Hasan, managing director of Mercantile Bank PLC.

He added that the weak loan demand has led to rising liquidity in the banking sector.

Ashikur Rahman, principal economist at the Policy Research Institute (PRI) of Bangladesh, said private credit growth has slowed as economic agents factor in the uncertainty surrounding the national elections scheduled for February 12.

“Since the political climate strongly affects investment decisions, entrepreneurs are delaying investments to see who will take power after the election and whether the process is seen as credible enough to bring political stability,” he added.

Mohammad Ali, managing director and CEO of Pubali Bank PLC, one of the oldest private banks, said private sector investment remains stagnant.

He added that the slow implementation of public development projects is another reason.

“All attention is on the election,” he said, adding that demand for long-term loans and capital machinery may increase in May-June after the election.

Bangladesh Bank said in its July-December 2025 policy that several factors may have slowed credit demand, including weaker borrowing from non-bank deposit corporations and other financial sectors amid ongoing uncertainties in the country, as well as the impact of a contractionary monetary policy.

The International Monetary Fund (IMF) said in its latest report on Bangladesh that unresolved banking issues would further limit credit, reduce investment, and slow growth. High non-performing loans and undercapitalisation in the banking sector restrict banks’ ability to provide credit for private sector development.

The Bangladesh Bank (BB) has asked banks to submit detailed information on agricultural and rural loans of up to Tk 10,000 so the data can be kept ready “for the next government”.

In a recent email from the central bank’s agriculture credit department, banks were instructed to provide comprehensive loan data following what officials described as an urgent directive from a BB board member.

“You are requested to send via email the data -- as of December 31, 2025 -- on agricultural and rural loans up to a maximum of Tk 10,000, including total principal, interest/profit, and outstanding balance,” according to the email seen by The Daily Star.

The central bank’s move to collect the information comes just days after Bangladesh Nationalist Party Chairman Tarique Rahman, on January 29, pledged to waive agricultural loans of up to Tk 10,000, including interest, and to introduce “farmer cards” if his party is voted into power.

Contacted, Arief Hossain Khan, executive director and spokesperson of Bangladesh Bank, told The Daily Star that a director had placed the matter before the board.

When asked about the reason, he said the central bank wants to be able to supply the information quickly if the next government takes any initiative regarding agricultural loans or the agricultural sector.

“It may be coincidental that the issue arose at the same time as a political party chief’s announcement on waiving agricultural loans,” he added.

Officials at the central bank said resentment has grown among agricultural loan departments of banks over the matter.

India has increased its defence budget by 15% to Rs 7.84 lakh crore for the 2026–27 financial year, as the country plans major procurement programmes, including contracts for Rafale fighter jets, submarines and unmanned aerial vehicles.

The allocation marks a sharp rise from Rs 6.81 lakh crore in the 2025–26 financial year.

Of the total outlay, the armed forces will receive Rs 2.19 lakh crore for modernisation under the capital budget, reflecting a 21.84% increase from Rs 1.80 lakh crore in the previous fiscal year.

Under capital expenditure, Rs 63,733 crore has been earmarked for aircraft and aero engines, while Rs 25,023 crore has been allocated for strengthening the naval fleet.

In another boost to the defence sector, Finance Minister Nirmala Sitharaman, while presenting the budget in parliament, announced an exemption of basic customs duty on imported raw materials used in manufacturing aircraft parts for maintenance, repair and overhaul activities in defence units.

US President Donald Trump on Saturday said India will buy Venezuelan oil, helping to replace some of the Russian oil that the world’s third-biggest oil importer buys.

“We’ve already made that deal, the concept of the deal,” Trump told reporters aboard Air Force One as he traveled to his vacation home in Florida from Washington.

Reuters reported on Friday that the United States has told Delhi it could soon resume purchases of Venezuelan oil to help replace imports of Russian oil, citing three people familiar with the matter. India stopped buying oil from Caracas last year after Trump in March imposed a 25 percent tariff on countries buying Venezuelan oil.

In his comments on Saturday, Trump said India would buy Venezuelan oil instead of Iranian crude. However, New Delhi stopped loading oil from Iran in 2019 due to US sanctions over Tehran’s nuclear programme.

Indian refiners turned to US oil to make up for the loss of Iranian supply, then curbed US purchases and became the top buyer of Russian seaborne oil sold at a discount after Western nations imposed sanctions on Moscow for its invasion of Ukraine in 2022.

