The economy of Bangladesh remains at a critical juncture despite regaining stability, according to a new government report released on Monday.
The interim government has taken measures to improve the macroeconomy that was affected due to soaring inflation, currency devaluation, and falling foreign exchange reserves amid growing inequality amid mismanagement during the previous regime.
On August 8, 2024, the interim administration assumed power three days after the ouster of the Awami League regime in the wake of a mass uprising.
Terming the expansion of mobile financial services and e-commerce activities as positive signs, the report said that the country’s economy was still facing challenges because of the limited reserves and strained investor confidence.
About the country’s large and growing labour force, the report observed that strengthening manufacturing sectors, boosting remittance inflows, and investing in human capital would be the key to tackling looming vulnerabilities, especially inflation, financial instability, the weak investment climate, governance challenges, and external risks.
The General Economics Division under the ministry of planning prepared the report titled ‘Bangladesh State of the Economy 2025’, a first of its kind report, to review the economy’s performance over the past year focusing on the progress of economic reforms and recovery.
Amid strains over the past one year, the country’s economy has managed to avoid a far worse outcome, said former World Bank Dhaka office economist Zahid Hussain.
The economy is showing both strengths and weaknesses, while the negative indicators still outweigh the positive ones, he said, adding that reform should be sustained for a fully-fledged economic recovery.
The report has been prepared by the General Economics Division against the backdrop of stubborn inflation, slow growth, falling real wages, stagnated employment, weakened exports, depressed investment, and growing poverty.
Inflation remains stubbornly high — 8-9 per cent in the financial year of 2024-25 — driven by food price shocks, import cost pressures, energy costs, and supply chain disruptions, said the report.
This reduces real incomes, added the report, mainly affecting low-income and rural households.
According to the report, foreign direct investment has remained critically low, while the subdued investment and industrial activities contributed to slower growth.
Job creation, poverty reduction, and better living standards will largely depend on policy choices, including targeting inflation with accommodative monetary policy, reforming financial intermediation, implementing a more effective regulatory framework, improving governance, and promoting greater inclusiveness, further said the report.
The report also highlighted chronic low revenue mobilisation as the main obstacle for the government to increase public investment in the essential areas like education, health, and human resources.
The country’s tax-to-GDP ratio has fluctuated between nearly 8.5 per cent and about 7.0 per cent over the period from FY16 to FY25, indicating a slowdown in tax collection efficiency relative to economic output.
The falling revenue income risks the government loan repayment capacity, said Centre for Policy Dialogue distinguished fellow Mustafizur Rahman.
‘The government has no other option but to increase the income base to ensure inclusive growth and avoid the risk of falling into a debt trap,’ he said.
The GED report, however, found improvements in the overall debt management.
The fiscal outcomes from July to February/March in the FY25 show significant improvements in sustainability and debt management compared to the same period in the FY24, said the report.
The total net domestic financing increased notably, reaching Tk 82,813.11 crore in July–May FY25, sharply up from Tk 48,665.94 crore in the FY24, indicating successful domestic resource mobilization, while the net foreign financing was Tk 38,063.73 crore, lower than Tk 58,048.31 crore in the same period of FY24, the report pointed out.
A seminar was arranged on the day to unveil the report at the National Economic Council conference room along with the ‘Sustainable Development Goals: Bangladesh Progress Report 2025 at Agargaon in the city.
Addressed by Dr Anisuzzaman Chowdhury, special assistant to the chief adviser for the ministry of finance, the seminar was attended, among others, by Bangladesh Bank governor Ahsan H Mansur, finance secretary Khairuzzaman Mozumder, NBR chair Abdur Rahman Khan, planning secretary SM Shakil Akhter, principal coordinator Lamiya Morshed, SDG Affairs at the Chief Adviser’s Office and Mohammad Shafiqul Alam, press secretary to the chief adviser.
GED member Monzur Hossain gave the welcome speech in the seminar while Professor Mahbubullah, former chair of the Department of Development Studies at Dhaka University, CPD distinguished fellow Mustafizur Rahman and Zahid Hussain participated in the seminar as discussants.