Stubborn inflation threatens to reverse Bangladesh’s poverty reduction gains

For ordinary citizens, the macroeconomic gains offer little relief. The unrelenting scourge of inflation continues to erode purchasing power, squeezing households and jeopardising grassroots economic recovery

Highlights: 

• Bangladesh now suffers South Asia’s highest inflation
• World Bank warns nearly 3 million more could fall into extreme poverty
• Rural non-food inflation hit 9.97% in March 2025, rising for the third consecutive months
• Job losses and shrinking wages are battering household welfare
• High inflation is the most destructive force, decimating buying power

Bangladesh has endured eight months under interim leadership, with resilient remittances, steady exports, and stable foreign exchange reserves shoring up its external balances.

Yet, for ordinary citizens, these macroeconomic gains offer little relief. The unrelenting scourge of inflation continues to erode purchasing power, squeezing households and jeopardising grassroots economic recovery.

South Asia’s highest inflation: A 25-month curse

Alarmingly, Bangladesh now suffers the highest inflation rate in South Asia—enduring 25 consecutive months of inflation above 9%. This sustained price surge, coupled with an anticipated economic slowdown in FY25, threatens to hit the most vulnerable populations hardest.

3 million more at risk of extreme poverty

The World Bank recently warned that nearly 3 million more Bangladeshis could slip into extreme poverty by FY25. The extreme poverty rate—measured as the share of the population surviving on less than $2.15 a day—is projected to climb to 9.3% in FY25, up from 7.7% in FY24.

Why Bangladesh’s inflation defies global trends

While countries like Pakistan and Sri Lanka have successfully reined in inflation—Pakistan slashed its rate from 20.7% to 0.7% in just a year—Bangladesh’s policymakers have struggled to replicate such success. Conventional tools like interest rate cuts and import restrictions, effective elsewhere, have yet to yield results here.

Once hailed as a model of resilience—lifting millions out of poverty and rebounding swiftly from the pandemic—Bangladesh now confronts a cruel irony: a new wave of poverty, not triggered by lockdowns or war, but by stagnant growth and relentless inflation.

Jobs Lost, wages shrinking

The World Bank’s Macro Poverty Outlook (MPO) highlights how soaring prices and job losses are battering household welfare. In the first half of FY25, nearly 4% of workers lost jobs, while wages fell by 2% for low-skilled workers and 0.5% for high-skilled workers.

Experts warn: Inflation is the biggest threat

These findings align with on-the-ground realities, says Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD). Speaking to The Business Standard (TBS) on 23 April, he noted that while data accuracy has improved, the economic outlook remains bleak.

“The economy has faced tremendous challenges, especially over the past year,” he said, pointing to political uncertainties that have deterred investment, stifled growth, and constrained job creation.

However, he singled out high inflation as the most destructive force, warning that it has decimated the buying power of low-income families.

“Despite progress in poverty reduction, millions remain perilously close to the edge—just two days without work could push 2 million people into poverty,” he cautioned.

The rural poor: Hardest hit

The rural poor are suffering the most. Once sustained by agriculture, they now face crushing non-food inflation, which hit 9.97% in March 2025—higher than both the national average (9.70%) and urban inflation (9.95%).

Wage stagnation deepens inequality

Making matters worse, wages have lagged behind inflation for 38 straight months, exacerbating income inequality. The World Bank predicts the Gini coefficient will worsen by nearly one point this fiscal year, while three in five households may deplete savings to survive.

A fading dream of zero poverty

Every nation dreams of a poverty-free future. But for Bangladesh, that vision is fading—smothered by inflation and stymied by political uncertainty.

Clearly, ending poverty requires more than rhetoric. Without urgent, decisive action to break inflation’s stranglehold, Bangladesh risks entrenching inequality and dooming another generation to poverty.