Trump in August doubled duties on imports from India to 50 percent to pressure New Delhi to stop buying Russian oil, and earlier this month said the rate could rise again if it did not curb its purchases.

However, Treasury Secretary Scott Bessent signaled in January that the additional 25 percent tariff on Indian goods could be removed, given what he called a sharp reduction in Indian imports of Russian oil.

The US government this week lifted some sanctions on Venezuela’s oil industry to make it easier for US companies to sell its crude oil.

Trump’s comments on Saturday appeared to reflect continued improvement in US-India relations, which have been tense throughout the past year.

Trump also said China could make a deal with the US to buy Venezuelan oil.

“China is welcome to come in and would make a great deal on oil,” Trump said, without providing any details.

Bashundhara Paper Mills, a listed company on the stock exchanges, incurred a Tk249 crore loss in the first half of the current fiscal year due to raw material shortages and price hikes, as well as rising utility and borrowing costs.

In last fiscal year, it faced a blow with incurring loss of Tk330 crore.

During the July to December, Bashundhara Paper Mills reported a loss per share of Tk14.34, which was Tk5.84 at the same time of the previous fiscal year.

In H1 of FY25, it incurred a loss of Tk101 crore.

Explaining the sharp fall in earnings per share (EPS), the company said operating profitability declined due to raw material shortages, higher utility expenses, a steep increase in raw material prices, and rising borrowing costs following interest rate hikes.

"As a consequence, the company's EPS decreased significantly," it said.

According to its half-yearly financial statements, the company's revenue plunged by 72% to Tk113 crore in the first half (H1) of FY26, down from Tk410.47 crore in the same period of the previous fiscal year—a decline of about Tk297 crore.

The report showed that its finance cost soared by 31% to Tk204 crore. As of December, long-term loans of Bashundhara Paper Mills stood at Tk2,118 crore, and short-term borrowings Tk581.85 crore.

In the second quarter, its revenue plunged to Tk81 crore, and incurred a loss of Tk134.59 crore, which was Tk143.22 crore and Tk70 crore respectively.

The net operating cash flow per share increased to Tk6.90 during the July to December against Tk5.41 at the same time of the previous fiscal year while its net asset value per share declined to Tk43.52, which was Tk57.82 as of 30 June 2025, its report showed.

The company said cash flow improved primarily due to a decrease in payments made to suppliers and other operating creditors, which positively impacted the company's overall operating cash position.

India's budget for the fiscal year 2026-27 presented in parliament today (1 February) slashed developmental aid to Bangladesh by 50%, amid a sharp downturn in bilateral ties post-Sheikh Hasina's ouster from power.

This marks the steepest reduction in regional aid, triggered by a diplomatic freeze, allegations of attacks on minorities, and Dhaka's tilt toward Pakistan.

For the next fiscal beginning in April, the budget's allocation for Bangladesh has been pegged at Rs60 crore as against Rs120 crore for FY26. In fact, the revised estimate of the aid to Bangladesh in FY26 budget has been pegged at Rs34.48 crore as ties between the two sides remained frosty.

Bhutan was allocated the largest share of Rs2,288 crore as development aid in the budget for FY27 followed by Rs800 crore to Nepal and Rs550 crore each to the Maldives and Mauritius.

Bhutan remains the largest recipient of Indian aid and sees its allocation rise by Rs138 crore to Rs2,288 crore from Rs2,150 crore in the previous budget of FY26.

The aid for the Maldives saw a drop of Rs50 crore to Rs500 crore while the same to Mauritius saw a 10% rise. Myanmar's allocation falls 14% to Rs300 crore.

In continuation with India's warming up of relationship with Afghanistan, an allocation of Rs150 crore has been made in the new budget to that country. The allocation to Afghanistan for FY26 was Rs100 crore.

Sri Lanka has been allocated Rs400 crore and Rs300 crore was set aside for Myanmar in the budget for FY27. The aid for Afghanistan, Sri Lanka and Nepal saw a marginal increase in allocation.

In a break from the last few years, no allocation has been made in the new budget for the Chabahar port project in Iran. In the budget last year, an amount of Rs100 crore was set aside for the project and the amount increased to Rs400 crore in the revised estimate.

The budget allocated a total of Rs22,118 crore to the Ministry of External Affairs (MEA) as against the current fiscal's budget estimate of Rs20,516 crore and revised estimate of Rs21,742 crore.

