Razib Pervez
Bangladesh’s economy, once celebrated for its impressive growth, is showing signs of fragility. Rising inflation, a persistent revenue deficit, weak capital markets, and declining foreign investment are straining households, businesses, and government finances alike. Despite strong historical growth, slow implementation of development projects and policy uncertainties have exposed vulnerabilities in key sectors, leaving the country more vulnerable to external shocks and internal pressures. As wages gap behind rising costs and unemployment rises, the challenges facing Bangladesh’s economy are becoming increasingly urgent, calling for significant reforms and strong governance.
Inflation in Bangladesh today is higher than under many past administrations in the previous decade, indicating increased price pressures. The average inflation in August 2025 was 8.29%. In April, the Daily Prothom Alo, quoting the World Bank, reported, food inflation in India is now below 6 percent. In Pakistan, inflation is now negative, meaning food prices are falling. The picture is the same in Sri Lanka. Food inflation in Nepal and the Maldives is below 8 percent. Bhutan’s figures were not available. Food inflation in the SAARC country, Afghanistan, is also now minus. In the unstable market system, the price of almost every daily essential product has increased.
The lower and middle classes of the country are always in a cycle of economic pressure. According to reports published in several national dailies, the price of rice per bag (50 kg) has increased by 200-300 taka in the space of two weeks. The price of chicken has increased by 20-30 taka per kg over the course of a week. The price of onions is continuously increasing. Even after importing from various countries, including India, Pakistan, and China, the price of onions is not decreasing due to the manipulation of traders. The interim government increased VAT and supplementary duties on over a hundred goods and services in January. As a result, the costs of these goods and services rose, which deteriorated the daily living expenses of ordinary people and caused a higher poverty rate. Many families are spending a large share of income on food and essentials. Some surveys find households paying over half their income on food and lessening savings.
Bangladesh has recently experienced significant revenue deficits, with shortfalls in both FY2024–25 and the ongoing FY2025–26. While 2025–26 shows some improvement compared with the larger gaps of the previous year, revenue collection still remains below targets, constraining fiscal space and adding pressure on public finances. The revenue collection consistently lagged targets, driven by lower tax collection efficiency and economic disruptions. Administrative and institutional pressures have hampered collections. In July 2025, the Daily Desh Rupantor reported that, according to the provisional estimates of the National Board of Revenue, the deficit in customs and tax collection in the last fiscal year was Tk 92,626 crore, which was the worst recorded deficit so far. The revenue-to GDP ratio dropped to 7.69 per cent in the FY2024-25 after having maintained a stand above 8.0 per cent in the last five years, according to the Ministry of Finance data.
Bangladesh’s Annual Development Programme (ADP) for FY2025–26 stands at about Tk 2.39 trillion, reflecting a tighter fiscal stance and downward changes compared to earlier years. Despite the substantial allocation, implementation has been very weak, with only around 17–18% of the ADP spent in the first half of the fiscal year, one of the lowest mid-year performances in decades. Bdnews24.com reported in July 2025 that, implementation of ADP in the outgoing fiscal year had been the lowest in two decades due to the slow step of development projects. At the end of the 2024-25 fiscal year, 67.85 percent of the total distribution of the revised ADP has been spent. This rate is about 13 percentage points lower than the same period in the previous fiscal year. In the previous 2023-24 fiscal year, the ADP spending rate was 80.63 percent. The Financial Express reported, projects and costs both saw deep cuts as the interim government downsized the annual development programme to Tk. 2 lakh 16 thousand crore. The revised annual development programme for the 2024-25 fiscal year reduced Tk. 49 thousand crore from the original ADP expenditure. The downsized ADP reflects a trade-off: improved macroeconomic stability in the short term, but weaker development outcomes and slower economic recovery in the medium term.
Bangladesh’s capital market has continued to underperform in 2025, reflecting weaker investor confidence and lower trading activity compared with earlier years. The Dhaka Tribune recently reported that half of the firms are now trading below the face value of Taka 10. This only indicates how badly these companies are performing, and investors have no faith in their shares. It may be noted that during August 2024 to June 2025, in a span of 9 months, the market capitalization has decreased by Tk. 54,930 crore to Tk 6,46,984 crore. Before 2023 under the previous long term government, the market had reached higher peaks. For instance the Dhaka Stock Exchange Index all time high was around 7,329 points in September 2021. Average daily turnover also declined, with 2025 seeing around Tk 521 crore, about 18% lower year on year, reflecting restrained liquidity and reduced investor participation.
In April 2025, the World Bank projected GDP growth of only 3.3 percent for this year, the lowest in 36 years and warned that three million more people would become unemployed in 2025. In May, Centre for Policy Dialogue (CPD) informed that, in the first half of the ongoing fiscal year, 2.1 million jobs were lost, with women accounting for 85.7 percent of the sum. Currently, only 19 percent of women are active in the labour market, the lowest in years. The Daily Kaler Kantho reported in August 2025 that, in the last year, 353 factories have been closed in Savar, Gazipur, Chittagong, Narayanganj and Narsingdi. Industrial owners said that worker dissatisfaction in factories, high interest rates on bank loans, LC problems in importing raw materials, continuous gas shortage in industries, periodic increases in gas prices, lack of uninterrupted power supply, and continuous increase in workers’ wages, many are unable to compete due to production costs.
Foreign investment in Bangladesh has been declining in recent years, driven by political uncertainty, regulatory hurdles, and bureaucratic inefficiencies. Net inflows of foreign direct investment (FDI) fell from around 3.6 billion US dollar in FY2023 to roughly 3.2 billion US dollar in FY2025, according to Bangladesh Bank data. During this time, foreign investment has decreased by more than 71 percent compared to the previous year. According to the Ministry of Finance, foreign investment worth only 213 million US dollars came in in the first 6 months of the current fiscal year. The amount was 744 million dollars in the same period of the last fiscal year.
Compared with previous administrations, the current government faces a more fragile economic landscape. While earlier periods saw relatively stable growth, higher investor confidence, and smoother implementation of development projects. Today’s challenges like rising unemployment, declining foreign investment, weak capital markets, and governance gaps have intensified. Without stronger political stability, rule of law, and effective reforms, Bangladesh risks falling behind, highlighting the urgent need to restore confidence and rebuild the foundations for sustainable and inclusive growth. Only through coordinated policy action and stable governance can the country turn its fragile economy into a robust and inclusive growth story.
Razib Pervez is Chairperson,
Governance Policy Explore
Center. He is based in
Manchester, England.
