[🇧🇩] Reforms carried out by the interim/future Govts.

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Retreat from reform could be costly

Published :
May 11, 2026 01:11
Updated :
May 11, 2026 01:11

The incumbent BNP government's amendment to the Bank Resolution Act 2025, which created scope for former owners of five merged Islamic banks to regain control of these financial institutions, has drawn widespread criticism both at home and abroad. Many have described the move as an attempt to rehabilitate bank looters, an outright ill-advised decision that has already begun to exact a toll. Last month, the IMF withheld the release of $1.3 billion under a $5.5 billion loan agreement, citing, among other reasons, the controversial amendment to the Bank Resolution Act as well as delay in implementing the bifurcation of the National Board of Revenue (NBR). Adding to the pressure, the World Bank reportedly wants the government to repeal Section 18(A) of the Bank Resolution Act 2026 before extending a $500 million budget support credit. As things stand, it is becoming increasingly clear that any retreat from financial sector reforms could prove costly. It risks not only undermining efforts to rescue the crisis-hit banks and restore public confidence in the banking sector, but also eroding the trust and support of development partners at a time when the economy can ill afford such setbacks.

The merger of the five troubled Islamic banks was necessary, as years of systematic looting had bled them dry. The banks were carrying NPL ratios as high as 90 per cent, and many depositors were protesting on the street demanding their money back. Against this backdrop, the interim government formulated the Bank Resolution Ordinance 2025, which provided a necessary legal framework for the merger of such distressed banks. The banks were merged in November 2025 to form Sammilito Islami Bank, touted as the largest bank of its kind in the country. Tk 350 billion was injected into the bank as paid-up capital, of which Tk 200 billion came from the government exchequer, while the rest was mobilised from depositors' fund. The main objective of the merger was to save the banks, safeguard depositors' interests and ensure broader financial stability - all of which were quite reasonable. However, in a move that defies reason, the BNP government enacted the Bank Resolution Act 2026, amending the Bank Resolution Ordinance 2025. Section 18(A) of the Act allows former shareholders to regain control of the banks by initially paying only 7.5 per cent of the government-injected funds. The remaining 92.5 per cent of the fund is to be paid over the next two years, with a 10 per cent simple interest charge added.

Economists decried the move, saying that paving the way for the former owners to regain control of the banks on such easy terms is akin to rewarding them instead of holding them accountable for their misdeeds. Moreover, questions remain as to how those who had already driven the banks to the brink through large-scale loan scams can now be trusted with their stewardship at those institutions again. There is every possibility that the government-injected funds could also be misused if proper accountability and oversight are not ensured. More importantly, such a move could set a dangerous precedent, encouraging a culture of impunity in the banking sector.

It is worth recalling that many of the country's major economic reforms - from market-oriented liberalisation and the expansion of private sector-led growth to the introduction of VAT - were undertaken under BNP governments. The current hesitation to pursue necessary reforms appears both puzzling and counterproductive. Anyway, the IMF and the World Bank have pushed the ball to the government's court. It is now up to the government to take the right decision.​

 

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Editor’s note

AS THE entire Bangladesh is keenly waiting for the post-mass uprising political and constitutional reforms and, obviously, electoral transition to democratic governance, the thinking sections of the people are having a lot of private and public discussions over theoretical aspects of various...

www.newagebd.net

Editor’s note

AS THE entire Bangladesh is keenly waiting for the post-mass uprising political and constitutional reforms and, obviously, electoral transition to democratic governance, the thinking sections of the people are having a lot of private and public discussions over theoretical aspects of various proposals put forward by different political and legal authorities. The high-level reforms commission concerned, set up by the interim government of Professor Muhammad Yunus, has already published its recommendations, along with the ways of implementing them in less than a year. The political parties concerned and the public would continue to debate them while New Age would continue to keep its readers updated about those and, of course, provide the readers with multidimensional analyses of the reforms agenda as well as the reforms process.

Meanwhile, New Age issues the second instalment of its special supplement on the occasion of the newspaper’s 22nd anniversary that deals with some issues of public importance, which reformers, political and otherwise, should take note of.

A couple of articles carried in the present supplement deal with certain long-neglected challenging reforms of the country’s police and armed forces, which, if carried out genuinely, would not only enable these national organisations to serve the public and the republic but also help restore the dignity of the institutions concerned. Besides, it publishes three separate articles on the Bengali chauvinistic legal, political and cultural attitudes towards the non-Bengali ethnic communities living in the hill tracts and beyond that stand in the way of forging genuine unity among the country’s peoples with different national identities.