The total overseas development partnership portfolio for FY26 was pegged at Rs6,997 crore, which is little over 31% of the allocation made to the MEA.

Out of the total allocation under the overseas development partnership portfolio, Rs4,548 crore has been earmarked for immediate neighbours.

The amount is expected to be spent towards implementation of a variety of initiatives ranging from large infrastructure projects such as hydroelectric plants, power transmission lines, housing, roads, bridges to small-scale grass-roots level community development projects, according to officials.

India's total foreign grants hit Rs5,685 crore in FY26, according to budget papers.

Bangladesh's leading textile companies reported a noticeable slowdown in business during the October–December quarter of FY26, as falling yarn prices, weak global demand and rising production costs combined to erode both revenue and profitability across the sector.

Financial statements show that most giant spinners and textile manufacturers posted year-on-year declines in revenue during the quarter. Malek Spinning's revenue fell 6% to Tk673 crore, while Square Textiles saw a sharper 14% drop to Tk580 crore. Envoy Textiles' turnover declined by 10% to Tk412 crore, Shasha Denims' revenue slipped 4% to Tk328 crore, Matin Spinning recorded a 2% fall to Tk215 crore, and Fareast Knitting's revenue dropped 7% to Tk201 crore.

The pressure on the top line was reflected more severely in profits, highlighting how declining yarn prices compressed margins yarn. Malek Spinning's profit dropped 37% to Tk31.85 crore, while Square Textiles suffered one of the steepest falls, with profit plunging 93% to Tk2.77 crore. Shasha Denims' profit declined 65% to Tk3.95 crore, Matin Spinning's fell 36% to Tk9.91 crore, and Fareast Knitting saw profit collapse by 99% to just Tk0.10 crore. Envoy Textiles stood out as an exception, posting a marginal 1% increase in profit to Tk35 crore despite lower revenue.

Company disclosures indicate that the sharp fall in yarn prices was a key driver behind the weaker performance. Square Textiles said its net profit declined significantly due to a notable drop in yarn prices alongside higher finance costs. With selling prices falling faster than input costs, mills struggled to protect their margins even when production volumes remained stable.

Malek Spinning also cited margin pressure in its quarterly statement, noting that the cost of goods sold rose in the second quarter as sales prices declined compared to raw material prices, while factory overheads increased. The company added that export demand weakened during the period, contributing to lower sales and gross profit, which ultimately dragged down net earnings.

Envoy Textiles painted a mixed picture. While its fabric exports increased by 12% during the quarter, cotton yarn exports plunged by 65%, weighing on overall revenue. Speaking to The Business Standard, company secretary Saiful Islam Chowdhury said the firm has gradually shifted away from exporting yarn as more output is consumed internally. Yarn exports, which once accounted for around 40% of total production, have now fallen to about 20%, reflecting changes in business strategy amid volatile prices.

Shasha Denims attributed its profit decline mainly to a sharp rise in the cost of goods sold combined with lower selling prices, which significantly compressed gross margins. The company said earnings were partially supported by consistent profit contributions from associate companies, preventing an even steeper fall in net profit.

Matin Spinning's results also underscored the impact of weaker yarn prices. The company said revenue declined despite higher sales volume because the average selling price per kilogram dropped from $3.68 to $3.47. Although cost efficiencies helped improve its gross profit margin, the lower price environment still weighed on overall performance.

Industry insiders say the challenges facing textile mills go beyond price fluctuations. Production costs have risen by around 30% over the past two years due to higher gas prices, wage hikes and irregular gas supply, making it difficult for mills to compete with imported yarn. According to data from the National Board of Revenue, cotton yarn imports surged 39% in 2024 to $2.28 billion, while fabric imports by knitwear factories jumped 38% to $2.59 billion, intensifying competition for local producers.

Mill owners also point to reduced government incentives for using local yarn, with cash incentives cut sharply and long delays in disbursement further discouraging garment exporters from sourcing domestically. At the same time, higher gas tariffs, stricter bank loan conditions and allegations of illegal yarn imports have added to the sector's woes.

While the government is considering higher tariffs on yarn imports to protect local spinners, industry leaders warn that without addressing structural cost pressures and restoring competitiveness, falling yarn prices will continue to squeeze revenues and profits in the months ahead.

