[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Economy at a critical point despite some stability

Bangladesh’s economy may have regained some stability in recent months, but it now stands at a critical point, with inflation, financial sector weaknesses, low investment, governance shortcomings and external risks emerging as major threats, according to a new government report.

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Economy at a critical point despite some stability
Tackle threats now or risk slower growth, rising poverty, warns GED report

Bangladesh's economy may have regained some stability in recent months, but it now stands at a critical point, with inflation, financial sector weaknesses, low investment, governance shortcomings and external risks emerging as major threats, according to a new government report.

Unless these vulnerabilities are addressed, the country risks slower growth, falling living standards and rising poverty, warns the report, Bangladesh State of the Economy 2025, prepared by the General Economic Division (GED) of the Planning Commission.

"Foreign direct investment remains critically low and is expected to remain at this level in the coming months. Subdued investment and industrial activity are cited as major contributors to slower growth," states the report unveiled yesterday.

However, it added, "Bangladesh has a real chance to re-accelerate, build more resilient institutions, and make growth more inclusive.

"The key will be speed and seriousness of reform, clear communication, policy credibility, and ensuring that those reforms benefit ordinary people, not just aggregate macro statistics. Bangladesh has a real chance to re-accelerate."

The GED noted that the second half of fiscal year 2024-25 (FY25) showed rebounding economic activity. But the outlook remains clouded by political uncertainty, subdued industrial output, persistent inflation and global headwinds, including pressures linked to the reciprocal tariff imposed by the United States.

It pointed out that growth forecasts from international agencies, including the World Bank, now range between 3.3 percent and 4.1 percent for FY25, with a modest rebound expected in the ongoing fiscal year. According to provisional government data, the growth rate for FY25 stood at 3.97 percent.

The GED identified remittances, export performance and manufacturing, particularly garments and SMEs, as the main drivers of growth in FY26, while noting that improvements in capital machinery imports may indicate early signs of recovering investment appetite.

The report, however, stresses that inflation continues to erode real incomes, particularly among low-income households.

"If Bangladesh can keep inflation under control, rebuild investor confidence, and stabilise the financial sector, there is potential for stronger growth in FY26."

Foreign exchange reserves stabilised at a level above three months of import coverage, it also said, attributing this to prudent macroeconomic management and structural strengthening of the economy's external front.

"A VICIOUS CYCLE"

Speaking at the event, Prof Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), recognised that some stability has returned but said it comes at a cost.

"The [existing] high policy rates being used to curb inflation really hurt investment. But interest is only one part of the cost of capital. Entrepreneurs face many other expenses as well," he said.

"We needed to ease the burden on entrepreneurs in these other areas, like strengthening institutional capacity and reducing corruption. We should have done more, especially since the cost of capital is already high. But we didn't," he added.

The economist said the lack of initiatives has trapped the economy in a "vicious cycle" of high interest rates increasing the cost of capital, which is raising the cost of doing business, and which ultimately depresses investment and job creation.

He warned that without faster reforms and stronger revenue mobilisation, Bangladesh risks slipping into a debt trap.

Former World Bank economist Zahid Hussain said the economy is sending mixed signals.

Remittances, slower illicit outflows, stronger revenue trends, steady electricity supply and natural-disaster resilience are positives, he said. But inflation, falling real wages, stagnant employment, weak export momentum and low investment paint a more worrying picture.

"Overall, the negative basket outweighs the positive," he said, noting that while the situation has not deteriorated as severely as feared, more decisive implementation of reforms could have produced stronger results.

"This government has shown ample evidence of intent to reform. But at the ground level, we still do not see major, visible results. To push reforms forward, willpower alone is not enough-stamina is also crucial," he added.

Meanwhile, Bangladesh Bank Governor Ahsan H Mansur stated that stabilising the financial sector remains difficult, even though the external sector is showing no major signs of stress.

He mentioned several reform initiatives taken by the interim government to stabilise the financial sector, including changes to the Bank Company Act, issuing the Bank Resolution Ordinance and restructuring the boards of several banks. "We also have to make the next government accountable for these things because these are significant progressions."

