[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Time for rebasing GDP

Replacement of the 2015-16 baseline price year used for calculating Bangladesh's economic output is overdue because of significant changes in its industrial sector and price weights. Countries the world over do this every five to ten years to include new industries, drop dead sectors, if any, and u

thefinancialexpress.com.bd

Time for rebasing GDP

Replacement of the 2015-16 baseline price year used for calculating Bangladesh's economic output is overdue because of significant changes in its industrial sector and price weights. Countries the world over do this every five to ten years to include new industries, drop dead sectors, if any, and update outdated price weights. But the country proposes to do more this time. It wants updating the framework of the 2008 System of National Accounts (SNA) it has so far followed to compile GDP (gross domestic product). The Bangladesh Bureau of Statistics (BBS) seeks inputs from academics, economists, think tanks and major data providers for rebasing the GDP. In the past also, the statistical agency sought expert opinions from academics and economists but this time broader and extensive consultations have been planned to recalibrate the proposed framework as accurately as possible to measure the country's output.

The new baseline price year has to focus on modern technology including artificial intelligence (AI), digital services and new industries or manufacturing units that have undergone phenomenal transition by this time. Indeed, outdated SNA either leaves such productive sectors out of calculation or the old price weights of the traditional industries do not reflect the changes that have taken place in the intervening period. The effect of price changes is not reflected in the system. True, GDP was revised and rebased several times since the country's independence, but there was always an element of doubt about the methodology, data coverage and assumptions behind the estimates. There was always some credibility gap. This fresh attempt seeks to put such suspicions at rest. Now that the BBS has decided to approach experts from specialised institutions and academies for their considered opinions on the issue, there are good reasons to be optimistic about real-time data sets so crucial to tracking developments on the economic front. Such authentic data will help policymakers plan for measures aimed at meeting crises and advancing development programmes.

Updating statistical framework in effect means recalibration of data sets that no longer reflects the diversified economic activities with the introduction of advanced technology, machines and equipment. With the change in means of production, a whole new business ecosystem with development of backward linkage industries or sub-sectors appears on the scene. Calculation of GDP has to take into account the economic snowball effects. The backward linkage industries of the garment industry present a clear picture of such a development.

Bangladesh's economy may be overly reliant on readymade garments but digital services and products ranging from cell phone to semiconductor, e-commerce, logistics and modern agriculture etc., have added new dimensions to it. The government move to promote Bangla QR code among small retailers can be cited as an example of digital transactions demanding accommodation in the financial system. The records of transactions can effectively be a substitute for collateral for small enterprises to qualify for bank loans. Tracking their potential economic expansion is necessary to understand the growth of economy at the grassroots level. Integration of these small and marginal retailers into the mainstream economic channel can have a proper reflection in the GDP calculation. Inclusion of such areas of economy so far excluded from calculation will project a real picture of the GDP. The BBS must take such informal areas of economy into account while calculating the GDP.​

 

[Saif]

An emerging macroeconomic challenge for Bangladesh

Bangladesh's economy is currently navigating a complex macroeconomic environment marked by persistently high inflation, subdued private sector credit growth, liquidity management challenges, and sluggish investment. Amid the policy focus on inflation, the exchange rate, and interest rates, one issu

thefinancialexpress.com.bd

An emerging macroeconomic challenge for Bangladesh

Bangladesh's economy is currently navigating a complex macroeconomic environment marked by persistently high inflation, subdued private sector credit growth, liquidity management challenges, and sluggish investment. Amid the policy focus on inflation, the exchange rate, and interest rates, one issue deserves equal attention - the unprecedented accumulation of physical currency held outside the formal banking system.

Despite the rapid expansion of mobile financial services (MFS), internet banking, agent banking, and the recently introduced Bangla QR payment system, Bangladesh is witnessing a historic surge in cash held outside banks. For an economy striving for greater financial inclusion and a modern digital payment ecosystem, this growing preference for cash is a serious macroeconomic challenge. Because it deprives the formal financial sector of liquidity, weakens monetary policy transmission, constrains private sector lending, and complicates the fight against inflation.

Bangladesh Bank data in this context reveal a remarkable upward trend over the past decade. Currency outside banks stood at approximately Tk 581 billion in 2011, and rose nearly fivefold to around Tk 2.91 trillion by June 2023. The figure held relatively steady at about Tk 2.96 trillion through mid-2025, before accelerating sharply. By May 2026, it had exceeded Tk 3.49 trillion, and recent Bangladesh Bank estimates put the number above Tk 3.8 trillion by July 2026. This is the highest amount of cash held outside banks in the country's history.

This acceleration can be attributed to several interconnected forces. Households, businesses, and segments of the informal economy are increasingly choosing to hold physical cash rather than keep funds in the formal banking system. The most direct driver is inflation. Since 2022, rising prices for food, transport, healthcare, and other essentials have pushed up the cash households need for daily transactions, so more money circulates in retail markets without returning to banks.

