Bangladesh’s construction industry is facing mounting pressure amid a sharp decline in public project implementation and development spending.

The sector’s troubles have been highlighted in a new Purchasing Managers’ Index (PMI) report from the Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Exchange Bangladesh (PEB), which shows the construction index falling below the critical 50-point threshold. A reading under 50 indicates contraction rather than growth.

Further exacerbating the situation, data shows that the implementation rate of the Annual Development Programme (ADP) dropped to a historic low of 49% during the first 11 months of the 2024-25 fiscal year.

“The construction sector in Bangladesh is facing unprecedented challenges,” said Mir Nasir Hossain, managing director of Mir Akhter Hossain Ltd and a former president of the Federation of Bangladesh Chambers of Commerce and Industry.

He pointed to surging material costs—up by 12% to 15%—and slower fund disbursement from government projects as major obstacles.

At the same time, borrowing costs have soared, with bank interest rates now ranging from 14% to 16%, up from 9%—a jump of nearly 44%.