In the first three months of the 2025–26 fiscal year, 35.33% – or Tk31,800 crore – of the government's operating expenditure was spent on servicing debt interest.

This was the single largest item of spending, covering interest payments on both domestic and external debt. Notably, interest payments also account for the largest allocation within the operating budget.

For the current fiscal year, the government has adopted a budget of Tk7.9 lakh crore in total expenditure, of which Tk5.4 lakh crore has been allocated to the operating budget. Of this operating budget, 22% – or Tk1.22 lakh crore – has been earmarked for interest payments, including Tk1 lakh crore for domestic debt interest and Tk22,000 crore for foreign debt interest.

These figures were highlighted in the Government Finance Statistics report for the first three months (July to September) of the 2025–26 fiscal year, published by the Office of the Comptroller General of Accounts.

According to the report, the government spent a total of Tk90,000 crore during the first three months. Of this, Tk16,900 crore was spent on salaries, allowances and pensions for government employees. In addition, Tk5,300 crore was spent on goods and services, Tk15,800 crore on subsidies, Tk8,400 crore on grants, and Tk8,700 crore on social safety net programmes. Expenditure in other sectors amounted to Tk3,100 crore. The government also spent Tk12,600 crore on the acquisition of non-financial assets.

Meanwhile, data from the Implementation Monitoring and Evaluation Division (IMED) of the Planning Commission show that development expenditure during the first three months of the fiscal year stood at Tk12,158 crore.

During this period, the government earned total revenue of Tk1,17,800 crore. Of this, Tk92,100 crore came from tax revenue collected by the National Board of Revenue (NBR) and other taxes. Grants amounted to Tk700 crore, while non-tax revenue and other income totalled Tk25,000 crore.

The report states that the government did not need to borrow to meet operating expenditure during the first three months of the fiscal year. After covering operating expenditure and spending on non-financial asset acquisition from total revenue, the government had a surplus of Tk15,200 crore. Even after meeting development expenditure, a surplus of Tk3,042 crore remained in government accounts.

An official from the Finance Division, speaking on condition of anonymity, said the surplus appeared mainly because development expenditure was low. Under the current government, fewer new projects have been taken up, and spending on ongoing projects has also been limited.

The official added that in the first three months of the current fiscal year, the National Board of Revenue collected more than 20% higher revenue compared to the same period of the previous fiscal year, but development spending did not increase accordingly.

When asked about the issue, Towfiqul Islam Khan, Additional Director (Research) at the private research organisation Centre for Policy Dialogue (CPD), told The Business Standard, "Allocations for interest servicing and salaries and allowances are always fixed in the budget, as interest on past borrowing must be paid. As a result, there is little scope to adjust these expenditures. Because spending in other areas that was expected at the start of the fiscal year did not take place, a large share of expenditure appears to have gone towards interest payments."

He noted that it would not be possible to exit this situation quickly.

"If the government can increase revenue collection and avoid high-interest borrowing, pressure from debt servicing could ease. However, in recent fiscal years, borrowing has been used to finance operating expenditure. Ideally, borrowing should be directed towards sectors where the resulting asset creation generates returns greater than the loan principal and interest," he said.

Towfiqul added that there was a time when deficit budgets were not a major concern, but that framework has now broken down. As a result, Bangladesh faces rising debt risks, and the budget structure itself has come under strain. An elected government, he said, must undertake a deep review of the situation and take informed decisions.

The weakening dollar, which hit a four-year low last week against major global currencies amid rising tensions between the US and Europe over Greenland, is expected to help Bangladesh contain inflation and ease its debt servicing burden, giving the central bank more flexibility in monetary policy.

However, it could dampen export earnings and remittance values unless gains in competitiveness and productivity offset the impact, according to market insiders.

The dollar's downturn is expected to appreciate the taka, as the euro and pound were among currencies that surged against the greenback this month. Eleven of the 19 emerging market currencies tracked by Oxford Economics also gained more than 1%.

Bangladesh Bank has been buying dollars at over Tk122 from the market for the past six months to contain volatility and support remitters and exporters, indicating that appreciation pressure is already present.

Against this backdrop, the central bank is expected to maintain a tight monetary stance for the second half of FY26, with the policy rate likely to remain unchanged at 10% when the monetary policy statement is announced next week.

A further fall in the global dollar price would help Bangladesh Bank reap the benefits of lower import costs, which would ease inflationary pressure and narrow the trade deficit, market insiders said.

