Dhaka January 29 2025:
Following the July mass uprising in 2024 the interim government has been tasked with addressing the critical challenges of the economy.
These multifaceted challenges require a comprehensive approach balancing short-term relief for the public, tackle long-standing issues, and implementing sustained reforms to strengthen economic fundamentals.
To address Bangladesh’s economic challenges in the coming months, the interim government must adopt a balanced and effective strategy that addresses immediate crises and initiates medium to long-term reforms to be carried out by the politically elected government.
Among several problems, weak revenue generation leading to a constrained fiscal space, heavy reliance on bank borrowing to meet budget deficits, tight liquidity in banks, high prices of essential commodities, low investment and declining foreign reserves have affected the macroeconomic stability.
These views were derived from a media briefing session organized by Center for Policy Dialogue (CPD) on Wednesday titled “State of the Bangladesh Economy in FY2024-25: Navigating Expectations in Turbulent Times” as part of its Independent Review of Bangladesh’s Development (IRBD) programme at its city office.
Dr Fahmida Khatun, Executive Director, chaired the session while Professor Mustafizur Rahman, Distinguished Fellow; Dr Khondaker Golam Moazzem, Research Director; Muntaseer Kamal, Research Fellow; and Syed Yusuf Saadat, Research Fellow (CPD) were present during the session.
It is reckoned that the current situation needs to be addressed through a three-pronged approach, taking into cognisance both the immediate and medium-term impacts.
Total revenue collection recorded a marginal 3.7 per cent growth during the July-October period of Fiscal Year (FY) 2025, implying that a whopping 45.1 per cent growth will be required during the remainder of FY2025 if the annual target is to be achieved, said Dr Fahmida Khatun.
Export performance during the first half of FY2025 indicates not only high growth of export earnings but also correspondingly high growth of domestic value retention, which is a positive development, although export earnings continue to remain volume-driven, she mentioned.
The point-to-point general Consumer Price Index (CPI) inflation rate was higher in rural areas than urban areas for 16 months out of the 21 months between April 2023 and December 2024, Dr Fahmida continued.
Dr Fahmida Khatun during the presentation added that private investment was experiencing major disarray during the tenure of the interim government, which started in the previous regime.
Besides, she highlighted that Aman production decreased in the first half of FY2025, creating a rice supply shortage.
The spiral effect caused by the ever-rising debt has entrapped the power and energy sector into a vicious cycle that will likely not end soon.
The size of non-performing loans (NPLs) as of September 2024 is 2.7 times higher than the combined allocation for the education and health budget in FY2024.
According the think tank, the interim government, formed on 8 August 2024, has taken several economic measures, including many reform initiatives, given the attendant challenges.
However, these initiatives have not resulted in substantive changes that will relieve people and businesses. Given the multi-dimensionality of ongoing economic challenges, measures must be targeted to all sectors and stakeholders.
The think tank recommended to put a high priority on preventing tax evasion, limiting tax avoidance, and bolstering compliance systems should be imperative for the interim government to create a more inclusive fiscal base and reduce revenue leakages.
It suggested for monitoring markets to limit intermediaries, connect farmers directly to buyers, and regulate hoarding and stockpiling by rice warehouse operators and millers.
Also, Bangladesh needs to undertake renewed efforts to realise the untapped export potentials in the markets of neighbouring regions of South Asia, East Asia and ASEAN by pursuing Free Trade Agreements and Comprehensive Economic Partnership Agreements and through triangulation of investment, transport and trade connectivities.
We need to design a subsidised credit facility with lower interest rates to support SMEs.
Given the rise in demand for non-household consumption, particularly animal feed and industrial use, a proper estimation of annual rice demand is highly required.
A specific two-year plan with the agenda to end the rising debt cycle in which the whole power and energy sector has been entrapped needs to be identified.

Bank accounts of willful defaulters and their immediate family members should be frozen immediately, their assets liquidated, and their businesses nationalized temporarily.
This was evidenced by, inter alia, subdued revenue mobilization, resulting in a shrinking fiscal space, a high reliance on government borrowing from commercial banks to finance the budget deficit, tightened liquidity in scheduled banks, elevated prices of essential goods, and a deteriorating external sector balance and foreign exchange reserves.
Regrettably, the macroeconomic dynamics of the ongoing fiscal year (FY) 2024-25 show slight improvement.
The fiscal landscape remains complex with limited revenue generation capacity of the government and over reliance on discriminatory indirect taxes. The implementation of the Annual Development Programme (ADP) was low due to the political turmoil during the first two months of FY2025 and reprioritization of projects.
The improvement in the fiscal framework requires a careful management and reforms to support a sustainable development of the country.
Soaring food prices, particularly in essential commodities, have exacerbated inflationary pressures. Factors driving high inflation include disparities in regional pricing, reliance on imports, dominance of cartels, influence of middlemen, and stockpiling.
Supply chain inefficiencies such as hoarding, commission agents’ dominance, inadequate agricultural practices, high input costs, and erratic weather further hike the price. Specific commodities like onions, potatoes, and brinjal suffer post-harvest losses, while in the rice sector, dominance by warehouse operators and millers distorts pricing due to which both farmers and consumers face difficulties.
The positive trends of the external sector during the first half of FY2025, driven by robust export growth, and strong remittance inflows are encouraging.
Reduced trade and current account deficits have helped to improve the balance of payment situation. Despite high remittance growth, subdued capital goods imports reflect low investment.
Private investment remains weak which is reflected through declining credit growth, FDI, and SME financing challenges. Market and product diversification for exports, FDI promotion, and structural reforms are critical for sustainable growth amid global uncertainties, and Bangladesh’s imminent LDC graduation in 2026.
The crop sector, especially rice and wheat, struggled during the first half of FY2025 due to floods in 23 districts.
The reduction in Aman rice production impacted rice procurement, imports, and public food distribution. Though rice was imported to fill up the gap, wheat imports declined. Addressing instability in the rice market requires accurate demand estimation, improved procurement, reduced input costs, and better coordination among various ministries through a permanent agricultural monitoring commission.
The power and energy sector in Bangladesh faces a deepening crisis marked by unsustainable debt and slow renewable energy progress. Despite some reforms by the interim government, such as open tenders for solar plants and extended tax holidays for renewable producers, challenges persist.
Transparency in public procurement remains inadequate, and the cancellation of letter of intent for 37 solar power plants has stalled renewable energy integration.
The financial burden on public authorities such as Bangladesh Petroleum Development Board (BPDB) and Petro Bangla has created a debt spiral. this requires a concrete two-year plan to break the cycle and ensure long-term sustainability of the sector.
The banking sector in Bangladesh faces systemic challenges, including poor governance, inefficiencies, and weak regulatory frameworks.
Political interventions at various levels including appointments in SCBs and licensing decisions have undermined the performance of the sector.
Weak internal controls, ineffective risk management, and inadequate legal frameworks exacerbate NPLs, while defaulters exploit legal loopholes and delays in the judicial system.
Banking Company Act has often been amended favouring vested interest groups. Implementation of comprehensive reforms through short, medium and long-term measures is critical to restore stability and efficiency of the banking sector. However, these reforms must be backed by political commitment from the highest level.
In view of the ongoing economic situation, a coordinated approach is needed to overcome the multifaceted challenges, stabilise the economy, protect the vulnerable, low- and limited-income households.
CPD undertakes several interim reviews of the economy throughout every fiscal year. Accordingly, CPD has prepared an assessment report titled “State of the Bangladesh Economy in FY2024-25.
Researchers, Media Personalities, Social Activists, among others, actively took part during the briefing session.
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