The new forecasts from international organisations have increased concerns about Bangladesh's economy. The International Monetary Fund (IMF) report from October 2026 states that Bangladesh's growth could be 3.2 per cent in the 2026-27 fiscal year. The organisation predicts that growth will decrease to 2.2 per cent in the following fiscal year. Although it may gradually increase afterward, it might reach nearly 3 per cent in the 2030-31 fiscal year. On the other hand, the World Bank has suggested a growth of 3.4 per cent, and the Asian Development Bank has suggested 4 per cent growth. The government's target is 6.5 per cent. The IMF forecast also predicts an average inflation of 10.9 per cent for the same fiscal year, while the government's target is 7.5 per cent.
These forecasts are not guaranteed outcomes. They also do not claim that the government's targets will not be met. However, they issue a warning that it will be difficult to quickly recover from the current path of the country's economy. In addition to low growth and high inflation, private investment is low. Therefore, there are fewer opportunities for employment creation, meaning the economy is currently going through a recession.
There are both international events and domestic issues behind this weak condition. Conflicts in the Middle East, rising fuel prices, and obstacles in shipping and product supply have increased import, transport, and production costs.
As Bangladesh purchases a large portion of its fuel from abroad, these shocks are felt more acutely here. If the demand for Bangladesh's products abroad decreases and uncertainty about global trade increases, factories will also be adversely affected. The IMF has identified conflicts, trade disputes, and the government's financial weaknesses as risks to the global economy.
However, Bangladesh's longstanding issues are internal. Investment has decreased, the cost of doing business and loan costs have risen, and uncertainty in policies has decreased investors' confidence. Private sector investment is declining. There are also shortages of fuel, weaknesses in banks, low tax collection, and weaknesses in implementing government projects. Even if there are business opportunities, entrepreneurs hold back on new investments if there is no regular power supply, easy access to loans, or concerns about changing regulations.
The problems in the banking sector have also hampered the economy. Many loans are not being repaid on time, and there are weaknesses in bank management. As a result, banks can't lend people's savings to good businesses. On the other hand, many businesses are unable to get new loans due to existing debt burdens or declining income. The weakness of businesses increases the risk for banks, while problems in banks further weaken businesses. If it is unclear which loans can be recovered and which cannot, simply providing new loans will not resolve the issue.
The pressure of low growth is being felt by the general public as well. According to World Bank estimates, nearly 2.1 million people will newly fall into poverty in the 2025-26 fiscal year compared to the previous year. As the prices of goods rise, wages can no longer facilitate the same level of purchasing. With fewer job opportunities, increasing income is becoming difficult. Remittances from expatriates are helping families and bringing in foreign currency. However, remittances cannot replace investment and businesses that create new jobs.
The government's low revenue limits its ability to address the crisis. According to data from the Bangladesh Bureau of Statistics, only 8.5 per cent of GDP may be collected as revenue in the 2026-27 fiscal year. With lower tax and other revenues, the government has less money to provide services, infrastructure, and support to poor families. A significant portion of the government's income is also going towards paying interest on debt.
To overcome this situation, the government must prioritise certain specific tasks. First, rules and accountability must be reinstated in the banking sector. Banks have the responsibility to keep depositors' money safe and lend to good businesses. The Bangladesh Bank should examine how much risk is associated with any given bank's loans. Weak banks need to account for losses within a specific timeframe, recover loans, and provide plans for addressing their capital shortfalls.
Taxpayer money should not be used to bail out banks or companies without clear conditions and credible turnaround plans. If providing government support to banks, there should be measures for ensuring good governance, accountability, and progress in recovering defaulted loans. Companies that are burdened by debt but have the capacity to continue operations should provide transparent, time-bound plans for repayment and business recovery.
Second, attention must be given to controlling rising prices while maintaining business and production activities. The government should reduce non-essential spending and avoid excessive borrowing from banks. Interest rates and lending policies should be managed in a way that reduces inflation. More individuals and organisations should be brought under the tax net, unnecessary tax exemptions should be reviewed, and tax evasion should be minimised using digital documentation.
Third, long-term benefits from infrastructure constructed with government funds must be ensured. Projects should begin only after land acquisition, design, funding arrangements, and tender preparation are complete. Before starting, cost analysis, potential benefits, and the project's necessity should be evaluated. The cost, progress, and expected outcomes of the project should be disclosed. Funds should also be allocated for the maintenance of roads, bridges, or power plants after construction.
Ministries should report on the work done with government funds and the benefits afforded to the people. Sustainable growth will not result simply from excessive spending if projects are delayed, selected incorrectly, or fail to improve people's transportation, energy, and services.
Finally, reliable energy and stable regulations are needed to regain investors' confidence. The costs and completion dates for solar power projects must be disclosed. Power purchase agreements should be made public. Even if a power plant does not generate electricity, the costs it incurs for remaining ready should be reviewed. Efforts to explore gas within the country must be increased, the electricity transmission system improved, and renewable electricity integrated into the national grid.
The government is in discussions with the IMF regarding a new loan programme. This loan programme will have conditions related to reforms in various sectors. However, the government should complete those reforms itself, regardless of whether or not the IMF loan is obtained. Reforms undertaken voluntarily, as opposed to imposed conditions, give a sense of ownership.
Banking issues, indebted businesses, energy costs, low government revenue, and weak investment—all these problems are interconnected. Therefore, reform initiatives must be taken domestically to resolve them collectively.
#Fahmida Khatun is an economist and distinguished fellow at the Centre for Policy Dialogue (CPD).
*The opinions expressed here are the author's own.
#This article, originally published in Prothom Alo print and online editions, has been rewritten in English by Rabiul Islam.