A second, less visible catalyst is the eroding confidence of depositors. Confidence is the cornerstone of any banking system, and frequent reports of loan irregularities, rising non-performing loans (NPL), and governance weaknesses at a handful of institutions have unsettled depositors more broadly. Although these problems may be concentrated within a limited number of institutions, they often create broader concerns across the financial sector, prompting precautionary withdrawals and increased cash holdings.

A third factor is the negative real return on savings whenever inflation outpaces deposit rates. Under these conditions, depositors reasonably feel that keeping money in banks erodes its purchasing power and so they turn instead to cash or physical assets, such as land and gold.

The consequences ripple through the financial system. Banks rely on deposits to fund lending; as deposits weaken, they turn to costlier interbank borrowing or Bangladesh Bank liquidity facilities, and higher funding costs eventually flow through to businesses and consumers as more expensive loans. Weaker deposit growth also directly limits banks' capacity to extend new loans, which in turn slows business expansion, industrial production, employment, and growth. Because Bangladesh Bank's policy rate and liquidity tools work mainly through the formal financial system, a large and growing pool of cash outside it also dulls the effectiveness of monetary policy itself.

The upside of reversing even part of this trend could be substantial. Additional deposits would strengthen banks' liquidity buffers, reduce reliance on expensive emergency funding, and support lending to manufacturing, SMEs, agriculture, and export industries. A stronger banking sector can also ease pressure on imports and support exchange rate stability over the medium term, while a smaller pool of informal liquidity gives Bangladesh Bank more traction over money supply and inflation through its usual tools.

Rebuilding public trust is the starting point, and it will take sustained effort from regulators, financial institutions, and the wider financial ecosystem. Depositors need to consider the right parameters to evaluate institutional strength, regulatory compliance, capital and liquidity adequacy, timely audited financial statements, board quality and management experience, transparency, and a clean governance record. Asset quality (particularly the level of NPLs), long-term reputation, and the quality of customer service and digital banking should be taken into consideration as well. Institutions with diversified funding, prudent risk management, strong internal controls, and a proven record of honoring obligations under stress are best placed to safeguard depositors' funds and earn back that trust.

The rapid increase in currency outside banks is a macroeconomic concern for Bangladesh with significant implications for liquidity management, private sector investment, inflation control, and sustainable economic growth. The ongoing digital transformation demonstrates that technology alone cannot change financial behavior. Public confidence, macroeconomic stability, sound governance, and attractive real returns on savings remain equally important. Maintaining confidence in the broader system is essential to preventing localized problems from triggering unnecessary contagion across the sector. Alongside this, stronger deposit protection, wider digital payment adoption, more inclusive financial products, and continued financial literacy efforts would all help draw savings back into the formal system.

A transparent, well-governed, and resilient banking sector is ultimately the most effective incentive for bringing Bangladesh's cash back into its banks, and back to work for its economy.

Nurul Karim Patwery, ACMA, is the Head of Treasury, IDLC Finance PLC.​

 

[Saif]

ADB to help Bangladesh become a trillion-dollar economy by 2034: Yingming Yang

Asian Development Bank (ADB) Vice President Yingming Yang has said the Manila-based lending agency is ready to help Bangladesh realize its ambition of becoming a trillion-dollar economy by 2034. "Our vision is to help Bangladesh realize its ambition of becoming an upper-middle-income country...

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ADB to help Bangladesh become a trillion-dollar economy by 2034: Yingming Yang

BSS
Dhaka

Asian Development Bank (ADB) Vice President Yingming Yang. File Photo

Asian Development Bank (ADB) Vice President Yingming Yang has said the Manila-based lending agency is ready to help Bangladesh realise its ambition of becoming a trillion-dollar economy by 2034.

"Our vision is to help Bangladesh realize its ambition of becoming an upper-middle-income country and a trillion-dollar economy by 2034. ADB remains committed to supporting a more productive, investment-driven, and resilient economy that creates opportunities across the country and improves the lives of all Bangladeshis," he said.

The ADB Vice-President for South, Central and West Asia said this in an exclusive interview with BSS after concluding his visit to Bangladesh from 9 August to 13 August.

During his visit, Yingming Yang held senior-level consultations on ADB's next Country Partnership Strategy (CPS), on key reform and investment priorities, and supporting the operationalization of the Integrated Growth Network Development (IGND) initiative.

He said Bangladesh has demonstrated considerable resilience, supported by strong remittance inflows, sustained services activity, and a dynamic private sector.

"The next opportunity is to translate this resilience into a deeper economic transformation," he said.

As macroeconomic conditions stabilize, inflation moderates, and investor confidence improves, Yingming Yang said ADB expects growth to gradually strengthen, with GDP projected to expand by 3.7 per cent in FY2026 and 4.5 per cent in FY2027.