The governor said reserves have risen by about $10 billion over the past 16-17 months, and reiterated that the policy rate will not be lowered until inflation declines to a tolerable level.

Shafiqul Alam, chief adviser's press secretary, criticised sections of the business community and media for highlighting "only negative developments", failing to acknowledge reforms such as the Chattogam port modernisation drive.

"If the Chattogram port becomes efficient, the garment sector would benefit first," he said, adding that the government has not seen a single welcoming statement from the many top trade bodies.

National Board of Revenue (NBR) Chairman Md Abdur Rahman Khan said the tax-to-GDP ratio has fallen from over 10 percent a few years ago to around 7 percent now, as revenue cannot be collected from all sectors of the economy.

Speaking on Prof Rahman's warning about falling into a debt trap, he said, "We have already fallen into a debt trap; unless we acknowledge this truth, it will not be possible to move forward."

Meanwhile, speaking on the government's reform initiatives, Anisuzzaman Chowdhury, special assistant to the chief adviser, said there is no textbook for the sequence and speed of reforms.

"We must decide what comes first, what comes later, and how to balance them. Low-hanging fruit should be taken first, but sometimes distortions or internal balance issues prevent that," he said.​

 

[Saif]

Some unpleasant arithmetic

Bangladesh’s economy is often acclaimed for its remarkable resilience despite recurrent global disruptions — pandemics, energy shortages, supply-chain shocks, regional conflicts, and internal political instability. Observers frequently point to four powerful “engines” behind

thefinancialexpress.com.bd

Some unpleasant arithmetic
Corruption and the four engines of growth

Published :
Dec 09, 2025 22:29
Updated :
Dec 09, 2025 22:29

Bangladesh’s economy is often acclaimed for its remarkable resilience despite recurrent global disruptions — pandemics, energy shortages, supply-chain shocks, regional conflicts, and internal political instability. Observers frequently point to four powerful “engines” behind this endurance: the ready-made garments industry (RMG), export processing zones (EPZs), remittances from migrant workers, and the vital role of Chittagong Port in sustaining trade flows (henceforththe four engines are referred as FEEG). Yet while these four engines propel the economy forward, a fifth and darker force relentlessly pulls it backward. That force is corruption.

In economic and engineering terms, national output (GDP) can be represented through a production function that explicitly incorporates corruption-related factors. Instead of writing it only in the conventional functional form, we can express it—consistent with modern growth theory—as: Y (GDP) = A(m) × f(L, K, T); Or, in more descriptive algebraic terms: Y (GDP) = A(m) × [joint contribution of L, K, and T]

This expression applies for a given amount of land, structures, buildings, and all other available resources that are fully and efficiently employed. Here, L, K, and T denote labor, capital, and technology, respectively. The factor A(m) captures the system’s integrity — or lack thereof — by reflecting the prevailing degree of corruption, inefficiency, and mismanagement. When A(m) is low, the same inputs produce less output; when A(m) approaches 1, the economy operates closer to its true potential.

Here, A(m) = Actual GDP/Potential GDP represents the moral, or integrity, multiplier — implying that the same L, K, and T may be producing far less GDP than they should. The value of A(m) lies between 0 and 1. As A(m) approaches 1.0, nearly every unit of effort, capital, and knowledge is translated into real output. When corruption becomes systemic, A(m) may fall to 0.6, 0.4, 0.3, or even lower.In simple terms, an economy capable of producing 100 units of value may realise only 70 in practice, with the remaining 30 units absorbed by bribery, rent-seeking, inefficiency, and institutional decay.

Actual GDP cannot sustainably exceed potential GDP. Therefore, any value of A(m) greater than 1 does not imply “super-efficiency”; it signals an underestimation of potential output, statistical distortion, or unsustainable overextension—like forcing a machine to operate beyond its rated capacity for short-term gain at the cost of long-term stability.

The focus of this article is not the entire economy’s production of GDP. Rather, it is on the output generated by each of the four engines of economic growth (FEEG). Every sector or engine possesses both a measurable potential output, under conditions of efficiency, transparency, and rational management, and an actual realized output, under prevailing conditions of misgovernance and corruption.

