The current wave of pessimism surrounding Bangladesh’s economic system underneath its interim administration, a lot of it amplified by selectively framed native commentary, presents an incomplete and infrequently deceptive portrait of the nation’s precise financial trajectory. A lot of this concern is overstated, because the headline indicators replicate a needed structural correction fairly than an financial collapse.
Whereas elevated inflation and a battered banking sector are actual and severe challenges, they don’t quantity to proof of an economic system in free fall.
A extra cautious studying, one which accounts for the disruptive legacy of the earlier administration and the corrective measures undertaken after the political transition, reveals a troublesome however needed interval of structural rebalancing.
The declare that the brand new authorities is inheriting a crippled economic system overlooks the truth that the earlier administration left behind a monetary system that resembled a home of playing cards, propped up by manipulated information and systematic concealment of danger.
To painting the present economic system as stagnant is to disregard Bangladesh’s longer arc of resilience in South Asia. Regardless of the worldwide shocks that adopted COVID-19 and the Russia-Ukraine battle, the nation delivered stronger progress than most of its regional friends.
It registered 3.5 % progress in 2020, adopted by 6.9 % in 2021 and seven.1 % in 2022. At present’s slower progress displays deliberate fiscal tightening geared toward restoring macroeconomic stability after years of extra.
Fairly than an indication of decay, that is the predictable cooling that follows the top of synthetic stimulus.
The anxiousness round nonperforming loans and personal sector credit score tells an much more revealing story, not of latest stress however of long-buried weaknesses lastly uncovered.
The alarming rise in nonperforming loans, with figures starting from over 20 % in ADB assessments to greater than 35 % underneath the central financial institution’s revised classification guidelines, stems from a long-overdue dedication to sincere accounting.
For years, the earlier regime reportedly pressured regulators to gloss over defaults, calm down classification requirements, and lengthen mortgage rescheduling indefinitely. The outcome was a banking sector that seemed superficially wholesome whereas quietly deteriorating.
The surge in nonperforming loans is subsequently the worth of confronting the system’s actual situation.
The compression in personal credit score progress, which dipped to about 6.29 % in late 2025, should even be understood in context. Earlier double-digit credit score progress was inflated by large, politically linked borrowing that produced little actual financial return and in the end fed into the ballooning nonperforming mortgage disaster.
Many of those loans had been by no means meant to be repaid and had been allegedly funnelled into abroad actual property or offshore accounts. In distinction, banks at the moment are extra cautious, with credit score flowing into sectors much less weak to default.
The amount of lending has decreased, however the high quality has improved. An economic system can not construct sustainable progress on a mountain of unhealthy debt. The present adjustment displays a shift in the direction of stability fairly than a collapse in funding urge for food.
These corrections within the monetary sector are just one a part of the broader adjustment. Essentially the most decisive rebuttal to claims of stagnation is the transformation underneath means within the fiscal and exterior sectors. In an uncommon present of self-discipline, the federal government has sharply reversed the longstanding behavior of borrowing closely from the banking system.
Between July and October of the 2025-26 monetary 12 months, it repaid greater than 5 billion taka (about $40.9m) to banks, in stark distinction to the greater than 150 billion taka ($1.23bn) borrowed throughout the identical interval a 12 months earlier.
Economists word that this shift eases strain on rates of interest and frees up liquidity for personal debtors, marking a big break with a previous the place the state crowded out the personal sector.
For a rustic lengthy accustomed to fiscal indiscipline, this transfer alerts a significant shift in the direction of stability.
International direct funding (FDI) tells a equally counterintuitive story. Towards the belief that political upheaval deters traders, Bangladesh skilled almost 20 % progress in FDI within the 2024-25 monetary 12 months.
For a post-transition economic system rising from a large rebellion that resulted in additional than 1,400 deaths, that is extraordinarily uncommon. Nations rising from political uprisings sometimes endure sharp drops in overseas funding for years.
In Bangladesh’s case, world corporations not solely remained but additionally reinvested their earnings. This displays a deeper confidence within the nation’s long-term prospects.
Maybe essentially the most hanging shift has occurred within the exterior sector. After months of regular erosion, overseas foreign money reserves have stabilised after which strengthened, climbing from lower than $20bn in mid-2024 to greater than $30bn a 12 months later.
Remittances surged to a document $30.33bn within the 2024-25 monetary 12 months, a 26.8 % improve attributed to renewed confidence within the formal monetary system, the crackdown on cash laundering, and the return to a market-based alternate price.
Expatriates who as soon as relied on hundi networks at the moment are sending cash legally, responding to a extra clear and predictable foreign money regime. This mixture of rising reserves, sturdy remittance inflows, and exchange-rate stabilisation types one in every of Bangladesh’s strongest macroeconomic buffers in years.
Inflation stays essentially the most potent concern, and rightly so. With charges above 8 %, larger than any nation in South Asia, the cost-of-living strain is extreme.
However right here once more, comparisons require nuance. Sri Lanka’s low inflation follows a whole financial meltdown and draconian financial tightening underneath an IMF programme.
Bangladesh’s inflation is structurally totally different, pushed partly by provide chain constraints, lingering market distortions, and the aftereffects of earlier financial growth. It’s troublesome, however not destabilising.
Equally, the poverty determine of 28 % usually cited by critics originates from a limited-sample personal examine. World Financial institution projections point out that poverty is more likely to proceed falling modestly this monetary 12 months, even amid inflation.
The battle forward isn’t merely about preserving progress charges, however about dismantling entrenched corruption, extortion networks, and bureaucratic bottlenecks which have acted as invisible taxes on the poor for years.
Bangladesh’s economic system at the moment isn’t collapsing; it’s present process a troublesome however needed reconstruction after greater than a decade of governance that most well-liked beauty stability over institutional well being.
Excessive nonperforming loans, slower credit score progress, and chronic inflation are signs of structural issues lastly being confronted. That confrontation was inevitable and overdue.
What stands out as a substitute is a set of achievements not often seen in a post-transition economic system: a speedy rebound in reserves, a document surge in remittances, almost 20 % progress in FDI, and an unprecedented demonstration of fiscal restraint.
These will not be the markers of stagnation, however the early foundations of a extra clear, sturdy financial future. Whether or not Bangladesh completes this transition will rely on the political will to maintain reform, particularly within the banking sector. The story of the economic system at the moment isn’t one in every of collapse; it’s the story of corrective surgical procedure. Whether or not the nation can end the operation stays the central query.
The views expressed on this article are the writer’s personal and don’t essentially replicate Al Jazeera’s editorial coverage.