He said maintaining this momentum will require continued progress on structural reforms. Recent steps to strengthen tax administration, improve banking sector governance, address non-performing loans, enhance financial sector discipline, and move towards a more market-based exchange rate framework are encouraging, he said.

"Looking ahead, Bangladesh can unlock stronger and more inclusive growth by improving the investment climate, expanding reliable and affordable energy, strengthening public investment management, diversifying exports, building workforce skills, creating opportunities for women and young people, and enhancing resilience," added the ADB Vice-President.

He noted that central to this agenda is private sector development and making markets investable so that private capital can flow into productive sectors, create jobs, and drive sustainable growth.

For the people of Bangladesh, Yang said this means better jobs, more competitive enterprises, improved services, and wider opportunities beyond traditional growth centers. These reforms will be critical for raising productivity, attract investment, and support sustainable long-term development.

When asked about the new Country Partnership Strategy for Bangladesh, he said ADB's partnership with Bangladesh has always evolved with the country's aspirations.

"As we prepare the next Country Partnership Strategy, our focus is on helping Bangladesh move toward a more diversified, competitive, inclusive, and resilient economy, anchored in private sector-led economic diversification and stronger resilience to shocks. In essence, our future partnership will support Bangladesh's move from resilience to transformation," he said.

Building on the current priorities, he said the ADB will support reforms and investments that strengthen the business environment, deepen financial and capital markets, expand access to reliable and clean energy, improve connectivity and logistics, accelerate digital transformation, and equip people with the skills needed for the jobs of the future.

"Our focus is to help create the conditions for private investment to thrive by addressing key policy and market constraints and fostering a more dynamic and competitive business environment," he added.

Yang said the Integrated Growth Network Development (IGND) initiative can serve as an important platform for advancing balanced regional development and mobilizing private investment so that new economic opportunities can reach more districts, firms, workers, and communities.

He said the IGND initiative is important because it provides a long-term framework for transforming Bangladesh's growth model from fragmented, project-based development into a more integrated, investment-led approach.

Endorsed by the Government in May 2026 and led by the Economic Relations Division with ADB's technical support, the initiative seeks to better connect production centers, logistics networks, urban hubs, energy systems, and trade gateways across the country. "This can help turn Bangladesh's geographic and economic potential into more productive investment, better jobs, and broader regional opportunities," he added.

By aligning infrastructure, industrial development, skills, and investment planning, Yang said IGND can help create a pipeline of priority, investment-ready projects that attract both public and private capital.

Mentioning that the initiative envisages approximately $80 billion in phased investments over the next two decades, Yang said the ADB has indicated support of up to $5 billion over the next five years.

He said successful implementation could strengthen connectivity, raise productivity, improve industrial competitiveness, diversify exports, and support the creation of millions of jobs over the next decade-across construction, manufacturing, logistics, services, agro-processing, and emerging industries.

By reducing logistics costs, expanding economic opportunities beyond major urban centers, and connecting businesses and workers to larger markets, the ADB Vice-President said IGND can help build a more competitive, diversified, and resilient economy capable of sustaining higher-quality growth and job creation. "It can also help ensure that the benefits of growth are more broadly shared across regions and communities," he said.

Regarding regional cooperation, the ADB Vice-President said Bangladesh is uniquely positioned between the large and rapidly growing markets of South and Southeast Asia.

During his visit to Bangladesh in May, ADB President Masato Kanda highlighted Bangladesh's great potential to become a regional hub for transportation, logistics, energy, and digital connectivity.

"By leveraging its strategic location, Bangladesh can strengthen trade, attract investment, integrate into regional value chains, and deepen its economic links with these regions. This is another important dimension of Bangladesh's transition from resilience to transformation," he said.

He said greater regional energy cooperation can strengthen energy security and support the transition to cleaner energy sources.

ADB's recently launched $20 billion Asia-Pacific Digital Highway initiative also offers Bangladesh an opportunity to strengthen digital connectivity, expand access to reliable broadband, and build digital and AI skills.

By working with the Digital Highway initiative, he said Bangladesh can further enhance its inclusive development agenda, addressing the needs of farmers, entrepreneurs, exporters, young workers, and women-led businesses. "Initiatives such as the IGND and the South Asia Sub-regional Economic Cooperation (SASEC) also provide important platforms for advancing these objectives," he added.

At the same time, he said deeper regional integration complements, rather than replaces domestic reform. "Strengthening competitiveness at home enables Bangladesh to benefit more fully from regional opportunities, while greater regional connectivity creates stronger incentives to invest, innovate, and reform."

Together, the ADB Vice-President said these efforts can help Bangladesh build a more connected, competitive, and opportunity-rich economy for the next stage of its development, one where private sector-led growth, innovation, and investment drive lasting impact.​