Rising poverty, declining investment and persistent economic instability demand urgent policy action. Restoring economic confidence and protecting ordinary citizens must now become national priorities.
Bangladesh’s economy has been under increasing stress for the past few years. Stunted growth, entrenched inflation, rising poverty, and falling investment have driven the crisis, and it is too grave for short-term fixes or comforting platitudes. The recently released World Bank Bangladesh Development Update is a gloomy report of the country’s highly vulnerable structural economy. The results should be an alarm bell for policymakers.
The World Bank says economic growth would be only 3.4 percent in FY2025-26 and FY2026-27, well short of the country’s historical rates. Worryingly, around 2.1 million people have been pushed into poverty, increasing the estimated poverty rate from 18.7 percent in 2022 to 22.5 percent in FY2025-26. This isn’t just a poor economic indicator. They stand for millions of people who can’t afford food, healthcare, education and other basic needs.
The more alarming aspect is that investment is also falling, and there is a lack of industrial growth. Private investors continue to be hesitant to expand operations in the face of high borrowing costs, regulatory uncertainty and unreliable energy supplies. The gas and electricity crisis has become an issue, disrupting industrial production, cutting working hours and jeopardising jobs. Economic recovery will be slow unless investor confidence is restored and energy supplies are maintained.
There are big challenges in the banking sector as well. Longstanding weaknesses in financial governance and lending practices reportedly led to an NPL ratio of 33.2 percent of total loans in June 2026. These alarming figures undermine public trust and restrict credit access to be channelled to productive activities. Hence, the government needs to focus on banking reforms and increased regulation and accountability for financial irregularities. Politically sensitive borrowers or influential defaulters should not be permitted to get away with it; this will exacerbate the situation.
At the same time, inflation keeps on reducing the purchasing power of households. While there might be occasional fluctuations in prices, there are basic commodities that many low- and middle-income families simply cannot afford. The high cost of living, coupled with poor job prospects, has led to a precarious situation in which small economic shocks can easily push vulnerable households into poverty. Growth is without significance if normal citizens fail to achieve a decent standard of living.
The government’s response has to therefore go beyond short-term subsidies and piecemeal assistance programmes. Social protection is fundamental, but benefits that are poorly targeted are unable to be a sustainable solution. A digitally managed social safety-net system should help identify those truly in need of assistance in a transparent way, and help deliver it without political influence, blockages, or corruption.
But the resurgence of domestic investment is also important. Bangladesh needs to cut down on the procedural hassles and ease the business environment and infrastructure to promote industrial development. SEZs should be working hubs of production and not a sign of unfulfilled ambitions. In addition to attracting foreign direct investment (FDI), mobilising domestic private capital is critical in generating jobs and enhancing economic resilience.
Special care needs to be taken for youth and women, whose employment prospects have been increasingly uncertain. The content of technical education and vocational training should be based on market demand, and SMEs should have easier access to cheap sources of finance. There is also a need to better support agriculture with modern technology, modern storage and better market access. If productive sectors of the economy are neglected, it is impossible to make it inclusive.
Fiscal discipline and institutional accountability are also essential. In Bangladesh, however, the government should broaden the tax base, reduce unnecessary tax exemptions, crack down on leakages in tax revenues and increase its tax collection as it is very low. Government spending must focus on healthcare, education, and productive projects instead of wasteful projects. Good governance and proper financial oversight and procurement are not just desirable changes, but essential elements for sustainable development.
Of course, there are extra stresses from outside geopolitical pressures and energy-market volatility. But it is no justification for continuing domestic mismanagement to blame international circumstances. Bangladesh needs to build its economic base to avoid such ‘Band-Aid’ measures whenever the outside environment weakens.
A major worry is that the gap between economic growth and the well-being of ordinary citizens is growing. Bangladesh’s development story has been mostly about growth and building infrastructure and boosting export revenue. But none of these accomplishments will matter if they are not sustained for the broader population. The increase in income inequality, the decrease in real income and the lack of good jobs risk jeopardising the social and economic developments achieved over decades. The government, therefore, has to change its emphasis from growth to quality and inclusiveness of growth. Economic policies need to be focused on equitable opportunities, productive job creation, fair wages, and improved public services. Otherwise, Bangladesh runs the risk of creating an economy that grows on paper, but not for the millions of people.
The nation has tremendous potential in its human resources, entrepreneurial ability and existing manufacturing sectors. However, this potential will not be realised without determination and integrity on the part of policymakers to tackle the structural weaknesses. The time for more laudable pledges is over in Bangladesh. It requires effective transformation that will bring back investment, create jobs, safeguard vulnerable people and restore public trust. A recovery in the economy must ultimately be judged by how much better people’s lives are.
The views expressed in this article are solely those of the author
The writer is an Associate Professor, Department of Public Administration, University of Rajshahi, E-mail: [email protected]
