Net foreign direct investment (FDI) in Bangladesh has risen by 114.34 percent in the first three months of 2025 compared to the same period last year, according to Bangladesh Bank data.
According to the central bank, total foreign investment inflows stood at $1.58 billion from January to March this year.
After deducting $711 million in repatriated funds, mostly interest and principal payments on earlier investments, net FDI stood at $864 million for the quarter. That compares with $403 million in net inflows during the same period in 2024, when $1.05 billion came in and $651 million was repatriated.
The figures represent a significant vote of confidence in Bangladesh’s investment potential despite ongoing macroeconomic challenges, including a volatile currency, high inflation, and rising external debt.
Net foreign direct investment is calculated by subtracting outgoing payments related to past investments from the total incoming investment during a specific period.
Economist Majedul Haque, director of research at the Centre for East Asian Foundation, said the unexpected rise in foreign investment was driven by external geopolitical dynamics, particularly trade policy shifts under US President Donald Trump.
“A large part of the foreign investment that increases in Bangladesh is reinvestment,” Majedul said.
“Foreign investment is not supposed to increase amid various social and economic instability, but it increased in the first quarter. The reason for the increase in foreign investment is Trump’s tariff war. Foreign businessmen who used to invest in China will now invest in Bangladesh.”
He added, “Vietnam still offers even lower tariffs, so the redirected capital may eventually move to Vietnam again. The reason for the increase in foreign investment in the last two to three months is Trump’s retaliatory tariff policy. When foreign investors invest in a country, they take the issue of low tariffs into account.”
US President Donald Trump responded to a letter sent three months earlier by Chief Advisor Muhammad Yunus, who had requested reconsideration of a supplementary duty on Bangladeshi exports.
In reply, Trump announced that all Bangladeshi products will now face a 35 percent tariff increase, down from an earlier proposed 37 percent, which will take effect on Aug 1.
Previously, the average US tariff on Bangladeshi products stood at 15 percent.
With the new increase, that rate will reach 50 percent.
While some other countries have received temporary relief from the tariffs, Trump has moved to further raise tariffs on Chinese goods, with rates now set at 125 percent.
Ousted prime minister Sheikh Hasina fled to India on Aug 5 in the face of a student-led mass uprising that toppled the Awami League government.
Following her departure, Yunus was appointed as the chief advisor to the interim government.
Majedul said that although investment would not typically increase under an unelected interim government, “personal relationships” may have played a role.
“There is no reason for investment to increase during an interim government that is unelected,” he said.
“However, this foreign investment increases due to some personal relationships. Therefore, the amount of foreign investment has increased due to some geopolitical reasons.”
He also pointed to efforts by the government to make the tax structure more investment-friendly, and credited BIDA’s one-stop service initiative as a contributing factor to the investment surge.
In 2024, the US-based rating agency Fitch downgraded Bangladesh’s credit quality, citing falling reserves and a dollar supply crisis that made the country’s foreign debt obligations riskier.
Over the past two years, Moody’s has also downgraded Bangladesh’s credit rating.
In July 2024, S&P Global followed suit, assigning a “B plus” rating to the country’s sovereign credit.
S&P said the downgrade was driven by an imbalance in foreign currency transactions.
Bangladesh’s foreign currency needs, it said, exceeded earnings from exports and remittances, placing pressure on the economy.