Economy remains biggest test

Six months into the BNP-led government's tenure, the economy is showing some signs of recovery but remains under pressure from high inflation, weak private investment, energy shortages, inadequate employment, revenue shortfalls and banking-sector vulnerabilities.

The government, headed by Chairman and Prime Minister Tarique Rahman, assumed office on February 17 with a focus on containing inflation, boosting investment, creating jobs, expanding social safety-net programmes and reviving the economy.

It has announced a Tk 60,000 crore incentive package, Family Card and Farmer Card programmes, and initiatives to create jobs in the health, financial and other sectors. Economists, however, say the government's success will depend on whether these measures address deeper structural weaknesses and improve people's lives.

Inflation stood above 9.42 per cent when the government took office and fell to 8.32 per cent in July. Economists cautioned that this means prices are rising more slowly, not that they have fallen, leaving low- and middle-income households under pressure. 

Prof Dr Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD), said high interest rates alone would not control inflation.

"Food supply, import costs, the exchange rate, energy prices and market management are equally important," he said, stressing the need to lower inflation without hurting production and employment.

The external sector has shown improvement. Foreign exchange reserves stood at around $37.7 billion in August, while merchandise exports totalled $20.05 billion between February and June. Exports rose nearly 26 per cent in June, and remittance inflows remained strong.

Economists, however, warned against excessive reliance on remittances, saying long-term stability requires export diversification, higher productivity and increased investment.

The Tk 60,000 crore incentive package is expected, according to Bangladesh Bank estimates, to generate more than 2.5 million jobs through direct and indirect impacts. The government has also taken initiatives to create 105,000 jobs in the health sector and another 500,000 in the financial sector and other areas.

It has set a target of around 9.327 million new jobs at home and abroad between 2026 and 2031.

Economists said government employment alone cannot meet the target. They called for new industries, greater private investment, stronger SMEs, agro-processing, logistics, labour-intensive manufacturing and skills development.

Private investment remains one of the biggest concerns. Despite investment summits, economic zones, tax incentives and new institutions, investor confidence has yet to recover, while the investment-to-GDP ratio has fallen by around one percentage point over the past year.

Economists said the core problem is confidence, with unreliable gas and electricity, high borrowing costs, foreign-currency access, unstable tax policies and lengthy approval procedures affecting investment decisions.

Gas and electricity shortages have disrupted power generation and affected industries, fertiliser factories and CNG stations. Fuel-oil import costs have risen around 60 per cent over the past nine months.

Economists said emergency imports, loans and subsidies could offer temporary relief but called for greater domestic gas exploration, diversified LNG sources, renewable energy, improved energy efficiency and stronger transmission infrastructure.

The government says it has distributed 67,278 Family Cards and plans to bring 4.1 million women under the programme by June 2027. Agricultural loans of up to Tk 10,000, including interest, have been waived for around 1.434 million farmers.

Economists stressed the need to identify genuine beneficiaries, include excluded households, ensure grievance redress and prevent multiple benefits. They said the Farmer Card programme will work only if farmers receive fertiliser, seeds, credit and technology on time and get fair prices.

A revenue shortfall of nearly Tk 100,000 crore has added to the pressure. Economists called for a realistic revenue policy, a wider tax base, digitised tax administration and tougher action against major tax evasion.