Headlines
BNP's first budget in 20 years dominated the week; financing pivots offshore.
Food's Share of Spending Rises as Income Falls
An IMF chart, built on USDA data, plots food spending as a share of GDP against food's share of total consumer spending. Poorer economies sit further up and further right on both scales.
- ▸Advanced economies hold the bottom-left corner. Food takes roughly 5 to 22 percent of consumer spending in that group, on food outlays worth under about 13 percent of GDP.
- ▸Emerging markets spread across the whole middle of the chart. Their markers run from about 11 percent of consumer spending to above 40 percent, and the group overlaps the advanced cluster at one end and the low-income band at the other.
- ▸Low-income developing countries occupy the top-right. Every marker in that group sits above roughly 29 percent of consumer spending, and the highest of them approach 55 percent.
A household that already spends half its money on food has no cheaper category to move into, so a price rise comes out of everything else it buys. The IMF places Bangladesh in the low-income group at the upper right of this chart. Food and beverages carry the largest single weight in the Bangladesh CPI basket, which is the same fact seen from the other side.
Food inflation belongs in the credit process, not only in the macro commentary. A price move reaches disposable income before it reaches any borrower's file, and the thinnest-buffer books — retail, microfinance-linked exposure, small-ticket SME — feel it first. A risk team reading food prices only off the monthly CPI print is working from the slowest signal available.
Policy & Rates (Bangladesh Bank)
On the Apr MPS, rate holds 10%; the budget eases front-end supply pressure.
FX Reserves
WATCH
- ◆First post-budget T-Bill auction — whether the offshore tilt keeps the front-end eased
- ◆June CPI for power-tariff pass-through after May's 9.42%
- ◆Reserves trajectory off the $34.55bn 1 May print
RISK
- ▼FY27 domestic borrowing target vs the BDT 1.25tn YTD run — if it returns, the front-end re-steepens
- ▼Reserves at 5.86mo import cover and slipping
- ▼A sticky 9.42% May CPI argues against further easing
Banking
On the Mar print, NPL holds 32.26%; the budget eases crowding, not capital.
WATCH
- ◆Bank-level Q1 2026 disclosures — due June, the only write-off-vs-recovery tell
- ◆Whether less domestic deficit financing frees bank balance-sheet capacity
- ◆Islami Bank governance row — unresolved
RISK
- ▼CAR 844bp below floor on the Sep 2025 read — solvency hole unchanged
- ▼Capital repair still write-off and reclassification, not borrowers curing
- ▼Private credit at 6.03% — weak demand transmission
The week's banking story was written in the fiscal section, not the capital ledger. The FY27 budget — tabled Thursday at Tk 9.38tn — pivots deficit financing offshore, more abroad and less at home, easing the sovereign crowding that ran govt bank borrowing to BDT 1.25tn YTD, past the FY26 ceiling. That frees some balance-sheet capacity and shows in the belly, where the 5y bond rallied 43bp on the week. It closes none of the capital hole: NPL held 32.26% on the Mar print while CAR sat 1.56% on the Sep 2025 read — 844bp below the 10% floor — repair still write-off and reclassification, not borrowers curing. Private credit growth read 6.03% in February, so the binding constraint stays capital, not appetite. The desk holds no fresh state-lender or stressed-private exposure and treats the bank-level Q1 2026 disclosures, due June, as the only print separating write-off from recovery.
FX & External
Peg held 122.75 through budget week; remittance covers the trade gap.
External Flow Balance
May remittance held $3.43bn all week, over-covering the $2.26bn trade gap; reserves $34.55bn as exports stayed $3.12bn, -7% YoY.
Remittance has held the $3.43bn May step since the $3.13bn run through April; reserves down from the 1 Apr $35.11bn.
Treasury: cover holds, but the June–July seasonal dip and the budget's offshore tilt are the swing — keep import-payment timing tight.
WATCH
- ◆June–July seasonal remittance dip after the $3.43bn May print
- ◆Reserves trajectory off $34.55bn — import cover 5.86mo
- ◆External-financing inflows as the budget leans offshore
RISK
- ▼Reserves eased to $34.55bn from $35.11bn — cover 5.86mo
- ▼Export base shrinking — $3.12bn, -7% YoY
- ▼Offshore-financing tilt lifts FX-denominated debt service
DSE Markets
DSEX hit a record 5,519.49 this week; the budget financing mix is the supply test.
DSEX Index
DSEX held its record 5,519.49 into the budget, breadth 246/100, turnover BDT 1,388cr — Friday a non-trading day, no fresh print.
The record set 10 Jun holds above the prior 5,516.16 high; the tape carried flat into Thursday's budget.
Risk/equity desk: hold large-cap quality; the budget's financing mix is the catalyst — a turnover break below BDT 1,000cr signals relief stalling.
WATCH
- ◆First post-budget T-Bill auction — the front-end tell for the equity bid
- ◆Whether turnover holds above BDT 1,300cr
- ◆DSE re-opens Sunday after the Fri–Sat close
RISK
- ▼Budget supply pulls liquidity into govt paper if borrowing stays domestic
- ▼A 9.42% May CPI still caps how far the front-end can ease
- ▼Record tape — stretched valuations if the relief stalls
T-Bonds & T-Bills
The 5y bond fell 43bp this week to 10.35%; T-bills eased, 10y ticked up.
BD Govt Yield Ladder
The 5y bond rallied 43bp on the week to 10.35% while the front-end held (364d 10.20%) and the 10y cheapened 5bp to 10.96%.
The 5y had held 10.78% for twelve straight reads before this 43bp drop; the 10y its first uptick to 10.96%.
ALCO: the belly bid prices the budget's offshore-financing tilt; watch the first post-budget auction for whether domestic supply returns.