Then, with the much-awaited general elections ahead and the speculations about the possible disruption of the election process by the undemocratic forces at home and abroad, an article underlines the need for pre-election security measures and their dynamics.

One article has shed light on the adverse effects of the necropolitical symptoms prevailing in society, which is shaped by the growing influence of far-right ideologies. The writer rightly argues that such phenomena cannot be allowed to persist, for it would definitely affect the democratic spirit of the millions who participated in the past year’s mass uprising against an authoritarian political regime having little respect for the rule of law.

Another article remains a piece of deep reflection on the political consequences of the post-mass uprising renaming of state institutions. Given the deposed Awami League’s partisan naming and renaming of most state organisations, most being named after Sheikh Mujibur Rahman and members of his family, it was definitely necessary to rename most of them, but it is important to think whether or not renaming all of them and, that too, following a certain pattern, would distort our history.

We believe that you, readers, would find the articles important and hope that you enjoy reading them.

Nurul Kabir​

 

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Economy awaits decisive reform push

Private investment in Bangladesh continues to show little sign of recovery. Businesses are postponing major investment decisions until the government demonstrates a credible commitment to reform, as evidenced by sluggish credit growth and decreased imports of capital machinery. As the Centre for Po

thefinancialexpress.com.bd

Economy awaits decisive reform push

FE
Published :
Jun 06, 2026 23:45
Updated :
Jun 06, 2026 23:45

Private investment in Bangladesh continues to show little sign of recovery. Businesses are postponing major investment decisions until the government demonstrates a credible commitment to reform, as evidenced by sluggish credit growth and decreased imports of capital machinery. As the Centre for Policy Dialogue recently observed, investors remain in a wait and see mode despite the easing of political uncertainty. This caution has significant implications for the economy because the private sector accounts for several times more investment than the government and remains the principal driver of job creation and industrial expansion. The upcoming national budget carries considerable importance against such backdrop, representing the most immediate opportunity for the government to demonstrate that it is serious about removing unnecessary regulatory barriers including high cost of doing business.

The government's proposed one-stop approval system is, in this context, a genuinely promising intervention. Bangladesh has long suffered from a bureaucratic culture that imposes costs before a business even begins operations. Entrepreneurs often spend months moving through multiple offices, repeated documentation requirements and discretionary approvals. Such inefficiencies discourage both domestic and foreign investors while creating scope for corruption. The proposed digital platform would address this most persistent complaint by allowing entrepreneurs to obtain all necessary documents and approvals within a defined timeframe. The effort, however, should not stop at facilitating large investors. Every entrepreneur regardless of size should be able to access all essential government services through a seamless digital interface using a single login. If fully implemented, a genuinely integrated digital approval system could become one of the most important reforms undertaken in recent years by reducing uncertainty and lowering transaction costs. However, this reform must be backed by institutional accountability so that digitalisation does not simply transfer existing bureaucratic delays onto a new platform.

The proposed expansion of bonded warehouse facilities, announced by the finance minister, merits both acknowledgement and scrutiny. Extending duty-free import privileges for export-oriented production beyond the readymade garment sector appears to support the long-stated objective of export diversification. But the proposal overlooks serious weaknesses that already afflict the existing system. There are already widespread cases of exporters misusing bonded privileges to flood the local market with imported goods, directly undercutting domestic traders that lack similar privileges. This problem calls for stronger oversight, yet the government has instead proposed relaxing audit requirements by extending inspection intervals to between three and five years, which is a remarkably reckless move. Without regular and stringent oversight, exploitation of the system by unscrupulous businesses would only multiply. This would undermine both revenue collection and fair competition. The reform conversation also has a conspicuous gap as export sectors that do not rely on imported raw materials remain largely absent from it. The leather-and-hide industry is a case in point. During Eid-ul-Azha, countless small traders were left with unsold rawhides, many of which were discarded into rivers, exposing vulnerabilities of a domestic value chain that should have been a valuable source of export earnings. Reform should definitely create opportunities across the entire export economy rather than favouring only sectors that fit a particular policy model.