In its most accurate and operational form, the corruption-adjusted output of the FEEG can be expressed in a single equation using sector-specific corruption factors, technically referred to as integrity (or corruption) multipliers: Output = A1X1 + A2X2 + A3X3 + A4X4 where X1, X2, X3, and X4 represent the four engines—RMG, EPZs, Remittances, and Chittagong Port, respectively—while each A represents a sector-specific corruption multiplier. The numerical value of each multiplier lies between 0 and 1, depending on the degree of corruption within the respective sector. Some sectors experience deeper leakage, greater rent extraction, and heavier bureaucratic drag than others. Because each sector’s labor skills, capital intensity, technology, and final product differ, the strength of its integrity multiplier also varies. These differences justify assigning a distinct corruption multiplier to each sector.

A1 = Actual output/Potential output in the RMG sector. The same definition applies to the remaining three multipliers.

If A1 = 1 for sector X1, the RMG sector is converting almost all of its resources into real value for society. If A1 = 0.5, half of the sector’s potential output is being lost to corruption, leakage, misallocation, and institutional decay. As A1 falls further below 1, an increasing share of the sector’s output is lost to corruption and mismanagement. The same logic applies to each of the four sectors. The accompanying bar diagram makes this visible by illustrating the gap between potential and realised output in each engine.

The true power of this sector-specific model lies in its diagnostic capacity. By isolating each corruptmultiplier, policymakers can pinpoint where corruption and inefficiency are most severe and where reform would generate the greatest marginal return. The bar diagram depicts the visual alternative – identifying output gap with uncomfortable precision, the institutional pressure points where corruption is most corrosive and where reform is most urgently needed.

The unpleasant corruption arithmetic, however, is not entirely one-directional. Some of the largest beneficiaries of corruption — the “big sharks” — do not simply hoard their illegal wealth in cash vaults. A significant portion is transferred to foreign banks, concealed in offshore accounts, or converted into properties in London, Dubai, Toronto, or other global cities. Some finance the elite education of their children abroad, quietly exporting not only capital but future loyalty and allegiance away from the country.

At the same time, a portion of this corruptly acquired wealth is recycled domestically. It is invested in local real estate, luxury apartments, shopping malls, hotels, transport companies, and speculative land projects. It fuels consumption of imported goods, high-end construction, and visible urban opulence. In a narrow accounting sense, this type of spending may create a limited feedback effect within the economy — generating some employment, stimulating certain service sectors, and adding superficial vibrancy to urban landscapes.

But this “compensation” is both distorted and deceptive. It does not represent productive investment in innovation, manufacturing capability, education, or long-term economic transformation. Rather, it deepens inequality, inflates asset bubbles, distorts land and housing markets, crowds out honest entrepreneurs, and reinforces a dangerous illusion of prosperity. What appears as growth is in fact misallocated capital — circulating not according to merit, productivity, or national priority, but according to proximity to stolen power.

In terms of this framework, even if a fraction of leaked wealth returns in the form of local spending, the value it creates is still far less than the value destroyed. The corruption multiplier may be marginally cushioned at the surface, but its structural core remains damaged. What the economy loses is sovereign capacity — the ability to direct its own surplus toward equitable, productive, and future-oriented development. Corruption may generate the illusion of motion, but it is the motion of a wheel stuck in mud — spinning, splashing, showing energy, yet going nowhere.

In the RMG sector, Bangladesh commands one of the world’s largest garment workforces and enjoys preferential market access, yet factories are burdened by unofficial payments at every administrative step — from safety certification to export documentation. Substandard compliance is sometimes overlooked through bribery, while honest producers must pay “speed money” to meet shipment deadlines. The result is a sector forced to operate beneath its capacity. Here, A1 is lowered not by labor or technology, but by invisible tolls that drain value before it reaches workers or reinvestment.

Within EPZ sector, corruption appears through land acquisition, tax exemptions, utility contracts, and licensing. Rule-based incentives are often converted into personal privileges, while firms without political backing face delays, unpredictable inspections, and demands for “facilitation.” Every delay, inflated procurement, or informal payment lowers A2 — not because the zones lack capacity, but because their operating environment undermines efficiency.