WATCH
- ◆First post-budget auction — whether the offshore tilt durably curbs domestic supply
- ◆10y at 10.96% — long-end term premium if external borrowing lifts FX risk
- ◆June CPI — whether 9.42% forces the front-end back up
RISK
- ▼If domestic borrowing returns despite the budget, the belly gives back the 43bp
- ▼Bull move compresses NIM on short-funded ALM (Asset-Liability Management) books
- ▼10y cheapening signals long-end supply concern
The week's defining trade was the belly. The 5y bond fell 43bp to 10.35% off a level — 10.78% — it had held for twelve straight reads, while the T-bill front-end held its prior cuts (364d 10.20%) and the 10y cheapened 5bp to 10.96%. The mechanism is the budget: the FY27 plan tilts deficit financing offshore — more abroad, less at home — removing expected domestic supply from the belly, so 5y paper bids; the long end cheapened because external borrowing adds FX and term-premium risk further out. For ALCO, the rally lifts mark-to-market on 5y holdings but compresses the duration spread the desk earns; for equities, the lower belly extends the front-end relief that carried DSEX to its record. The position into next week: the move is mispriced if the first post-budget auction shows domestic borrowing returning — watch it, and be ready for the 5y to give back the 43bp fast.
Macro & Inflation
On the Mar print, 12m-avg 8.6%, lowest since Mar 2023; May's 9.42% caps easing.
CPI Trend
CPI 12m-avg held 8.6% on the Mar print — food 8.24%, non-food 9.09% — but the May headline P2P spiked to 9.42%.
12m-avg at lowest since Mar 2023 (8.4% then), but the May spike flags the average turning back up.
MPC: the disinflation read has stalled; the auction front-end still eased through budget week, pricing the 9.42% spike as the peak, not a trend.
WATCH
- ◆June CPI for power-tariff pass-through after May's 9.42%
- ◆Whether the budget's offshore tilt eases imported-inflation pressure
- ◆Non-food above 9% as the stickiness tell
RISK
- ▼May's 9.42% headline re-steepens the front-end if it persists
- ▼Power-tariff hike compounds the June CPI
- ▼Private credit at 6.03% signals weak demand transmission
Remittance
Remittance held the $3.43bn May step; the June–July seasonal dip is the watch.
Remittance Inflow
WATCH
- ◆June–July seasonal pattern — pre-Eid inflows now past
- ◆Whether the $3.43bn pace holds into the dip
- ◆Reserves at $34.55bn — remittance the swing variable
RISK
- ▼Post-Eid seasonal dip typical in Jun–Jul
- ▼Informal-channel share widens if a kerb premium opens
Commodities
Gold held $4,263 after the haven unwind; LNG $15/MMBtu on the Apr print.
WATCH
- ◆LNG spot for Jun–Aug monsoon-demand pricing
- ◆Gold as a global risk-sentiment proxy after the haven unwind
RISK
- ▼LNG spike on monsoon power demand lifts Petrobangla off-take costs
- ▼Gold reversal signals risk-on rotation away from haven assets
Fiscal
FY27's Tk 9.38tn budget pivots financing offshore; bank borrowing already past ceiling.
NBR Tax Revenue
NBR collection holds BDT 3.27tn YTD after the step from BDT 2.88tn, lifting the run-rate, though the pace still trails the FY26 target.
The BDT 3.27tn YTD level has held for the last eleven reads after the step up from BDT 2.88tn.
Treasury/ALCO: a firmer run-rate trims the deficit at the margin, but Thursday's Tk 9.38tn budget and the offshore tilt reset the borrowing math.
WATCH
- ◆FY27 domestic borrowing target against the BDT 1.25tn YTD run
- ◆First post-budget auction — the deficit-financing mix in practice
- ◆NBR collection pace vs the full-year target
RISK
- ▼Offshore tilt lifts FX-denominated debt service even as it eases bank crowding
- ▼Revenue-to-GDP near the world's lowest caps domestic financing
- ▼Tk1.22 lakh crore subsidy bill against acknowledged fiscal strain
The budget's signal is the financing mix, not the headline number. BNP's first budget in 20 years plans Tk 9.38tn against a revenue base ranked just above Sudan and Yemen — and the pivot is to borrow more abroad, less at home. That eases the domestic crowding that pushed govt bank borrowing to BDT 1.25tn YTD, past the FY26 ceiling; the relief showed in the bond market, where the 5y rallied 43bp on the week. But the offshore tilt trades one risk for another — less bank crowding, more FX-denominated debt service against a $34.55bn reserve base and a shrinking export line. NBR at BDT 3.27tn YTD trails target, and Friday's detail confirmed the strategy: Tk1.22 lakh crore of subsidies against acknowledged fiscal strain. $564m of Japan/AIIB support is the cushion. The desk reads the bank-borrowing line as the swing for both the front-end and the equity bid.
Iran War & Oil
Brent fell below $90 to $88.54 this week; the pullback eases the import bill.
Brent Crude
Brent slid to $88.54 and WTI to $85.94 over the week, consolidating below $90 — spot ~$22 below the May $111 peak.
WTI's break below $90 deepened this week; the May $111 peak now sits ~$22 above spot.
Treasury: the slide trims the fuel bill, but a 9.42% May CPI leaves no cost-push cushion — watch the $90 line.
WATCH
- ◆A sustained break below $90 versus a $95 retest
- ◆Oil pass-through into the June CPI after May's 9.42%
- ◆Tk42,600cr subsidy flag if the premium returns
RISK
- ▼Any bounce re-arms the import bill into a 9.42% CPI
- ▼Renewed supply premium if the ceasefire frays — Tk42,600cr subsidy tail
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