Bangladesh’s economy is currently facing significant stress as it grapples with the twin challenges of controlling inflation and managing mounting debt obligations. Efforts to stabilise prices have coincided with sluggish revenue collection, a rising tide of non-performing loans, and structural weaknesses in governance—all of which have dampened economic growth and eroded the real incomes of ordinary citizens.
According to economic advisor Dr. Salehuddin Ahmed, who prepared a comprehensive successor note for the incoming finance minister, the government’s capacity to respond to major fiscal challenges is constrained by these compounding pressures. With the national budget deficit widening, reliance on both domestic and foreign borrowing has intensified. The high volume of debt service payments is placing substantial strain on the broader economy.
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Key Recommendations for the New Government
In his note, Dr. Ahmed stressed that the immediate priorities for the incoming finance minister should include controlling inflation and restoring market confidence. He urged an urgent focus on strengthening revenue collection, particularly through the ongoing reform of the National Board of Revenue (NBR), reviewing tax exemptions, and modernising income tax and customs administration through digitalisation.
The successor note also underscores the importance of continuing ongoing reform programmes rather than initiating entirely new projects. Dr. Ahmed emphasised that consolidating these reforms would allow the new administration to build on existing momentum.
Banking and Financial Sector Challenges
The interim government inherited a banking sector in a particularly fragile state. Research by the Centre for Policy Dialogue (CPD) indicates that between 2008 and 2023, approximately BDT 92,000 crore was misappropriated from the banking sector, with 36% of loans now classified as non-performing. Similar vulnerabilities exist within non-bank financial institutions. Strengthening regulatory oversight and instituting robust legal frameworks are critical challenges for the incoming government.
| Sector | Key Issues | Measures Taken / Recommended |
|---|---|---|
| Banking | 36% NPLs, capital shortages | Bank Resolution Ordinance 2025; consolidation of Islamic banks; creation of Bank Resolution Unit |
| Fiscal | Low revenue collection | NBR reforms, VAT automation, e-invoice system |
| Inflation | Upward trend in consumer prices | Tight monetary policy; supply chain management for essential goods |
| External Sector | Slower export growth | Encouragement of RMG production; monitoring imports for essential goods |
Financial and Monetary Developments
Dr. Ahmed’s note highlighted that deposit and loan interest rates have risen marginally over the past year, reflecting a shift toward market-based lending. However, non-performing loans, capital shortfalls, and governance weaknesses persist, limiting private sector credit growth. As of November, private sector loan disbursement had fallen by 6.58% year-on-year.
The interim government enacted several key financial sector laws, including amendments to the Bank Companies Act, Finance Companies Act, and Secured Transactions Act. The Bank Resolution Ordinance 2025 empowers Bangladesh Bank to intervene in failing or high-risk banks, ensuring depositor protection and continuity of banking services.
Outlook
Despite challenges, the economic advisor projects inflation to moderate to around 7% by June, aided by contractionary monetary policies and disciplined fiscal management. Meanwhile, foreign trade remains uneven, with export growth constrained by underperformance in the ready-made garment sector, even as imports continue to rise.
The successor note, formally titled “Overall Economic Situation, Risks and Policy Priorities of Bangladesh,” will be handed over to the new finance minister by the Finance Secretary, providing a roadmap for immediate and medium-term policy priorities.