Remittances should be among the cleanest inflows, yet systemic leakage occurs. Migrants pay excessive recruitment fees to middlemen, borrow at predatory rates, and face corrupt bureaucracy at home and abroad. Informal Hundi networks flourish due to inefficiency and mistrust in official channels. Each illegal fee and undocumented transfer reduces the benefit reaching families and the national reserve, quietly lowering A3.

At Chittagong Port, corruption is measured in time as much as in money. Congestion, artificial delays, misdeclared containers, bribed officials, and politically controlled contracts turn a logistical artery into a bottleneck. Each daydelays raise costs and weakens competitiveness. The port does not lack infrastructure or labor; it lacks insulation from interference and rent extraction, causing A4 to fall due to institutional decay, not physical limits.

Across all four sectors, capacity exists and demand persists, yet value is bled away through tolls, favors, embezzlement, and delay. The FEEG continue to run, but with friction and chronic underperformance.

Bangladesh economy suffers from the systematic erosion of value as that effort moves through corrupted channels of power and administration. Corruption is an invisible tax on productivity, an internal tariff on trade, and an undeclared transfer of income from the many to the few. Until this arithmetic is confronted, Bangladesh’s celebrated resilience will remain impressive in appearance, yet deeply limited in its realized potential.

Dr Abdullah A Dewan, Professor Emeritus of Economics, Eastern Michigan University (USA) and Former Physicist and Nuclear Engineer, Bangladesh Atomic Energy Commission.​

 

[Saif]

Bangladesh’s debt repayments jump 617%, fastest in S Asia

External debt repayments by both the public and private sectors in Bangladesh have increased far more sharply than in any other South Asian country over the past 15 years, even though the country’s export earnings have not kept pace.

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Bangladesh’s debt repayments jump 617%, fastest in S Asia
With exports failing to keep up, rising repayments have crossed IMF risk thresholds and now squeeze the national budget

External debt repayments by both the public and private sectors in Bangladesh have increased far more sharply than in any other South Asian country over the past 15 years, even though the country's export earnings have not kept pace.

Across South Asia, countries together paid $95 billion in 2024 to repay foreign loans and the interest on them. This was 253 percent higher than it had been 15 years earlier, according to the World Bank's (WB) International Debt Report 2025, released on Sunday.

Bangladesh's repayments grew the fastest in the region. In 2024, the country paid $7.3 billion in total, a 617 percent jump from 2010. No other country in the region saw an increase on this scale.

Of the total repayment last year, $4.9 billion went towards paying back the original loan amounts, a mountainous jump from $821 million in 2010. Meanwhile, interest payments rose to $2.4 billion, compared to just $203 million in 2010.

According to WB data, Pakistan recorded the second-highest increase at 251 percent to $13.82 billion, followed by India at 246 percent to $82.06 billion and Sri Lanka at 211 percent to $4.17 billion last year.

IMF WARNING LEVEL CROSSED

Zahid Hussain, former lead economist at the WB's Dhaka office, said such rapid growth in repayment obligations squeezes the government's ability to plan the national budget.

As more money must be set aside for repayments, the economist said, the government has less room to respond to urgent spending needs.

Bangladesh's external debt compared to its export earnings has also crossed the warning level maintained by the International Monetary Fund (IMF).

The IMF considers a country at risk when its external debt reaches more than 180 percent of its annual export income. Bangladesh's ratio is now 192 percent.

The rise in external loans without a matching increase in exports also prompted the IMF in 2024 to downgrade Bangladesh's risk rating from "low" to "moderate".

According to the WB report, Bangladesh's total foreign debt stood at $104 billion in 2024, up from $26 billion in 2010. By the end of last year, the country spent 16 percent of its export earnings on debt repayment alone.

This surge also comes at a time when the National Board of Revenue (NBR), which is responsible for collecting 90 percent of the country's revenue, has consistently fallen short of reaching its target for the 13th year as of fiscal year 2024-25.