The finance minister's acknowledgement that taxation harbours the highest concentration of corruption within government is a candid admission. Such corruption not only enriches dishonest officials but also deprives the state of revenue because bribes are often exchanged in return for reducing or avoiding tax liabilities. Digitalisation of the tax system can help disrupt this cycle by reducing human discretion in routine transactions and creating traceable records.​

 

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Opposition only talks about reforms that would give it share of power: State minister for health

Minister of State for Health, MA Muhit has said the opposition frequently talks about reforms and the July Charter, but only supports reforms that would give it a share of power. The state minister made the remarks today, Sunday, while taking part in the discussion on the proposed budget for...

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Opposition only talks about reforms that would give it share of power: State minister for health
Special Correspondent
Dhaka
Published: 28 Jun 2026, 17: 00

Minister of State for Health, MA Muhit speaks in parliament on 28 June 2026 Screngrab of a BTV video.

Minister of State for Health, MA Muhit has said the opposition frequently talks about reforms and the July Charter, but only supports reforms that would give it a share of power.

The state minister made the remarks today, Sunday, while taking part in the discussion on the proposed budget for the 2026–27 fiscal year in the Jatiya Sangsad (parliament).

Referring to the opposition's role, MA Muhit said, “They have not spoken for a single day about reforming the health sector. A Health Sector Reform Commission was formed. After careful consideration, it produced a number of recommendations. I would have been pleased if our opposition had discussed the commission’s report here in parliament.”

In his speech, the state minister highlighted several challenges facing the health sector. He said 71 per cent of deaths in Bangladesh were caused by non-communicable diseases.

Another major challenge, he added, was the threat of epidemics and pandemics.

Describing the rising cost of healthcare as a major challenge, MA Muhit said patients in Bangladesh bear nearly 80 per cent of total healthcare expenditure out of their own pockets. “By comparison, the figure is only 10 per cent in Thailand and around 18 per cent in the Maldives.”

Stating that the primary objective of the proposed health budget was to overhaul the country's weakened healthcare system, the state minister said the government wanted to establish an integrated health system under which people would have access to free and affordable healthcare regardless of their economic status.

Noting that the health sector budget had nearly doubled, MA Muhit said the proposed budget contained no plans for the unplanned construction of hospitals or other buildings.​

 

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Slow reforms may weigh on Bangladesh’s growth: Fitch

Bangladesh’s long-term economic growth could slow if the government delays key economic and institutional reforms, Fitch Ratings has cautioned, saying such delays would also leave the economy more vulnerable to external shocks.

www.thedailystar.net

Slow reforms may weigh on Bangladesh’s growth: Fitch

Star Business Report

Bangladesh’s long-term economic growth could slow if the government delays key economic and institutional reforms, Fitch Ratings has cautioned, saying such delays would also leave the economy more vulnerable to external shocks.

The global credit rating agency said weak reform momentum was one of the main reasons it revised the Outlook on Bangladesh’s “B+” Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable in May.

“We believe slower progress on reforms may limit the economy’s growth potential and weaken its capacity to absorb shocks,” Fitch said in its latest assessment.

According to the agency, the government is reviewing or scaling back several reforms introduced under the previous caretaker administration.

These include reconsidering a proposal to strengthen the independence of the National Board of Revenue (NBR), watering down measures to improve bank governance under the Bank Resolution Ordinance, and giving lower priority to a proposed Bangladesh Bank ordinance aimed at strengthening the central bank’s independence.

Constitutional reforms approved through a referendum, including term limits for the prime minister and measures to strengthen judicial independence, have also stalled.

Fitch said slower reform implementation and weak execution could hurt fiscal performance.

Although the FY27 budget targets a revenue-to-GDP ratio of 10.2 percent, the highest since 1993, the agency does not expect the goal to be met.

The government has set a revenue target of Tk 695,000 crore for FY27, including Tk 604,000 crore to be collected by the NBR.

“Given a weak implementation record, we think these revenue targets are unlikely to be achieved,” Fitch said.

The agency expects the government to keep spending below budgeted levels, mainly by cutting capital expenditure to contain the fiscal deficit. It said this could further slow medium-term growth.

Fitch also expects Bangladesh’s external position to remain fragile because of limited exchange rate flexibility, a widening current account deficit and uncertainty over a new International Monetary Fund (IMF) programme.

However, strong remittance inflows and continued financing from bilateral and multilateral development partners should help cushion the economy, it said.

