Bangladesh’s leading economic think tank, the Centre for Policy Dialogue, warns that stabilisation remains fragile after the government’s first six months, with 19 of 31 indicators deteriorating amid structural weaknesses and external shocks.

Bangladesh’s economic stabilisation remains fragile and the road to recovery is likely to stretch longer than official expectations, according to a detailed assessment by Bangladesh’s leading economic think tank, the Centre for Policy Dialogue. Presenting the findings at a media dialogue on the government’s performance over its first six months, CPD Distinguished Fellow Debapriya Bhattacharya cautioned that while leaders have spoken of a one-to-two-year recovery timeline, the country is heading toward a more prolonged process.

Of 31 key economic indicators tracked by the think tank, 19 deteriorated and only 12 improved between the period before the government assumed office and the subsequent six months. Many of the negative trends are structural rather than temporary, Debapriya noted, underscoring the depth of the challenges inherited and those that have emerged or intensified since.

Mixed Scorecard Masks Deeper Weaknesses

The assessment paints a picture of uneven progress. Improvements were recorded in foreign exchange reserves, export growth, food inflation and implementation of the Annual Development Programme. Reserves rose to around $32.3 billion, export growth turned positive at 3.5 per cent, food inflation eased to 7.2 per cent and headline inflation moderated to 8.3 per cent.

Yet these gains were outweighed by setbacks elsewhere. Revenue growth, government bank borrowing, remittance growth, overseas employment and the balance of payments all worsened. Remittance growth nearly halved from 21.4 per cent to 11.8 per cent, while average monthly overseas employment dropped sharply from roughly 95,500 to about 51,200, hit hard by disruptions in Middle East labour markets linked to regional conflict. The trade deficit widened from $6.7 billion to $10.4 billion and the current account swung from surplus into deficit.

Industrial production showed no improvement, with both general and manufacturing indices stagnating near zero growth. Provisional data later confirmed that industrial output contracted 0.28 per cent in the January-March quarter of FY2025-26, the first such decline since the pandemic-hit period, dragging overall GDP growth in that quarter to just 2.22 per cent. Private-sector credit growth slowed and net foreign direct investment inflows declined.

Inherited Burdens and New External Shocks

CPD emphasised that the government inherited a difficult legacy: weak banks burdened by high non-performing loans, chronically poor revenue mobilisation, tight fiscal space, subdued investment and an unfavourable global environment. The conflict involving the US, Israel and Iran, together with volatility around the Strait of Hormuz, has sent fresh energy-price shock waves across the world, complicating stabilisation efforts.

Factory closures add a human dimension to the numbers. Ninety-five factories permanently shut down across Gazipur, Savar-Ashulia and Narayanganj-Narsingdi between January and August, resulting in 61,881 direct job losses. Gas shortages continue to disrupt energy-intensive industries including textiles, steel, paper, particleboard and ceramics, exposing weaknesses in crisis management and supply planning despite some positive steps such as inviting international bids for offshore oil and gas exploration.

On the fiscal side, CPD projected a substantial revenue shortfall of Tk 1.30-1.40 lakh crore in FY2026-27 against what it described as an unrealistically high target. While the government is expected to stay within the programmed budget deficit limit of 3.6 per cent of GDP, the scope for cutting non-ADP spending is limited and pressures from a possible new pay scale and rising subsidy demands are mounting. Per-capita external debt has also risen notably.

Positive Steps Amid Governance Concerns

The think tank acknowledged several constructive measures. Austerity efforts, the abolition of duty-free vehicle entitlements for officials, the introduction of an AI-based traffic management system, the launch of e-Return, the withdrawal of provisions allowing legalisation of undisclosed money, expanded bonded warehouse facilities and the waiver of agricultural loans up to Tk 10,000 were cited as steps offering relief or signalling intent. The decision to withdraw a proposed electricity tariff increase for low-income residential consumers was also welcomed.

At the same time, CPD raised concerns about institutional processes. The abrupt cancellation of the previous central bank governor’s tenure and the subsequent appointment, amid questions of potential conflict of interest, have prompted questions about central bank independence and the criteria for senior appointments. No concrete steps have yet been taken to assess public debt stress comprehensively.

Calls for a Core Budget and Coordinated Reforms

Debapriya argued that a longer recovery path demands more than incremental adjustments. He recommended preparation of a core fiscal budget covering October 2026 to June 2027, grounded in real-time data and a credible framework, that would offer a shorter outlook for the remainder of FY2026 and a near-term view of FY2027. These targets should align with a broader Five-Year Strategic Framework for Reform and Development spanning July 2026 to June 2031.

An integrated reform package is essential, focused on energy security, banking-sector restructuring, the proposed bifurcation of the National Board of Revenue, rationalisation of public spending and the ADP, logistics improvements, digitalisation and the work of the wage commission. “Deliver a credible energy-security package instead of repeated emergency, no-tender imports. Review power purchase agreements to cut the subsidy burden; intensify offshore gas exploration,” Debapriya urged. He also called on the finance minister to place key reform action plans and economic issues before the country’s Parliament for proper scrutiny.

Independent assessments from international institutions echo elements of caution. S&P Global Ratings revised Bangladesh’s outlook to negative in July 2026, citing sustained economic risks from banking-sector imbalances, energy vulnerabilities and the impact of Middle East conflict on growth and external balances. The IMF has projected a gradual rebound, with growth around 4.7 per cent in FY26 and FY27 under supportive policies, but has stressed the need for revenue mobilisation and financial-sector reforms to sustain higher medium-term growth.

Optimism and Concern

The CPD review of 362 observations across nine areas found grounds for both optimism and concern. Monetary indicators showed the clearest gains through lower inflation, while the external sector recorded the sharpest deterioration. Overall, negative trends outweighed positives, and many problems are entrenched. Without a coherent, coordinated reform push backed by political commitment and improved institutional capacity, stabilisation risks remaining fragile and the recovery period longer than hoped.

For ordinary Bangladeshis, the implications are tangible, CPD says: slower job creation, pressure on real wages despite some inflation moderation, and continued uncertainty for industries already struggling with energy and financing constraints. The coming months will test whether the government can translate initial stabilisation measures into the deeper structural changes required to put the economy on a firmer footing, says Debapriya.