Inflation has already begun to ease, falling to single digits from double digits, while the external balance remained comfortable. The financial account recorded a surplus of more than $1.2 billion during July-November of FY26, according to central bank data.

'Mixed but broadly supportive effects'

The US Federal Reserve is expected to lower interest rates amid mounting pressure from Donald Trump, a move that could weaken the dollar further as investors chase higher returns outside US Treasuries.

Explaining the impact on Bangladesh, a former Fed official, speaking on condition of anonymity, told The Business Standard that a weaker dollar would have mixed but broadly supportive effects on the economy.

"On the positive side, Bangladesh's large stock of dollar-denominated external debt, both public and private, would become cheaper to service in local-currency terms, easing fiscal pressure and balance-sheet stress," the official said.

Central bank data show total external debt stood at $113.20 billion at the end of FY25. The ratio of foreign exchange reserves to total debt rose to 23.60% from 20.80% a year earlier.

"Import costs for fuel, fertiliser, food grains, and capital machinery would also decline, helping contain inflation and narrow the trade deficit. For a country like Bangladesh, where imported inputs play a major role in domestic price formation, a softer dollar can translate relatively quickly into lower cost-push inflation, giving the central bank more flexibility in monetary policy," said the Fed official.

On the downside, export and remittance channels are more complex. Garment exports are largely dollar-invoiced, meaning a weaker dollar could reduce taka earnings unless higher volumes or price adjustments compensate, he said.

"Competitiveness will depend on peer currencies," added the official. "If the euro, pound or major Asian currencies strengthen, Bangladesh could gain market share. If competitor currencies weaken more sharply, export margins may come under pressure."

Remittances, mostly earned in dollars, could also convert into fewer taka, potentially weighing on household consumption, he explained.

"Overall, a weaker dollar would likely ease short-term macroeconomic pressures for Bangladesh, but longer-term growth will still depend on productivity gains, export diversification and careful exchange rate management," said the official.

'Overall gains outweigh losses'

Echoing this view, Md Ezazul Islam, director general of the Bangladesh Institute of Bank Management, said Bangladesh would gain more than it would lose from a weaker dollar.

He said the government would need to increase imports from the US as part of efforts to reduce tariffs, and a softer dollar would lower costs, offering significant relief.

In November last year, a consortium of Bangladesh's top three soy crushing companies – Meghna Group, City Group and Delta Agro – committed to buying $1 billion worth of US soybeans over the following 12 months.

Ezazul said the taka could strengthen further, allowing the central bank to buy more dollars and rebuild reserves.

Reserves rebuild amid stable dollar rate

Bangladesh Bank Governor Ahsan H Mansur recently told The Business Standard that reserves could reach $35 billion to $36 billion by June next year, based on official projections.

The central bank has already rebuilt more than $8 billion in reserves, mainly through market purchases at over Tk122, taking total reserves to $28 billion under IMF calculations.

Ezazul, also a former executive director of Bangladesh Bank, said the dollar rate had remained stable at Tk122.30 despite large-scale purchases, largely due to global dollar weakness.

"This signals that the central bank could gain naturally from further dollar softening in the coming months," he said. He added that exporters could also benefit, as Europe remains Bangladesh's largest export market and the euro has already strengthened against the dollar.

Lower import costs would help offset exporters' currency losses from a stronger taka, he said, although Bangladesh Bank may face income losses as much of its reserves are invested in US Treasuries.

On monetary policy, Ezazul said the central bank's tight stance was appropriate, as inflation would ease naturally if global prices fell amid a weaker dollar. "This is not the right time to cut the policy rate due to political uncertainty," he added.

The main reason for restoring the lottery system in primary share allocation is to boost turnover in the secondary market against the backdrop of a persistent investor exodus.

The IPO lottery system was removed in April 2021 after it was repeatedly accused of depriving retail investors of IPO shares. The Bangladesh Securities and Exchange Commission (BSEC) replaced it with the pro-rata allotment system, which enabled share allocation to every valid applicant in proportion to the quantities applied for.

"We have observed that IPO shares were mostly exhausted by high net worth individuals [under the pro-rata system]. They have more money. They applied for more shares and they got more," said BSEC spokesperson Abul Kalam.

According to the market watchdog, the very objective behind removing the lottery system could not be achieved. Instead, enthusiasm surrounding new listings faded as retail investors received only nominal numbers of shares.

