Economy regains stability, but household situation worsens: Zahid Hussain

• Money laundering halt cuts hundi, boosts currency inflows
• Bank conditions yet to improve; defaulted loans rise
• Country stuck in middle-income trap
• Power crisis, distressed banking sector hinder growth
• Trump tariffs on India, China open $205cr export boost to US in FY26

Bangladesh’s economy has regained stability and economic activity has increased, compared to the 2022–23 fiscal year, former lead economist at the World Bank’s Dhaka office Zahid Hussain said today (30 August).

“However, during the period, the situation at the household level has deteriorated, with poverty and inequality on the rise,” Zahid said during the Moazzem Hossain Memorial Lecture organised by the Economic Reporters Forum (ERF) in the capital today. 

Moazzem Hossain is the late editor of the English daily The Financial Express and the founding president of the ERF.

According to Zahid, the restored economic stability is primarily due to the removal of those responsible for previous instability.

“Money laundering from the country has stopped, resulting in a significant decline in hundi [informal money transfers] and an increase in foreign currency inflows.

“Meanwhile, looting within the banking sector has halted. Yet, the true condition of banks has not improved, as defaulted loans continue to rise,” he added.

He also highlighted the impact of international developments favourable to Bangladesh’s economy, particularly the notable decline in the value of the US dollar.

Addressing the role of policy, Zahid asserted that policy has not contributed significantly to the current stability. “However, there has been a shift in economic management, with greater discipline introduced in policymaking. Still, this does not imply that all government decisions are correct.”

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Zahid further noted that tariffs imposed by the Trump administration have created a positive environment for Bangladesh’s economy.

Presenting his analysis, he said, “Tariffs on India and China have opened an opportunity for Bangladesh to increase its exports to the US by approximately $205 crore in the 2025–26 fiscal year.

“Since India faces tariffs roughly 30% higher than Bangladesh, this creates an export advantage ranging between $120 crore and $207 crore. For China, the increased tariffs could boost Bangladeshi exports to the US by an additional $7 million to $25 million.”

The main obstacles include the ongoing power and energy crisis, a distressed banking sector…and institutional decay.

Despite these positive signs, Zahid warned that Bangladesh remains trapped in the middle-income bracket.

“The main obstacles include the ongoing power and energy crisis, a distressed banking sector, weaknesses in the logistics system, underdeveloped labor markets, and institutional decay.”

Also read: Bangladesh needs $35b to meet 2040 clean energy target: CPD

On the government’s reform efforts, Zahid emphasised that political will alone does not guarantee success. “Effective reform requires strong delivery capacity. This calls for a coordinated effort among the Council of Advisers, the administration, the business community, and civil society. Without collaboration among these four groups, reforms are likely to stall.”

Commenting on the current Council of Advisers, Zahid described them as “sincere and courageous in some areas others, yet helpless or directionless in some cases.”

The event also featured remarks from prominent businessman and chairman of the Board of Directors of the Financial Express, Mahbubur Rahman, who expressed disappointment that the changes anticipated following the July revolution have not materialised, and that inequality has, in fact, worsened.

The memorial lecture was presided over by ERF President Doulot Akter Mala and was conducted by General Secretary Abul Kashem.