From bank bond risks to yarn standoff

Bangladesh’s economy last week centred on key developments in financial markets, trade policy, tax administration, inflation dynamics, revenue collection, energy supplies and textile industry pressures.

The following is a recap of seven major developments, reflecting strains in macro-financial stability, policy trade-offs and sectoral stresses, as covered by Star Business.

The dangerous illusion of bank bonds (Jan 18)

Banks’ heavy reliance on mutual bond purchases inflates capital ratios on paper but fails to attract fresh external funds. This practice concentrates risk within the banking system, undermining the quality of capital and amplifying contagion risks should a lender fail.

Govt moves to curb yarn imports, RMG exporters unhappy (Jan 19)

The commerce ministry’s recommendation to end duty-free import of medium-to-coarse yarn under the bonded warehouse scheme met resistance from apparel exporters, who warn that higher local input costs could erode global competitiveness at a time of intense price pressure, even as spinning mills seek protection.

Online tax, offline refund (Jan 20)

Despite mandatory online tax filing for individuals, taxpayers continue to face challenges in securing refunds, as the National Board of Revenue (NBR) has not yet implemented an electronic refund system, leaving many overpaid taxes difficult to reclaim under the legacy manual process.

Stubborn and sticky: Why inflation defies monetary tightening (Jan 21)

Inflation has remained elevated despite tighter monetary policy, as monetary injections to support fragile lenders and central bank dollar purchases have offset traditional tightening effects; structural supply bottlenecks and weak fiscal discipline further blunt policy efforts to cool price pressures.

NBR misses target by Tk 46,000cr despite 14% collection growth (Jan 21)

The NBR recorded 14 percent year-on-year revenue growth in the first half of FY2025-26 but still fell about Tk 46,000 crore short of its mid-year target, underscoring challenges in  obilizing tax revenue amid subdued private investment and slow public spending.

LPG imports by BPC unlikely to ease crisis soon (Jan 22)

The government has sanctioned Bangladesh Petroleum Corporation (BPC) to import LPG to address a cylinder shortage, but logistical constraints, including a lack of vessels and infrastructure, make relief unlikely in the near term, with private operators continuing to dominate distribution.

Spinners threaten factory shutdown from Feb 1 (Jan 23)

Local textile millers warned they would halt operations from February 1 unless duty-free yarn import concessions are maintained, citing unsold inventory and competitive pressures