CPD for coordinated approach to stabilise economy
DHAKA, Jan 29, 2025 (BSS) – The Centre for Policy Dialogue (CPD) today laid emphasis on coordinated approach to overcome the multifaceted challenges, stabilise the economy, and protect the vulnerable, low- and limited-income households.
“Looking ahead, to address Bangladesh’s economic challenges in the coming months, the interim government must adopt a balanced and effective strategy that addresses immediate crises and initiates medium to long-term reforms to be carried out by the politically elected government,” said CPD Executive Director Dr Fahmida Khatun.
She said this at a media briefing on “Bangladesh Economy 2024-25: First Interim Review,” at CPD centre in the city.
Fahmida said Bangladesh economy has come under significant challenges during the past few years. “Among several problems, weak revenue generation leading to a constrained fiscal space, heavy reliance on bank borrowing to meet budget deficits, tight liquidity in banks, high prices of essential commodities, low investment and declining foreign reserves have affected the macroeconomic stability,” she added.
Following the July mass uprising in 2024, she said, the interim government has been tasked with addressing the critical challenges of the economy.
“Addressing these multifaceted challenges requires a comprehensive approach- balancing short-term relief for the public, tackling longstanding issues, and implementing sustained reforms to strengthen economic fundamentals,” she mentioned.
Fahmida, however, said the positive trends of the external sector during the first half of FY2025, driven by robust export growth, and strong remittance inflows are encouraging.
“Reduced trade and current account deficits have helped to improve the balance of payment situation. Despite high remittance growth, subdued capital goods imports reflect low investment. Private investment remains weak which is reflected through declining credit growth, FDI, and SME financing challenges,” she added.
She said market and product diversification for exports, FDI promotion, and structural reforms are critical for sustainable growth amid global uncertainties, and Bangladesh’s imminent LDC graduation in 2026.
The CPD executive director said the banking sector in Bangladesh faces systemic challenges, including poor governance, inefficiencies, and weak regulatory frameworks.
“Political interventions at various levels including appointments in SCBs and licensing decisions have undermined the performance of the sector. Weak internal controls, ineffective risk management, and inadequate legal frameworks exacerbate NPLs, while defaulters exploit legal loopholes and delays in the judicial system,” she added.
She mentioned that Banking Company Act has often been amended favouring vested interest groups.
“Implementation of comprehensive reforms through short, medium and long-term measures is critical to restore stability and efficiency of the banking sector. However, these reforms must be backed by political commitment from the highest level,” she added.
At the press briefing, CPD Distinguished Fellow Professor Mostafizur Rahman said the country’s tax-to-GDP ratio is very low and specific measures must be taken to address this issue.
He pointed out that inflation is rising at twice the rate of wage increases, which is leading to a decline in the standard of living for ordinary people.
“There was an opportunity to address income inequality. The Anti-discrimination Student Movement had created a significant opportunity in this regard,” he said.