The BSEC brought back the lottery system even though the taskforce assigned to suggest capital market reforms made no recommendation on IPO share distribution.

"Out of 200 public opinions that we received [on the revised rules], 171 voted for the lottery system," said Kalam.

"We did not recommend bringing back the lottery system in IPO," said Md Moniruzzaman, managing director and CEO of Prime Bank Securities Ltd, adding that IPO hunters might have pushed for the return of the system.

"They might have given votes in the public opinion. It is true the lottery system encouraged participation with the hope for higher profits," said Moniruzzaman, who was in a focus group responsible for assisting the taskforce.

Under the pro-rata system, the IPO share pool was divided into different investor categories with predefined quotas for each.

The main categories were general investors (including retail and local individuals), non-resident Bangladeshis (NRBs), and eligible investors (institutional or qualified investors). The total number of shares allocated to each category was fixed as a proportion of the IPO size.

That meant if the eligible or institutional portion was oversubscribed, each applicant in this segment received shares in proportion to the amount applied for.

"The pro-rata system prefers big investors," said Kalam.

Another reason for removing the lottery system earlier was to curb investors' speculative behaviour.

The lottery-based IPO process encouraged short-term speculation, with investors applying mainly to gain quick listing profits rather than long-term investment returns.

However, the BSEC took into consideration the steep decline in the number of BO accounts since the repeal of the lottery system.

"There were nearly 3 million BO accounts in the market when the lottery system was in place. Now it has fallen to 1.6 million. Market turnover has also declined. We believe the reintroduction of the lottery system will bring back the festive mood [around listings] and increase turnover," said the BSEC spokesperson.

When retail investors make profits from IPO shares, they reinvest a portion of those profits in the secondary market, Kalam added.

Lottery-driven IPOs used to witness excessive oversubscription-sometimes hundreds of times the required amount-creating operational and settlement pressure in the IPO process.

According to Kalam, this will not happen now as BO account opening has become more tightly regulated. Investors must have a bank account and a bank certificate in their own name before opening a BO account. Opening a bank account requires a national ID card.

"Fake accounts can no longer be used to apply for IPO shares," said the BSEC spokesperson.

The regulator has also eliminated, under the revised IPO rules, the minimum requirement of Tk 50,000 investment in the secondary market for each BO account.

"We have brought back the lottery system to ensure more shares for general investors. We believe this will increase investor participation in the market," Kalam added.

Chief Adviser Prof Muhammad Yunus Sunday directed opening free-trade agreement (FTA) negotiations with the European Union forthwith to safeguard Bangladesh's trade preferences in its largest export market as the current duty-free access is set to expire.

The head of interim government stressed the urgency during a courtesy call by Nuria Lopez, Chairperson of the European Chamber of Commerce in Bangladesh (EuroCham), at the state guesthouse Jamuna in Dhaka.

Michael Miller, European Union's Ambassador in Bangladesh, took part in the meeting and discussion.

They discussed the need to accelerate European investment in Bangladesh, how to ensure smooth trade relations between Bangladesh and the EU, and the need for further reforms to improve the country's business climate.

They also discussed the upcoming elections and the deployment of international observers to monitor the polls.

Professor Yunus mentions that the Interim Government has recently concluded an Economic Partnership Agreement (EPA) with Japan, paving the way for duty-free access for more than 7,300 Bangladeshi products to the world's fourth-largest economy.

Bangladesh is preparing to hold similar negotiations with other countries, including the European Union, to ensure continued duty-free access for its products -- particularly readymade garments -- to the EU market for the foreseeable future, he told the EU side.

"The EPA with Japan has opened doors for us. It gives renewed hope for our exports. We definitely hope to sign an FTA with the EU to expand our market," the Chief Adviser said.

The EuroCham chairperson, Nuria Lopez, said Bangladesh needs to begin FTA negotiations urgently, as the country may lose its existing trade preferences in the EU -- its largest export destination -- after graduating from least-developed country (LDC) status.

She notes that an FTA would attract more European investment to Bangladesh, create jobs, and boost exports to advanced Western markets.

Lopez points out that India is signing an FTA with the EU, while Vietnam already has such an agreement, allowing both middle-income countries preferential access to the European market.

"We are advocating for an FTA. I will go to Europe to encourage private companies to invest in Bangladesh," she told the meet.