Remittances rose to $35.6 billion in FY26 from $30.3 billion a year earlier, while the government sought a new IMF-supported programme in June.

The agency said inflationary pressures remain high, partly because of shortages of essential commodities. Although headline inflation eased to 8.71 percent in March 2026 from 9.13 percent in February, it remained well above Bangladesh Bank’s FY26 target range of 6.5-7.0 percent.

Fitch said fuel price increases for diesel, kerosene, petrol, octane and liquefied petroleum gas (LPG), which took effect on April 19, are likely to add to inflationary pressures. It expects average inflation to remain around 9 percent in FY27, unchanged from FY26.

The agency also highlighted persistent weaknesses in the banking sector, particularly among state-owned banks. Gross non-performing loans stood at 30.6 percent at the end of December 2025 and could rise further once regulatory forbearance measures are withdrawn, increasing contingent liabilities if credit stress intensifies.

Private sector credit growth also slowed to 6 percent in January 2026 from nearly 10 percent two years earlier, weighing on investment, it said.

Despite these challenges, Fitch said Bangladesh’s relatively low government debt remains a key credit strength. It expects gross government debt to stabilise at around 38 percent of GDP over the medium term, below the median for “B”-rated sovereigns.

However, it warned that contingent liabilities from the banking sector, debt owed by state-owned enterprises and higher borrowing costs pose risks to the debt outlook.

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The government’s interest-to-revenue ratio reached about 29 percent at the end of 2025, more than double the 14 percent median for “B”-rated peers, adding to fiscal pressure.

Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), said he agreed with Fitch Ratings’ assessment that slow progress on reforms could curb Bangladesh’s growth potential.

He said delaying reforms would only increase the cost of implementation while reducing the benefits of other policy measures. Stressing the need for a comprehensive approach, he said reforms should be pursued through parallel and integrated initiatives to strengthen investor confidence and attract both domestic and foreign investment.

Asked which reforms should be prioritised, Mustafizur said the immediate focus should be on implementing measures already introduced, including the single-window system, the logistics policy and customs reforms.

On the banking sector, he said priority should be given to passing the pending Banking Companies (Amendment) Act and ensuring the independence of Bangladesh Bank.

He also called for sustained efforts to reduce loan defaults and strengthen banking sector governance.​

 

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Social protection needs smarter reforms, not just bigger budgets

Bangladesh's social protection system has been one of the country's quiet success stories. Over the past several decades, it has helped millions of poor and vulnerable households cope with poverty, natural disasters, food insecurity, and economic shocks. The government now spends more than Tk 1.20

thefinancialexpress.com.bd

Social protection needs smarter reforms, not just bigger budgets

Bangladesh's social protection system has been one of the country's quiet success stories. Over the past several decades, it has helped millions of poor and vulnerable households cope with poverty, natural disasters, food insecurity, and economic shocks. The government now spends more than Tk 1.20 trillion annually on social protection-one of the largest components of public expenditure. This sustained investment reflects a strong national commitment to inclusive development and has contributed significantly to Bangladesh's progress in poverty reduction.

Yet, despite this impressive expansion, an uncomfortable question remains: Are we getting the maximum return from this investment? The answer is mixed. While Bangladesh spends substantially on social protection, the system remains fragmented, many benefits are too small to make a meaningful difference, and targeting errors continue to prevent support from reaching those who need it most. As Bangladesh prepares for the next stage of development amid rising living costs, climate change, and slowing economic growth, improving the quality of social protection has become just as important as expanding its budget.

The challenge today is not simply to spend more. It is to spend smarter.

One of the biggest weaknesses of Bangladesh's social protection system is how resources are allocated. A significant share of reported social protection expenditure goes towards pensions for government employees and other expenditures that do not primarily target poor or vulnerable households. While these expenditures serve legitimate public purposes, they should not be mistaken for poverty-focused social assistance. As a result, headline budget figures often overstate the amount of public resources that directly support the poorest citizens.

Fragmentation is another major concern. Bangladesh currently operates around 90 social protection programmes administered by 25 ministries and agencies. Over time, new programmes have been introduced to address emerging priorities, but many overlap in objectives and administration. This fragmentation increases administrative costs, weakens coordination, and makes it difficult to ensure consistency in beneficiary selection and service delivery. Meanwhile, public resources are concentrated in a handful of programmes, leaving many others underfunded and unable to provide adequate support.