Speaking at an event in Dhaka on Monday, economist Prof Mustafizur Rahman said if the trend continues, Bangladesh is poised to fall into a "debt trap".

Falling into a debt trap would mean the government will have to repay loans by taking loans, he added.

At the same event, NBR Chairman Md Abdur Rahman Khan said, "We have already fallen into a debt trap; unless we acknowledge this truth, it will not be possible to move forward."

However, economist Hussain believes Bangladesh is not yet in a severe debt crisis but warned that the pace at which loans and repayments are rising could push the country into a riskier position sooner than expected.

He attributed part of the problem to what he called "irresponsible borrowing".

The economist noted that foreign loans should be backed by well-prepared projects and clear repayment plans, but that has not always been the case. "If you take a project at a cost of Tk 500 instead of its real cost of Tk 100 and launder the excess money, then how will you repay the loans?"

However, Bangladesh's debt position is still stronger than that of Pakistan and Sri Lanka, both of which have seen much larger mismatches between external debt and export income.

Pakistan's external debt is 315 percent of its exports; Sri Lanka's is 280 percent and Nepal's is 234 percent. India's is 82 percent, while Vietnam's is just 31 percent. The South Asian average stands at 93 percent, World Bank data show.

Hussain said Bangladesh should treat the rising ratio as an early warning that it could move towards the same difficulties faced by some neighbouring countries.

In this situation, he recommended that the government reschedule foreign-funded projects that are already underway but unlikely to generate enough revenue to repay the loans tied to them.

For projects that have been approved but have not yet begun, he said the disbursement should be reviewed and, if necessary, restructured or repurposed.

"Potential new borrowing should be analysed rigorously so that wastage cannot happen," he added.

The WB report also highlighted a wider global trend. Between 2022 and 2024, developing countries collectively paid $741 billion more in loan repayments and interest than they received in new financing. This was the biggest net outflow related to debt in more than half a century.

By 2024, the total foreign debt of low and middle-income countries reached a record $8.9 trillion. Of this, $1.2 trillion was owed by the 78 most vulnerable countries that qualify for low-cost loans and grants from the WBs International Development Association.

These record-high burdens, the report noted, came at a time when global interest rates are at their highest levels since just before the 2008-09 financial crisis.​

 

[Saif]

Interest rate and inflation to stay stubborn

At a time when fiscal discipline is crucial for the economy to stabilise, it is not easy to navigate the tortuous course of financial policy and action. The contractionary monetary policy with domestic high interests followed by the country certainly proves useful in containing inflation for

thefinancialexpress.com.bd

Interest rate and inflation to stay stubborn

Published :
Dec 10, 2025 23:12
Updated :
Dec 10, 2025 23:12

At a time when fiscal discipline is crucial for the economy to stabilise, it is not easy to navigate the tortuous course of financial policy and action. The contractionary monetary policy with domestic high interests followed by the country certainly proves useful in containing inflation for a short period but it cannot be a permanent recipe for stabilising the economy. High interest rates also constrains industries, particularly small and medium enterprises, from going whole hog for production. In worse case, factories and industries run below capacity and even are forced to shut down. Such industrial reversal also leaves workers, management and entrepreneurs without participation in the production process. But now that the governor of the Bangladesh Bank rules out reduction of interests in the near future, the outcome is likely to a below-par production in the majority of industries and continuation of the ongoing economic slowdown.

Given the massive unemployment with 2.0-2.2 million young people joining the rank every year, such contractionary monetary policy does not help the cause. Here another intriguing development can throw light on the archaic distribution of wealth. This concerns the creation of 5,974 millionaires between April and June last. The figure is based on accounts with deposits over Tk 10 million. Money must roll in order to create jobs and boost production. If 1.3-1.4 million jobs are created in normal time, it leaves 70,000-90,000 job-seekers with no employment. Also 85 per cent of the annual jobs are created in the informal sector. Since the private sector is reeling from shocks ---both domestic and international, there was a need for big investments. But the size of the new entrants to the millionaire rank clearly shows that their money is deposited to secure high interests instead of its investment for boosting production and absorbing the unemployed. This further shows where the problem lies with fresh investment and generation of employment.

