Dhaka moves to restart idle factories

Bangladesh Bank has launched a 600 billion-taka support package to revive closed factories, expand credit to small businesses and lift growth after a prolonged slowdown in production, exports and private investment.

Governor Md Mostaqur Rahman announced the programme at the central bank headquarters in Dhaka, setting out a refinancing and support structure aimed at restoring industrial capacity, creating jobs and easing pressure on businesses hit by high borrowing costs, weak demand and foreign exchange volatility. The fund, worth about $5 billion, is one of the largest policy interventions by the central bank since Bangladesh began stabilisation measures following years of inflation, reserve pressure and banking-sector stress.

The package is expected to support more than 2.5 million direct and indirect jobs if fully deployed. It will prioritise closed industrial units, service-sector enterprises, cottage, micro, small and medium enterprises, agriculture, export diversification, rural economic activity and selected high-potential sectors such as leather, footwear, frozen fish, shrimp, green investment and start-ups.

Of the total amount, 410 billion taka will be channelled through refinancing facilities linked to banks with surplus liquidity, while 190 billion taka will be provided through central bank-owned support programmes backed by government guarantees. The structure is designed to move idle liquidity into productive lending without immediately abandoning the central bank’s broader anti-inflation stance.

Large borrowers under the scheme will be able to access loans at a 7 per cent interest rate. Bangladesh Bank will provide funds to lenders at 4 per cent, allowing banks a maximum spread of 3 percentage points. Smaller borrowers may face slightly higher rates because of higher administrative costs in microcredit and small-ticket lending.

A major component of the fund will be directed towards reopening shuttered factories and partially operating industrial units. More than 1,200 large and small enterprises are estimated to have either closed or reduced operations because of liquidity shortages, elevated input costs and weaker business conditions. Priority will be given to firms with confirmed orders, market demand and a credible prospect of restarting production.

The central bank has earmarked 200 billion taka for closed industries and service-sector enterprises. Agriculture and rural activity will receive 100 billion taka, while 50 billion taka has been set aside for cottage, micro, small and medium enterprises. Export diversification and a North Bengal agricultural hub initiative will receive 30 billion taka each.

Separate support schemes include 50 billion taka for pre-shipment credit refinancing, 50 billion taka for cottage and micro entrepreneurs, and 20 billion taka each for leather and footwear exports and frozen shrimp and fish exports. Allocations are also being made for green finance, start-ups, creative economy projects, overseas employment and unemployed youth.

The programme comes as Bangladesh tries to revive growth while keeping inflation under control. The economy has slowed from earlier growth rates above 5 per cent, with output projections now closer to the 4 per cent range. Inflation remains elevated, and the central bank has kept its policy rate at 10 per cent to contain price pressures and support the taka.

Officials face a difficult balance. Cheaper credit can help revive output and employment, but excessive lending could complicate inflation management if funds flow into consumption or weak borrowers rather than productive activity. The package therefore places emphasis on refinancing, targeted sectors and eligibility checks rather than a blanket liquidity injection.

Bangladesh’s financial system has also been under scrutiny because of rising classified loans, governance weaknesses and declining depositor confidence in weaker institutions. The authorities have moved to strengthen resolution frameworks, protect small depositors and push banks towards cleaner balance sheets. The new fund will test whether banks can identify viable borrowers while avoiding a fresh build-up of bad loans.

Exports remain central to the recovery effort. Garments continue to dominate foreign earnings, but policymakers are seeking broader growth across leather, footwear, agro-processing, fisheries, technology services and light manufacturing. Support for pre-shipment credit and export-oriented working capital is intended to help firms fulfil orders at a time when global demand remains uneven.