The most recent assessment report from the World Bank has highlighted potential risks for Bangladesh’s reform plans and economic recovery. The bank recently approved a $500 million development credit for Bangladesh with conditions attached. An additional $500 million is pledged contingent on the interim government’s commitment to expedite key reforms before the upcoming general election. However, Bangladesh is facing significant challenges, including a 35 percent tariff imposed on its goods entering the US market as of August 1. This places Bangladesh among the countries most affected by the recent US trade measures, with duties ranging from 25 to 40 percent. Addressing these challenges will require carefully crafted strategies.
The Bangladeshi economy is already feeling the strain from reduced investments and lower demand in global markets. The World Bank has warned about the impact of trade tensions between major economies and potential escalation of tariff rates. A projected 5 percentage point decrease in exports could result in a 1.3 percentage point reduction in real GDP growth and a $1.7 billion depletion in foreign reserves. Real GDP growth dropped to 3.97 percent in the fiscal year ending June 2025, the slowest rate in over ten years. Private sector credit growth has also declined significantly, hitting a 30-year low of 6.8 percent in February 2025. Despite these challenges, the World Bank forecasts that GDP growth could rebound to 4.9 percent in FY26 and 5.7 percent in FY27 if there is improved political stability and a resurgence in investments.
Tackling inflation is another crucial task for Bangladesh. Inflation surged to an average of 10.3 percent between July 2024 and April 2025 due to various factors like supply chain disruptions, high energy costs, currency depreciation, and the lingering effects of floods and political unrest. However, inflation eased to 8.48 percent in June, the lowest level in almost three years. The World Bank anticipates a further decrease in inflation in the upcoming years, assuming strong domestic consumption and stable global prices.
The interim government has initiated key economic reforms aimed at enhancing transparency and governance since assuming office. Bangladesh Bank has implemented stricter regulations for banks, mandating disclosure of actual ownership, tighter oversight on insider lending, and improved monitoring of non-performing loans. A significant ordinance passed in May separates tax policy development from tax administration to minimize political influence and boost revenue. The reform of public investment management is ongoing, with plans to ensure comprehensive audit coverage of public revenues. The successful execution of these reforms, coupled with sustained political stability, will be vital in steering Bangladesh towards a robust economic resurgence.