A decade ago, Bangladesh was hailed in international investment circles as one of the fastest-growing economies in the developing world. Its steady growth, expanding exports, and youthful population positioned it as one of the most promising frontier markets. Yet, by 2024, the same country found itself on the brink of economic collapse.
A banking panic, a severe dollar shortage, and fears of default created an atmosphere of despair. At that point, an interim government intervened to stabilise the economy, halting the downward spiral. The crisis served as a stark reminder of how fragile progress can be when governance falters. The question now is whether Bangladesh can leverage this moment of recovery to chart a path toward long-term prosperity and where it might stand by 2035.
Over the past year, significant progress has been made to restore confidence. The most immediate threats – bank runs, exchange rate instability, and depleted reserves – have been brought under control. Importers who once struggled to secure dollars now find the market functioning again. Foreign exchange reserves have increased by five to six billion dollars, reversing earlier losses.
The Taka has remained steady at around Tk122 to the dollar, and for the first time in years, Bangladesh Bank has been able to purchase dollars from the market rather than sell them. International financiers, who had previously cut ties with Bangladesh, have resumed cooperation, with many expanding their credit lines. The balance of payments has moved back into surplus. These developments, which seemed impossible just a year ago, mark an important turning point.
Yet, the recovery is far from complete. Inflation remains stubbornly high at 8.5%, well above the target of 4%. It may take another year of consistent effort before this goal is within reach. More troubling is the condition of the banking sector. For years, weak governance, lax regulation, and outright corruption allowed institutions to disguise losses and distribute dividends despite deficits. Officially reported non-performing loans of 9% concealed a much darker reality.
Today, with stricter classification rules in place, it has become evident that bad loans make up nearly a quarter of the system’s portfolio, with the figure potentially climbing as high as 30%. It is an ugly truth, but one that must be confronted squarely if the sector is to be repaired. Boards have been reshuffled in 15 banks, and capital-starved institutions are barred from paying dividends. These measures are painful, but they lay the foundation for genuine reform.
This is where the real crossroads lies. Bangladesh will certainly graduate from the least developed country status within the next 10 years. But graduation alone does not guarantee prosperity. The more critical question is whether the country can avoid stagnation in the lower rungs of middle-income status or push forward into the high-middle-income category that leads eventually toward advanced-economy status.
The answer depends largely on the choices made by the next two political governments. If they are stable, reform-minded, and committed to strengthening democratic governance, the chances of a successful transition are very high. But if they cling to old practices, tolerate corruption, or allow authoritarian tendencies to resurface, aspirations will remain unfulfilled.
The importance of governance cannot be overstated. For ordinary citizens, it is reflected in daily struggles. When someone cannot correct an error on a national identity card without paying bribes, or when a villager is driven from his land by local muscle without recourse, it shows how fragile rights remain.
Administrative offices, from land records to police stations and tax departments, remain notorious for their inefficiency and corruption. Files vanish, applications take years to be processed, and nothing moves unless money changes hands. This entrenched culture has eroded people’s faith in the system. Without reforming these practices, no amount of macroeconomic stability will deliver real progress.
Already, the consequences are visible in society. A growing share of Bangladesh’s educated youth is leaving the country for opportunities abroad. Parents openly admit they prefer their children to settle overseas, even at the cost of family separation, because they do not believe the country can offer a secure and dignified future.
By 2035, this exodus could worsen, leaving the nation deprived of its brightest minds. True development will only be achieved when parents can confidently tell their children to return home after study, ensure that they will find fair pay, opportunities, and respect in their own country.
Investment is another critical area. Bangladesh has consistently failed to make itself hospitable to foreign investors. Newcomers face harassment, delays, and endless demands for payments at every step. Files disappear mysteriously, and accountability is absent. Some reforms are now under way. Bangladesh Bank has simplified payments for royalties, dividends, and capital repatriation, delegating these to authorised banks. Plans are being developed to adopt internationally recognised asset-valuation methods so that investors know in advance how they can legally repatriate their funds. These measures reduce uncertainty and signal a new openness.
But they must go further. Liberalisation and transparency are essential. Without them, investors will not come. And without investment, the industrialisation that Bangladesh desperately needs will remain out of reach. Industrialisation and job creation are the backbone of future prosperity.
Encouragingly, early signs of renewed interest are visible. Foreign direct investment has grown by 20% in the past year. Portfolio inflows are rising. The stock market is showing new life. These are small beginnings, but they matter.
Industrialisation, however, depends on macroeconomic stability. The lessons of 2023 to 2025 remain clear: political stability alone is not enough. When economic management falters, when reserves dwindle and the exchange rate collapses, investors retreat. This cannot be allowed to happen again. Liquidity must be managed responsibly. That means no reckless printing of money to cover deficits. Instead, liquidity should come from balance of payments surpluses, foreign capital inflows, and bond purchases by international investors. This approach strengthens the financial system without fuelling inflation.
The politics of rent-seeking remains a serious obstacle. Chattogram port, the nation’s main trading hub, has repeatedly been held hostage by vested groups determined to protect their narrow interests. This behaviour damages the entire economy. Critics often denounce foreign involvement in port management, but almost every advanced economy relies on international operators for efficiency, technology, and modernisation. Singapore, Dubai, Rotterdam, and Hong Kong are all examples.
If Bangladesh partners with such companies for a decade or more, it can learn the necessary management practices and eventually take full control. To reject this opportunity for short-term political gain is to sacrifice national progress.
The bureaucracy presents another entrenched challenge. Citizens face harassment and delay across government offices, while officials rarely face consequences. Land management, city development, policing, and tax administration remain riddled with inefficiency. Even the interim government, with strong intentions, has struggled against these bottlenecks. A future elected government must push harder for reform, or the system will remain stagnant.
This brings the discussion back to the future. By 2035, Bangladesh could be a transformed economy, or it could be a country still trapped by the same old weaknesses. If governance is strengthened, if democratic institutions are preserved, if investment is welcomed, and if industrialisation accelerates, Bangladesh can break free of the middle-income trap and stand among the high-middle-income nations. If not, the country risks stagnation, its brightest youth working abroad, its institutions hollow, its dreams unfulfilled.
Economic indicators matter, but the deeper foundation is governance. Only when citizens feel their rights are protected, when investors feel confident they will not be extorted, and when parents believe their children can live with dignity at home will the dream of development become reality. The decisions made in the next one decade will determine whether Bangladesh in 2035 and 2040 is celebrated as a success story or lamented as a lost opportunity.
The writer is the governor of Bangladesh Bank.
