The year 2025 was an important one for Bangladesh’s economy. The economy managed to get through the year without any major shocks. Throughout the year, efforts were made to control high inflation while also addressing the challenges of sustaining investment and employment. Recently, a downward trend in global food and fuel prices and signs of a gradual return to stability in the domestic economy have made many people optimistic about 2026. A major reason for this optimism is the national election scheduled for February. It is believed that the formation of an elected political government for the subsequent five years will boost the confidence of both domestic and foreign investors.
In the meantime, some relief has come from the external sector and foreign exchange reserves. Over the past year, the interim government has managed to halt the decline in reserves. Expatriates have sent the highest amount of remittances in decades. Within three years, the central bank’s gross reserves have reached their highest level, at nearly $34 billion. Rising remittance inflows have enabled Bangladesh Bank to purchase dollars from banks as needed.
Despite President Trump’s imposition of “reciprocal tariffs,” the export sector maintained a positive trend. However, exports faltered somewhat in the final months of the outgoing year. This is partly attributed to the global economic slowdown. Higher prices in the US market due to reciprocal tariffs have reduced sales, and orders have not come in as expected. At the same time, as the United States imposed higher reciprocal tariffs on China and India, exporters from those countries have sought to offer goods at lower prices to buyers in the European Union. This has placed Bangladeshi exporters under intense competitive pressure. Although diversification of products and export markets has long been discussed, little tangible progress has been made.
The financial sector remained under significant strain last year. Rising non-performing loans worsened conditions in the banking sector. However, stakeholders expect that the merger of five weak banks will help create a stronger foundation for lending and financial stability in 2026. Although initiatives are underway to recover defaulted loans and bring back siphoned-off funds, no major success has yet been achieved. Still, the central bank governor has stated that a large portion of those involved in capital flight has been identified and that necessary legal reforms are being introduced. While the process is difficult, he remains optimistic that progress is possible over time.
If all goes as planned, Bangladesh will officially graduate from Least Developed Country (LDC) status on 24 November 2026. Although business leaders have called for the transition to be postponed by three to six years, the government’s position is clear—it wants the graduation to take place on schedule. On 21 January, preparations for graduation and socioeconomic indicators will be reviewed in a meeting with a United Nations delegation in Dhaka. The UN reached this decision after an eight-year process and multiple assessments. Only 11 months remain. LDC graduation may increase pressure on export sectors, particularly the pharmaceutical industry, and access to low-interest foreign loans could become more difficult. However, this is not a unilateral government decision; postponement would require strong justification and international support.
After several consecutive years of economic pressure and uncertainty, 2026 has generated renewed optimism among development partners and investors. If political stability returns following the February parliamentary election, investment, employment, and GDP growth may gain momentum. Analysts also believe that if global commodity and fuel prices continue to decline, inflation may ease somewhat as well.
However, it will take time for the economy to fully recover. The new government will need several months to formulate and implement policies. Following a credible election and a democratic transfer of power, the new government must ensure fair, inclusive, and sustainable growth. Ongoing reforms and policy stability will help boost investment, leading to increased employment, higher incomes and purchasing power, and greater economic momentum. At the same time, improvement in the law-and-order situation is critically important.
In the new year, four priorities are essential for the economy. First, addressing the ongoing macroeconomic crisis. Second, reviving investment, exports, small and medium enterprises, and domestic demand. Third, ensuring good governance in banks, insurance companies, non-bank financial institutions, and the capital market. Fourth, implementing a comprehensive economic reform programme.
Last year, high prices of essential commodities put significant pressure on the livelihoods of ordinary people. The true extent of non-performing loans has begun to emerge. As of the end of last September, non-performing loans stood at Tk 6.44 trillion, accounting for nearly 36 per cent of total loans. Once again, special powers have been used to allow loan rescheduling, with decisions taken in the cases of nearly 300 institutions. However, breaking free from the culture of loan default will require stronger political will.
Several banks that were looted during the previous government’s tenure have been merged to form the "Sammilito Islami Bank.” A decision has been taken to abolish the National Board of Revenue and establish separate divisions for revenue policy and revenue administration. These initiatives will require time and political resolve to yield results. In addition, the leasing of two terminals at Chattogram Port to foreign companies and India’s repeated export restrictions will compel the new government to reassess its approach. Forming a skilled and well-coordinated economic team is also essential for economic recovery.
#Mamun Rashid is an economic analyst
#Opinions are the author’s own
*This article, originally published in Prothom Alo print edition, has been rewritten in English by Rabiul Islam