Benefit adequacy also deserves urgent attention. Many cash transfer programmes have failed to keep pace with inflation. Monthly allowances that may have been meaningful several years ago now cover only a small share of household needs. For many beneficiaries, transfers account for only a tiny proportion of household income and provide limited protection against rising food prices or unexpected shocks. Expanding coverage is important, but expanding coverage without ensuring adequate benefit risks spreading resources too thinly to make a lasting difference.

Perhaps the most critical issue is targeting. Every social protection system faces two risks: excluding households that genuinely need assistance and including households that are relatively better off. Bangladesh is no exception. Despite improvements in programme administration, significant inclusion and exclusion errors remain across several major programmes. Improving targeting is, therefore, one of the most cost-effective ways to enhance the impact of existing public spending without necessarily increasing the overall budget.

The government's recent introduction of the Family Card Programme marks an important milestone in this regard. By using Proxy Means Testing (PMT) and digital government-to-person payment systems, the programme aims to improve transparency and reduce leakages. It has the potential to become the country's most significant social protection reform since the National Social Security Strategy (NSSS) was adopted in 2015.

However, international experience suggests that no single targeting method is perfect. Proxy Means Testing is a useful tool, but it cannot fully capture the complex and dynamic nature of poverty. Household circumstances change frequently, and statistical models inevitably make errors. For this reason, Bangladesh should adopt a hybrid targeting approach that combines PMT with community validation and evidence-based categorical indicators such as age, disability, occupation, housing conditions, and other easily verifiable characteristics associated with poverty. Such an approach would improve both fairness and accuracy while strengthening public confidence in the system.

Evidence also shows that some programmes consistently perform better than others. Rather than creating new schemes, policymakers should focus on strengthening programmes that have demonstrated strong targeting performance and positive impacts, including the Vulnerable Group Development (VGD) programme, Mother and Child Benefit Programme, Old Age Allowance, disability allowances, and allowances for widowed and deserted women. Increasing benefit levels, expanding coverage, improving digital payments, and regularly adjusting cash transfers for inflation would significantly enhance their effectiveness.

Bangladesh must also pay greater attention to urban poverty. Rapid urbanisation has transformed the country's poverty landscape, yet social protection remains disproportionately focused on rural areas. Low-income urban households often face insecure employment, high living costs, and limited access to formal safety nets. Expanding successful programmes such as the Open Market Sales (OMS) programme, introducing labour-intensive urban public works, and gradually extending the Family Card Programme to urban poor households would help address this growing gap.

Looking ahead, social protection should evolve beyond providing temporary relief. The objective should be to help households build resilience and eventually graduate from poverty. International and domestic evidence suggests that transfers become far more effective when combined with complementary interventions such as nutrition education, livelihood training, financial inclusion, and access to healthcare. Such integrated approaches not only reduce immediate hardship but also strengthen households' capacity to withstand future shocks and improve their long-term earning potential.

Health protection deserves particular attention. Medical expenses remain one of the leading causes of financial distress among poor households in Bangladesh. A serious illness can quickly erase years of progress and push vulnerable families back into poverty. Piloting targeted health insurance and expanding health voucher programmes would strengthen the country's social protection architecture while improving access to essential healthcare for low-income households.

Bangladesh has already laid a strong foundation. The National Social Security Strategy (NSSS) provides a clear policy framework, and the Family Card Programme offers an opportunity to modernise beneficiary identification and programme delivery. The next phase of reform should focus on improving the quality of spending rather than simply increasing its quantity. Better targeting, stronger coordination, adequate benefits, digital delivery systems, and regular impact evaluations should be the pillars of a modern social protection system.

Bangladesh's ambition to become an upper-middle-income country cannot be achieved through economic growth alone. Growth must be accompanied by a social protection system that is efficient, equitable, transparent, and capable of protecting citizens against increasingly complex economic, health, and climate-related risks. Smarter spending-not simply higher spending-should therefore guide the next generation of social protection reforms. If public resources can be directed more effectively towards those who need them most, Bangladesh will not only reduce poverty more rapidly but also build a more resilient and inclusive society for decades to come.

Akhter U Ahmed is an Emeritus Research Fellow at the International Food Policy Research Institute (IFPRI), Washington, DC, USA and Md Sadat Anowar is a Research Analyst at the IFPRI-Bangladesh country office.​