Growth Must Move beyond Mere Stabilisation

Six months into the BNP-led government, Bangladesh’s economy shows some signs of stability, but it remains far from a broad-based recovery. A recent review by the Centre for Policy Dialogue (CPD) of 31 major economic indicators found improvement in only 12, while 19 deteriorated. Inflation has eased, foreign exchange reserves have increased and exports have returned to positive growth. However, weak investment, sluggish industrial activity, poor revenue collection, energy insecurity and banking-sector weaknesses continue to weigh on the economy. The government must now recognise that stabilisation is only the first step; the real challenge is to turn it into sustained growth and better economic prospects for common people.

The CPD’s latest review shows why caution remains necessary. Headline inflation fell from 9.1 per cent in February to 8.3 per cent in July, while food inflation declined from 9.3 per cent to 7.2 per cent. Foreign Exchange reserves also rose from $30.1 billion to $32.3 billion. Meanwhile, exports returned to positive territory and capital machinery imports improved. However, these gains have yet to revive the broader economy. Private-sector credit remains weak, businesses remain cautious about new investment, and industrial activity and foreign investment are still subdued. Moreover, the trade deficit has widened to $10.4 billion and the current account has moved into deficit. Thus, stability has not translated into the investment and production needed for sustained growth.

The consequences are significant. Lower inflation does not mean lower prices, while negative real wage growth continues to erode household purchasing power. Businesses face high energy costs, limited finance and policy uncertainty. Meanwhile, weak investment and banking-sector problems constrain industrial expansion and job creation. Poor revenue collection also limits public spending on infrastructure and social protection. Against this backdrop, economic recovery could remain fragile unless these constraints are addressed together.

The government must therefore focus on measures that can restore confidence and unlock investment. It should ensure predictable policies, reliable energy supplies, easier access to finance and faster regulatory approvals. Banking reform must tackle bad loans, weak governance and poor supervision. More importantly, revenue mobilisation should improve by broadening the tax base and strengthening administration. The government should also reduce energy vulnerability through greater domestic gas exploration, diversified LNG supplies and renewable energy. Even so, these reforms will succeed only with strong coordination and consistent implementation. Above all, corruption and abuse of power must stop, and transparency as well as accountability must be ensured.

We expect the government to treat the CPD assessment as both a warning and an opportunity. Six months may be too early to judge its policies; nevertheless, the trends show that stabilisation alone is not enough. The next six months should show whether the government can turn improved macroeconomic indicators into stronger investment, industrial production and employment. 

Ultimately, recovery must be measured not only by inflation, reserves and exports, but also by household purchasing power and business confidence. Therefore, economic stability must become the starting point for recovery, not its endpoint.