Now, the BB governor's statement made at the launching event of the "Bangladesh State of the Economy 2025 and SDG Progress Report 2025" on Monday last does not augur well for the country. His projection of no recovery of the economy within five to six years hardly gives an encouraging message. The greatest villains are the debt-servicing obligation and non-performing loans (NPLs). In many cases, huge amounts of money were laundered abroad and recovery of those is mostly ruled out. The NPL has, the governor asserts, increased to 35 per cent of the total outstanding loans. In this connection, the NBR chairman who attended the launching ceremony of the reports, made the observation that interest payments now surpasses the budget allocation for agriculture and education.

So the uneven distribution of wealth is raising inflation on the one hand and on the other, disallowing investment for generation of employment. Without addressing this mismatch between wealth creation and its redistribution through generation of employment in the productive sector, the country now experiences stagflation. The NBR chairman goes a step further when he claimed that the country has got into a "debt trap". The economic stress favours the rich but not the poor, the marginal and even the lower middle class people. Making the wheels of production run in full speed could make the economy stronger but for the political uncertainty and polarised distribution of wealth. The need is to bridge the yawning gap.​

 

[Saif]

Put domestic industry and business first

I write as a manufacturer, a Bangladeshi manufacturer at heart. I believe in protecting our ability to make products at home. I agree with the idea behind tariffs, but they must be used smartly, not as slogans. My concern is simple and existential: Bangladesh’s real economy is seriously bruised...

www.thedailystar.net

Put domestic industry and business first

I write as a manufacturer, a Bangladeshi manufacturer at heart. I believe in protecting our ability to make products at home. I agree with the idea behind tariffs, but they must be used smartly, not as slogans. My concern is simple and existential: Bangladesh's real economy is seriously bruised, and unless we act immediately to start the healing process, many factories will not survive to see the upswing.

In real terms, since 2018, and particularly since 2020, domestic demand has never fully returned, yet input costs have soared and credit has turned prohibitively tight. Capacity kept being added. This was because misleading headline indicators like foreign-exchange reserves and gross domestic product growth masked the reality on the ground.

Today, many firms are deeply loss-making. Even a few of the biggest names are living on prayers. Businesses such as those in steel and cement are drowning in unutilised capacity and equity erosion.

We see this stress daily. Several financial institutions are unable to adjust letter of credit (LC) facilities to absorb the devaluation of the taka. Some are struggling to extend already-approved working capital, and some cannot clear cheques. Business owners can feel the systemic pressure building inside a fragile system. The government may look rich on paper, but if its industrial base collapses, the entire economy follows.

Also remember that in times like these, capital erosion, especially in heavy and capital-intensive industries, happens quickly and pushes industries towards monopoly: the big get bigger, and small and even medium firms grow weaker.

Some industries already see up to 70 percent of the market controlled by as few as two players — a situation that may not seem urgent to a politically busy government but will be paid for dearly by the people sooner than we think.

Historically, governments have used construction to fight stagflation and recession. But we have almost stopped all major infrastructure projects or chosen not to launch new ones. Construction — our primary economic flywheel — has lost half its public-sector buyers.

The slowdown in the private sector is equally tragic. It is caused not only by squeezed money markets but also by suffocating bureaucracy. Real estate approvals have become slow by default. Understandably, political representatives have been temporarily replaced by bureaucrats as heads of city corporations, upazilas, and municipalities. Many of them hold multiple positions on top of their regular duties. They are very cautious because this is not their area of expertise. I can't blame them. Files sit until an elected representative takes office. Projects wait while the economy suffers.

Several countries already practise e-approval for construction — and, yes, they're building faster, and getting money circulating earlier.

We are running out of time. Elections are scheduled for early 2026. The new government will need months to form a team, settle in, and prepare. The fiscal year 2026-27 budget will already be drafted by then. In all likelihood, a conservative approach like the current budget will follow. Practically, real policy room may not open until FY2027-28. Waiting that long is not an option.

Factories are not lines on a spreadsheet; they are homes and communities; they are workers' shrines. Construction sites are not just concrete-pouring sites but the epicentres for creating jobs in those 3,600 support industries.

