Middle East tensions may disrupt food supply chains: BB

Rising geopolitical tensions involving Iran, Israel and the United States have already disrupted global energy and food supply chains, and may put additional pressure on Bangladesh's external balance and domestic inflation, according to Bangladesh Bank.

In its Quarterly Report for October-December, published today (8 April), the central bank said the newly elected government, which took office at the end of February, has taken steps to mitigate external vulnerabilities.

These include efforts to diversify crude oil import sources and reduce reliance on the Middle East, it added.

The central bank also said Bangladesh's external sector showed improvement in the second quarter of FY26, driven largely by a surge in workers' remittances. "The current account posted a surplus of $476 million, reversing a deficit of $818 million in the previous quarter."

However, the report mentioned that export performance weakened, particularly in the ready-made garments sector, amid cautious demand in major markets and rising global trade tensions.

At the same time, import payments remained broadly contained amid subdued domestic demand and moderate investment activity, resulting in a slight widening of the trade deficit, it said.

According to the central bank, the financial account recorded a surplus of $329 million, supported by higher foreign direct investment and increased disbursements of medium- and long-term external financing.

Overall, the balance of payments registered a surplus of $1.09 billion, helping boost gross foreign exchange reserves to $33.19 billion ($28.58 billion under BPM6) by the end of December 2025. The exchange rate remained stable under the market-based framework.

The report said inflationary pressures persisted during the quarter. Point-to-point headline inflation rose to 8.49% in December 2025 from 8.36% in September 2025, partly due to higher administered fuel prices.

Food inflation edged up to 7.71%, driven by increased prices of fish, dried fish and fruits. Non-food inflation also rose to 9.13%, reflecting higher energy-related costs, including gasoil. Despite steady nominal wage growth, elevated inflation kept real wages in negative territory, eroding purchasing power, the central bank said.

In the real sector, economic performance was mixed. Agricultural output exceeded both targets and last year's levels, supported by favourable weather and continued policy support.

However, industrial growth slowed sharply to 1.27% during the quarter, down from 6.82% in the previous quarter, it said, adding that the services sector remained resilient, helping sustain overall economic stability.