Bangladesh’s upcoming budget must address both the structural weaknesses of the country’s growth model and the cumulative economic crisis that has deepened since the pandemic, Power and Participation Research Centre Chairman Hossain Zillur Rahman said.
In an interview with Mahfuz Ullah Babu of TIMES of Bangladesh, the economist said the economy requires a “double transition,” combining institutional and governance reforms with a new growth strategy capable of generating employment, reducing poverty and restoring investor confidence.
“The budget needs to focus on enabling a double transition,” he said. “It must address the crisis in the existing growth model while setting the economy on a new growth path. One will reinforce the other.”
Both domestic and foreign investors are ready to invest but are waiting for clearer policy direction and stronger governance, he added.
Rahman argued that Bangladesh’s lengthy period of authoritarian rule requires a deeper economic assessment beyond political criticism centred on the absence of accountability, credible elections and effective governance.
Public debate has largely focused on corruption, capital flight and the banking-sector crisis that became particularly visible by 2024. However, he said the economic characteristics of the development model pursued over the past decade deserve closer scrutiny.
Although the economy recorded relatively strong growth for much of the period, questions remain over its quality and sustainability.
According to Rahman, the model relied heavily on mega-projects, social protection programmes and state-led economic activity but came under strain following the Covid-19 pandemic, the Ukraine war and subsequent political and economic uncertainty.
“The growth model entered a crisis and failed to recover,” he said.
He identified three structural weaknesses that received less attention than corruption and macroeconomic instability.
First, growth became increasingly detached from job creation. Employment elasticity declined significantly after 2010, meaning economic expansion generated fewer jobs than in previous decades.
Second, the poverty-reducing impact of growth weakened, with each percentage point of expansion translating into a smaller reduction in poverty than before.
Third, the link between education and employment deteriorated as the quality and labour-market relevance of education came under question.
“The education system became less employment-friendly,” Rahman said, noting that many graduates struggled to secure suitable jobs while companies continued hiring foreign professionals.
He said these weaknesses contributed to rising unemployment and underemployment even during years of relatively strong growth.
Rahman said the interim administration inherited an economy already under severe stress but focused primarily on macroeconomic stabilisation, banking-sector reforms, reserve management and risk reduction.
While those measures were necessary, policymakers paid insufficient attention to reviving economic activity and addressing longer-term challenges related to employment, poverty reduction and human capital development, he said.
He called for a banking-sector policy framework that supports inclusive growth while avoiding conflicting policy signals.
“Mixed signals should be avoided,” he said, adding that policy consistency is essential to rebuilding confidence.
Rahman also expressed concern over the handling of recent developments at Islami Bank Bangladesh PLC, saying the process surrounding governance changes created discomfort and raised questions about institutional practices.
“The signals matter,” he said.
He cautioned against using taxpayers’ money to absorb losses at weak banks, arguing that such measures are inconsistent with a market economy.
On state-owned enterprises, Rahman said policymakers should focus on efficiency and value for money rather than ideological positions favouring either blanket privatisation or continued state ownership.
“The main issue is ensuring efficient expenditure,” he said.
Rahman also identified the absence of reliable real-time economic data as a major obstacle to policymaking and economic analysis.
Despite various reform initiatives and task forces, key institutions still lack the capacity to produce timely data needed for informed decision-making, he said.
“Strong action is needed on real-time data,” Rahman said, describing it as one of the most important prerequisites for effective economic management.
