Prothom Alo explainer
How is economy doing?
Half of the current fiscal year has passed. Despite a range of reform initiatives by the interim government, the economy continues to face multiple challenges. With a national election ahead, speculation has begun over what kind of economy the next government will inherit. Inflationary pressure has yet to ease. Exports are under strain due to retaliatory tariffs imposed by Trump. Remittance inflows, however, remain strong. Revenue collection is falling short of targets, while investment and employment face significant challenges. So, through a question-and-answer format, let us take a closer look at how people are doing, and how the economy is performing.
What is the overall picture of country’s economy after six months of the current fiscal year?
By late 2025, country’s economy appeared to be under pressure, while also showing signs of stability. Overall, it is in a mixed state.
Inflationary pressure remains high due to food prices. At the same time, there are some positive indications in GDP growth, remittances and foreign exchange reserves. However, private sector credit growth and revenue collection remain weak. Export earnings have also deteriorated slightly compared with earlier periods.
For general public, the most important indicator is the price of rice. Has the price of rice fallen?
Not entirely. Rice inflation eased slightly in December. In that month, rice inflation stood at 11.92 per cent, compared with 12.26 per cent in November. Prices of fine rice, medium-grade rice and coarse rice declined marginally. However, while the pace of price increases has slowed, market conditions have not improved enough to bring real relief.
How does the price of rice affect people’s daily lives?
In Bangladesh, around 22-25 per cent of overall inflation depends on rice prices. As a result, fluctuations in rice prices have a significant impact on inflation. Prices of food items including that of rice is the main driver of inflation.
Inflation has fluctuated over the past year. In December, it rose to 8.49 per cent, up from the previous month. Although inflation has remained in single digits for several months, it is still above a tolerable level. According to the Bangladesh Bureau of Statistics (BBS), food inflation in December was 7.71 per cent, while non-food inflation stood at 9.13 per cent. Food inflation has increased for three consecutive months.
Which items have provided some relief?
Prices of edible oil and vegetables have fallen, easing inflationary pressure. Vegetable prices declined due to the winter season. In the case of edible oil, its negative contribution to inflation increased, helping to reduce overall food inflation.
Are people’s incomes rising at the same pace as prices?
No. Given the overall inflation situation, this is the most painful issue for ordinary people. Inflation acts like a tax.
Most people spend their entire monthly income on household expenses. If prices suddenly rise without a corresponding increase in income, they are forced either to borrow or to cut back on essentials such as food, clothing and transport.
When wage or income growth lags behind inflation, hardship increases and real incomes fall. According to BBS, the national wage growth rate in December was 8.08 per cent, lower than the inflation rate.
What does this wage-price gap mean?
It means that even though people may be earning more than before, they can no longer buy the same amount of goods and services with that income. As the gap widens, it puts pressure on consumption, living standards and overall economic welfare.
Despite various pressures, is the economy showing signs of recovery? Has GDP increased?
Yes, to some extent. According to BBS records, GDP growth in the first quarter (July-September) of the 2025-26 fiscal year was 4.5 per cent, compared with 2.58 per cent in the same period of the previous year. This indicates an improvement in production and economic activity.
Which sectors contributed to growth?
The industrial sector made the largest contribution. During July-September, industrial growth rose to 6.97 per cent, up from 3.57 per cent in the same period last year.
Growth in the services sector was 3.67 per cent. Agricultural growth remained relatively low, but improved compared with contraction in the previous year, reaching 2.3 per cent. This indicates that the industrial sector has become more buoyant.
Has borrowing from banks increased?
Credit growth has not increased significantly. Both public and private sector credit flows indicate the near-term direction of the economy, with private sector credit being more influential.
For example, private sector credit growth was 6.58 per cent in November, compared with 6.23 per cent in October. High interest rates and uncertainty have kept borrowing subdued.
So where is the money in the banking system going?
Bank lending to the public sector has increased relatively more. As a result, a large portion of the banking system’s resources is being used to finance the government, while private sector credit remains relatively weak.
This has narrowed employment opportunities in the private sector. Political uncertainty and the election may have prompted private entrepreneurs to adopt a wait-and-see approach.
What is the situation with deposits?
queDeposit growth in November stood at 10.8 per cent, with total deposits reaching Tk 19,537.95 billion (1,953,795 crore). Although deposits have increased, loan disbursement has not grown at the same pace.