I am not asking for favours, but I am crying out loud: with each day that passes, our capital erodes, businesses fail, and the very people you have taken responsibility for are weakened.

The writer is the chairman of Anwar Group of Industries​

 

[Saif]

undefined | The Financial Express

thefinancialexpress.com.bd

Economic stability remains under threat without bank resolution regime: Experts at a seminar

UNB
Published :
Dec 12, 2025 00:19
Updated :
Dec 12, 2025 00:23

Speakers and policy makers in a seminar on Thursday warned that Bangladesh's economic stability remains severely threatened without the immediate establishment of a credible bank resolution regime.

The warning was issued from a seminar hosted by the Policy Research Institute of Bangladesh (PRI), with support from the Foreign, Commonwealth & Development Office (FCDO), titled "Bank Failures and Resolution Regime: Understanding the Challenges for Bangladesh".

Lutfey Siddiqi, Special Envoy to the Chief Adviser for International Affairs, attended as the Chief Guest and stressed the critical need for change.

He stated, "If the banking sector continues with business as usual, nothing will change. Ensuring good governance regardless of which political party forms the government is essential."

Dr. Ashikur Rahman, Principal Economist at PRI, delivered a trigger presentation focusing on the necessary follow-up to legislative reform. He argued that simply "passing the Banking Resolution Ordinance is only half the job". The real challenge lies in making a serious investment in the "processes, systems, and institutional capacities" needed for the Bangladesh Bank and the financial sector to actually implement the resolution regime.

"Without the ability to execute orderly resolutions, manage failing banks efficiently, and protect depositors while minimising systemic risks, the Ordinance will remain a promise on paper," Dr. Rahman cautioned.

Dr. Zaidi Sattar, Chairman of PRI, chaired the event and highlighted the unique crisis facing the nation's financial sector. He noted that the recent rise of non-performing loans (NPLs) to nearly 35 percent is "unprecedented," exceeding levels seen even in countries affected by the global financial crisis.

Dr. Sattar described the situation where many distressed banks are "too toxic to fail," as allowing them to collapse could cause severe economic contagion.

The impact of this instability on external investment was underscored by Professor Dr. Mohammad Akhtar Hossain, Chief Economist at Bangladesh Bank.

Dr. Akhtar pointed out that the already low Foreign Direct Investment (FDI)-to-GDP ratio is being hampered by the "combination of high NPLs and ongoing political uncertainty," making it extremely difficult to attract foreign capital.

The seminar concluded with an open-floor discussion among participants—including policymakers, business leaders, and financial sector experts—who exchanged insights on priority reforms such as legislative updates, strengthened deposit protection, and enhanced crisis preparedness.​

 

[Saif]

Collapse of Hasinomics and the fight for real growth

In 2024, real wages fell across the board: two percent for low-skilled workers, 0.5 percent for high-skilled.

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Collapse of Hasinomics and the fight for real growth

FILE VISUAL: SHAIKH SULTANA JAHAN BADHON

The human psyche is wired for justice—this is not metaphor but science. When injustice accumulates beyond a threshold, it does not dissipate; it detonates. That is what happened in July 2024. For a fleeting moment in those days, it seemed as if the country might finally locate its collective self. But rage, on its own, cannot rebuild; it merely exposes the wound. And here we stand again—precariously close to square one.

As we move forward, we must confront the wrong in its totality. Yet while the horror was visceral, the remedy cannot be. The challenge before us is not emotional. It is structural.

Let me state the argument plainly: Hasinomics did not collapse because it was authoritarian; it collapsed because it destroyed the engines of sustainable development. It hollowed out the structural drivers of productivity, mobility, and resilience. By 2024, these fractures converged into a complete blockade on social mobility, ultimately triggering the political explosion we witnessed.

Bangladesh's production base remained fundamentally weak because both of the main sectors, agriculture and RMG, were stuck in a low-productivity equilibrium. Agriculture, still employing nearly 40 percent of the labour force, consistently grew at a slower pace than inflation. For over a decade, rural incomes declined in real terms even as GDP increased. When a sector that employs the majority of labour produces less output per worker, transformation becomes mathematically impossible.

