By Naima Sultana
Following several years of economic turbulence, Bangladesh’s macroeconomic indicators are beginning to show encouraging signs of recovery, offering much-needed relief to both the government and the business community.
Stubbornly high inflation has eased to its lowest level in over two years, foreign direct investment (FDI) has picked up significantly, and remittance inflows continue to climb. Perhaps most notably, the foreign exchange market has stabilised to such an extent that the Bangladesh Bank has intervened to purchase US dollars from commercial banks in order to prevent an excessive appreciation of the taka.
The interim government inherited a fragile economy plagued by persistent inflation, weak revenue collection, sluggish budget execution, a liquidity shortfall in the banking sector, and dwindling foreign currency reserves.
Compounding these challenges were declining export receipts and reduced remittance inflows, which further exposed underlying vulnerabilities.
As macroeconomic stability is of paramount importance to businesses, the pressing question now is whether the current indicators point towards sustained improvement.
Economists, multilateral development partners, and government officials remain cautiously optimistic about the economy’s prospects. Early signs of a rebound are evident. However, the pace and resilience of the recovery will depend heavily on the domestic political landscape, evolving geopolitical dynamics, and the government’s commitment to structural reforms.
In their latest assessments, the World Bank, the International Monetary Fund (IMF), and the Asian Development Bank (ADB) have acknowledged that the Bangladeshi economy is exhibiting signs of recovery, as reflected in rising remittances and a rebound in gross domestic product (GDP) growth.
According to the IMF, the economy is projected to grow by 5.4 percent in the upcoming fiscal year, up from an estimated 3.8 percent in the year just concluded.
Headline inflation dropped to 8.48 percent in June, the lowest level in 35 months and the first time since March 2023 that inflation has fallen below 9 percent, as per data from the Bangladesh Bureau of Statistics (BBS).
Nonetheless, several downside risks persist. The IMF has warned that continued political uncertainty, a tight monetary-fiscal policy mix, escalating trade barriers, and mounting pressure in the banking sector could hinder the speed and extent of the recovery.
Concerns have already surfaced among businesses regarding the recently imposed 35 percent tariff on Bangladeshi readymade garment (RMG) exports to the US, which may shave 1 percentage point off the country’s GDP and impede employment generation.
Trade tensions with India are also affecting export-oriented industries, especially those reliant on raw materials sourced from across the border.
Despite these headwinds, economists remain confident that declining inflation will ease pressure in the money market. This is already being reflected in the falling yield on 10-year treasury bonds, now at 10.48 percent and trending towards single digits.
As borrowing costs fall, businesses will benefit from lower financing expenses, encouraging investment and entrepreneurship. Confidence is also being bolstered by relative stability in the foreign exchange market. Following several years of depreciation during which the taka lost nearly 30 percent of its value against the US dollar post-Covid; the local currency has recently shown signs of strength.
The Bangladesh Bank was compelled to purchase approximately half a billion US dollars from commercial banks after the exchange rate appreciated by more than Tk 2 within five days, reaching Tk 120 per US dollar.
For the first time in years, the central bank is enjoying some breathing space in managing foreign reserves, owing to stronger remittance inflows and improved export performance.
Net FDI also saw a marked improvement in the January-March quarter of 2025. According to the Bangladesh Bank, FDI surged to $865 million, a 114 percent increase from $403 million in the same period in 2024, and 76 percent higher than the $490 million recorded in the previous quarter.
Remittances reached an all-time high of $30.32 billion in the just-concluded fiscal year, surpassing the previous record of $24.77 billion set in the financial year (FY) 2021 by $5.54 billion.
Meanwhile, export earnings increased by 8.58 percent year-on-year in FY2024–25, bringing the total to $48.28 billion, as per data from the Export Promotion Bureau (EPB).
Still, the trajectory of recovery will hinge on addressing several critical areas. Economists have urged the government to prioritise reinforcing macroeconomic stability, improving domestic resource mobilisation, strengthening public financial management, and enhancing the delivery of services in health and education.
Attention is also required to resolve financial stress in the power and energy sectors, tackle environmental vulnerabilities, and provide targeted support to small and medium-sized enterprises (SMEs).
A balanced strategy is crucial when financing the budget deficit, particularly to ensure that crowding out of private investment is avoided.
Simultaneously, Bangladesh must engage in effective diplomacy with the United States to negotiate tariff reductions, while steadfastly protecting the country’s national interests.
Improving governance in the banking sector remains another critical priority. Structural reforms across all sectors of the economy must be accelerated and implemented meaningfully to lay the foundation for a resilient, inclusive, and sustainable recovery.