EU Ambassador Michael Miller said that the commercial relationship with Bangladesh would evolve after graduation but not before 2029.

He underlines EU's strong interest in bringing European investment and technology to Bangladesh -- an important market with a population of nearly 200 million. He also expresses EU readiness to organise an EU-Bangladesh Business Forum in 2026.

"We are looking for early political signals that EU companies will be encouraged to come and will enjoy a level playing field," he said during the

trade discussion.

The Chief Adviser also emphasised the relocation of factories to Bangladesh, noting that European firms can take advantage of the country's large pool of skilled labour at competitive costs.

"We are building a free-trade zone. Our aim is to turn Bangladesh into a manufacturing hub for global businesses. We want more European investment in Bangladesh," he told the EU side.

Professor Yunus expressed satisfaction over the EU decision to deploy a large contingent of election observers to Bangladesh for the upcoming general election and referendum.

"It is important that EU election observers are here. It is a huge vote of confidence in revitalising our democracy," he said, adding that the overall picture of the election campaign is "very positive."

Lamiya Morshed, SDG Coordinator and Senior Secretary of the government, was also present at the meeting.

Merchandise exports earned Bangladesh US$48.28 billion in the last fiscal year (2024-25) and the EU accounted for 44.29 per cent or $19.71 billion.

Bangladesh's exports are destined to face up to 12-percent duty after LDC graduation and its transition period till 2029.

Despite political and economic uncertainty, most listed pharmaceutical companies reported strong revenue and profit growth in the October–December quarter and the first half of the fiscal year.

Analysts said higher sales, lower costs, easing finance expenses, efficient working capital management, stable demand, steady exchange rates, and operational efficiency drove the improved performance.

Renata PLC, one of the country's leading drug manufacturers, reported 25% year-on-year profit growth in the first half of the fiscal year. Consolidated profit rose to Tk156.26 crore in July–December from Tk125.08 crore a year earlier, while EPS increased to Tk13.58 from Tk10.83. Consolidated revenue grew 6.56% to Tk2,223.84 crore.

Pharmaceutical product revenue, accounting for 80.7% of total revenue, rose 10% year-on-year, driven entirely by higher sales volumes, while the animal health segment remained flat. Export revenue, including subsidiary income, declined 10.1%, and contract manufacturing revenue fell 28.4%.

Export income rose 8.2% in the first quarter of FY26 but dropped 23.4% in the second quarter after export-bound inventory was damaged in a fire at Dhaka airport on October 19, 2025, leading to deferred orders. Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) increased 20.6% due to operational efficiency, while financing costs fell 7.3% following capital restructuring.

Square Pharmaceuticals, the country's largest drug maker, also posted strong growth. In the first half of the fiscal year, consolidated revenue rose 15% year-on-year to Tk4,338 crore, while net profit increased 16% to Tk1,467 crore, with EPS reaching Tk16.56. In the October–December quarter alone, revenue grew 9% to Tk2,179 crore and net profit rose 10% to Tk727 crore, reflecting sustained domestic demand despite rising sector-wide costs.

The results include contributions from foreign subsidiary Square Pharmaceuticals Kenya EPZ Ltd, local subsidiary Square Lifesciences Ltd, and associate companies Square Textiles, Square Fashions, and Square Hospitals, underscoring the group's diversified operations.

Advanced Chemical Industries (ACI) reported an 18% year-on-year increase in consolidated revenue to Tk7,794 crore in the first half of the fiscal year, up from Tk6,619 crore a year earlier. The company posted a consolidated net profit of Tk30 crore, reversing a net loss of Tk64 crore in the same period last year.

ACI said gross profit growth outpaced operating expenses due to strong performance across key segments, though borrowing costs rose amid higher interest rates and increased funding needs for working capital and strategic investments.

Navana Pharmaceuticals recorded a sharp turnaround in the October-December quarter, driven by higher sales, improved margins, lower finance costs, and stronger operating cash flows. Diluted EPS rose 65% year-on-year to Tk1.65 from Tk1.

The ACME Laboratories posted 15.75% year-on-year revenue growth in the October–December quarter, with EPS rising to Tk3.10 from Tk2.86. For the July-December period, EPS increased to Tk6.11 from Tk5.47.

Beacon Pharmaceuticals reported a 29.32% increase in earnings in the October–December quarter, while six-month EPS rose to Tk4.73 from Tk3.47 a year earlier.