What does the government’s revenue collection look like?
In the first six months (July-December) of the current fiscal year, there was a shortfall of around Tk 460 billion (46,000 crore) in tax and customs revenue. As in previous years, the National Board of Revenue (NBR) has struggled to meet its targets.
According to NBR data, the revenue target for July-December was Tk 2,312.05 billion (231,205 crore), against which Tk 1,852.29 billion (185,229 crore) was collected, putting pressure on government finances.
Has the dollar situation improved?
Yes. The dollar situation has improved and the shortage has largely eased. The crisis peaked during the Ukraine war. The exchange rate has now stabilised at around Tk 122 per dollar.
By the end of December, foreign exchange reserves rose to USD 31.18 billion (3,118 crore). Under the IMF’s BPM method, reserves stood at USD 28.57 billion (2,857 crore). Increased remittances and improvements in the current account contributed to this rise.
Reserves had peaked at USD 48 billion (4,800 crore) in 2021, but had fallen to USD 26 billion (2,600 crore) at the time of the fall of the Awami League government.
What is the trend in remittances?
Migrant workers have increased the pace of remittance inflows, helping stabilise the external sector.
Remittances exceeded USD 3 billion (300 crore) in December. Inflows have remained strong for several months, particularly since the fall of the Awami League government in August 2024. A record was set in March, when USD 3.29 billion (329 crore) in remittances was received—the highest ever for a single month.
In the first six months of the current fiscal year, remittances totalled USD 16.26 billion (1,626 crore), an 18 per cent increase compared with the same period last year.
Can the export sector really recover?
Exports fell by 14 per cent in December-the steepest decline in the past year and a half. Exports that month amounted to USD 3.97 billion (397 crore), compared with USD 4.62 billion (462 crore) a year earlier.
Not only that, export earnings declined for five consecutive months, raising concern among exporters. They cite reduced sales in the US market due to retaliatory tariffs, which have raised prices and reduced orders.
At the same time, higher US tariffs on China and India have prompted exporters from those countries to offer lower prices to EU buyers, intensifying competition for Bangladeshi exporters.
Which sector remains the mainstay of exports?
As always, the ready-made garment sector remains the primary driver of export earnings. In the first half of FY 2025-26, the bulk of export income came from this sector. More than 80 per cent of Bangladesh’s total exports are generated by garments, meaning any slowdown has a broad impact on overall exports.
How are non-garment sectors performing?
Growth in non-garment export sectors remains limited. While these sectors contribute to diversification, their overall share of export growth is relatively small. As a result, Bangladesh’s export earnings continue to depend heavily on garments, leaving the economy exposed to risk due to limited diversification.
What about imports? Is the country still importing heavily?
Bangladesh remains import-dependent, spending billions of dollars each month, on average USD 5-6 billion (500-600 crore). In December alone, imports amounted to USD 5.80 billion (580 crore). This reflects continued domestic demand and high global prices.
Which imports are driving costs?
Energy, consumer goods and intermediate raw materials account for most import expenditure. Meanwhile, imports of capital machinery remain weak, signalling sluggish investment activity.
What does weak capital machinery import indicate?
It suggests that new industrial investment and production expansion remain subdued. Political uncertainty and the election have dampened investor confidence, affecting job creation. While existing production continues, momentum in new investment remains limited.
What might 2026 look like?
According to projections by the General Economics Division (GED) of the Planning Ministry, GDP growth could be around five per cent this fiscal year. The World Bank forecasts 4.6 per cent growth, the Asian Development Bank (ADB) 5 per cent, and the IMF 4.9 per cent.
Although inflationary pressure may ease somewhat, moving the economy onto a sustainable path will require good governance, policy continuity, and investment in skills and technology. Diversifying beyond the garment sector has become increasingly urgent.
Bangladesh is currently at a critical juncture, transitioning from Least Developed Country (LDC) status while undergoing a democratic transformation. In this context, a stable, reform-oriented political environment and effective use of knowledge-based technologies could help the country move from a low-wage, labour-dependent economy towards higher value-added production and employment.
Sources: Ministry of Finance; Planning Ministry; General Economics Division; NBR; BBS; Bangladesh Bank; EPB