Bangladesh’s mounting economic woes to spill into 2026
Several challenges faced by the Bangladesh economy from 2025, such as the rising non-performing loans in the financial sector, are likely to spill into the new year, according to local media reports.
New Delhi: Several challenges faced by the Bangladesh economy from 2025, such as the rising non-performing loans in the financial sector, are likely to spill into the new year, according to local media reports.
The Bangladesh Bank had limited room to act, as the government relied heavily on high cost borrowing from the banking sector. At the same time, debt defaults continued to weaken banks’ ability to extend fresh credit, the Dhaka-based The Daily Star reported.
High interest rates discouraged even capable entrepreneurs from pursuing new investments. Large banks found a “safe haven” in high-yield government treasury bonds rather than extending new loans to the private sector, the report said.
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The interim government largely opted to maintain the status quo in public financial management. As a result, no new model emerged for budget allocation, social safety net management, or broader fiscal policy. Long-pending revenue reforms were pushed forward under IMF pressure, but deeper restructuring faltered due to legacy constraints within the civil bureaucracy, the report points out.
Investment remains sluggish, and the pressure to create decent jobs for young people continues. In an emerging economy like Bangladesh, inflation must be managed carefully through market oversight and supply-side measures. Rising debt repayments call for stronger domestic revenue mobilisation through tax digitisation, capacity building, a firm stance against corruption, reduced VAT leakages, and expanded income tax collection. Close monitoring of the exchange rate is also essential, the report stated.
According to the report, “a conducive law and order situation is non-negotiable” if Bangladesh has to progress. The new government should engage more actively with global investors, trade partners, and development agencies. This requires political stability and peace in production belts. Lower energy and food prices, alongside resilient global supply chains, could further support growth, provided no major disruptions emerge, the report added.
Export growth has slowed in recent months, highlighting the need to lower the cost of doing business, improve turnaround times, and ensure better management of industrial zones.
The report further states that while diversification of products and markets has long been discussed, progress remains limited. As Bangladesh prepares to graduate from the LDC category this year, these measures will demand sharper focus and decisive action.