What makes this more tragic is what never occurred. Peer economies built the basic infrastructure of modern agriculture: cold-chains, storage ecosystems, agro-processing hubs, salinity-resistant seeds, and digital commodity platforms. Bangladesh built none of these at a meaningful scale. Capital that should have funded this transition was diverted into choreographed megaprojects and loan defaults.

The RMG sector followed identical logic. Comparable economies such as Vietnam boosted their exports by shifting into higher-value textiles, synthetics, technical fabrics, automated processes, and design-rich manufacturing. Bangladesh remained locked in low-value stitching lines. Data suggest Vietnam's textile and apparel exports are approaching $44 billion, a growth model predicated on value-addition and upgrading, not bare labour advantage.

Meanwhile, Bangladesh's labour productivity stagnated because capital never returned to the factory floor. Politically connected conglomerates understood that higher returns lay in loan-capture, land speculation, and public contracts rather than genuine industrial upgrading. By 2024, this diversion had produced a Tk 7.56 lakh crore distressed-asset crater—capital that should have financed innovation and diversification.

The clearest indicator of this extraction-driven stagnation lies in wages. In 2024, real wages fell across the board: two percent for low-skilled workers, 0.5 percent for high-skilled. Despite rising exports, wages declined because productivity did not rise. The economy generated two kinds of jobs: low-skill sewing-line roles or high-skill managerial positions often filled by foreign-educated elites. Domestic graduates were trapped in the "missing middle": overeducated for factories, underprepared for elite roles, and excluded by insider networks. That missing middle is not a theoretical abstraction; it is the very real absence of the technicians, supervisors, digital operators, and process controllers that every modern industrial economy needs to thrive.

By 2024, less than one percent of depositors, i.e. 1,13,586 accounts controlled 43.35 percent of all bank deposits with at least Tk 1 crore in the accounts. This was no statistical quirk; it was the political settlement in full display. The economy was engineered to pool capital at the top, not to circulate it through SMEs, innovators, or workers. SMEs were not starved by accident, but by design.

This top-heavy economy left bottom-of-the-pyramid communities exposed to climate change. Climate inequality hardened into a permanent economic trap for many: the poor lived directly in the path of environmental destruction while the wealthy insulated themselves with generators, air filtration and offshore accounts.

In the coastal belt, salinity and cyclones erased livelihoods. In the riverine north, erosion repeatedly destroyed land, savings, and the possibility of intergenerational progress. Instead of channelling resources into adaptation—embankments, drainage, green infrastructure, community shelters—national wealth continued flowing upwards through the perfected extraction mechanism.

The extraction machine operated at peak efficiency. First, politically connected groups received enormous loans from state and private banks, often without meaningful collateral or even a door to hang their signboard above. Second, those loans were systematically defaulted, creating a ballooning distressed-asset hole. Third, when banks began to falter, the state intervened with taxpayer funds to recapitalise them—turning private theft into public liability. Fourth, the same networks siphoned money abroad—an estimated $16 billion annually—draining the country of the investment capital needed for industrial upgrading. Fifth, inflated megaprojects and politically allocated contracts provided an additional rent pipeline. Finally, the liquidity that remained inside the country pooled at the very top. This was not mismanagement—it was a weaponised political economy brutally calibrated for extraction.

But we must stop attributing novelty to Hasinomics. Its genius lay in perfecting an extractive machinery with roots traceable to colonial administration—centralised, coercive, and designed to drain. Just because the regime has fallen, it does not follow that the machine has been destroyed.

A sustainable development strategy must begin with a simple and non-negotiable principle: growth must be productive, inclusive, and resilient. That means diversifying beyond low-value sectors, building middle-skill industries, investing in community-level climate adaptation, and rewiring finance so that capital circulates through the real economy rather than escaping it.

The window of Bangladesh's demographic dividend closes by the mid-2030s. Time is not on our side. If we hesitate, the system will revert. We would be another generation that wasted a generational opportunity.

Saba El Kabir is a development practitioner and founder of Cultivera Limited.​