What should be Bangladesh's strategic priorities in 2025?
As Bangladesh steps into a new year and looks forward to confronting ongoing economic and political challenges, the need for objectively assessing the country's current economic realities cannot be overstated. The economy is experiencing several complex challenges that require a cohesive and strategic approach. Key priorities for the upcoming national budget, to be placed in June, must also be outlined while underscoring the importance of a broader reform agenda.
The source of the economic hurdles lies in the unrelenting inflationary pressure that does not seem to recede. The Bangladesh Bank has resorted to hiking interest rates on many occasions over the past two years, with little effect on containing inflation. As a result, the country has been a major failure, whereas many neighbouring countries have successfully controlled inflationary pressure. While the past regime faced allegations of either inaction or improper action in combating inflation, the present interim government has also not been able to show any success so far. The failure emanates from the lack of coordination among monetary policy, fiscal policy, and domestic market management. By now, policymakers must understand that without a synchronised approach, these measures remain fragmented and ineffective. For the interim government, containing inflation and providing solace to low-income people must be the top priority.
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Exports and remittance inflows have provided some respite, with recent performances showing promise. This has led to a marginal improvement in the foreign exchange reserve position. However, the key to sustaining this momentum is addressing the macroeconomic instability, labour unrest, and tensions that have bedevilled many factories. Furthermore, private investments remained stagnant in the context of high and rising interest rates and an unfriendly business environment, with an unstable law and order situation. That has had a strangulating effect on job creation and industrial growth.
The forex market is another area of concern. While the Bangladesh Bank is signalling a shift towards a more market-driven exchange rate policy, careful timing and implementation are necessary to avoid exacerbating import costs and inflationary pressures. The transition should be well complemented with a properly communicated strategy in which businesses and consumers are duly prepared for it.
However, the absence of strong and resolute economic management from the interim government has not helped much in addressing the major economic challenges. The apparent lack of coordination in major economic issues raises concerns about the mechanism for making and implementing policies. It is high time for the interim government to show seriousness in addressing the challenges through comprehensive and effective interventions.
The White Paper Committee's recent report, submitted on December 1, sheds light on systemic corruption, illicit money transfers, cronyism, and rent-seeking activities that have plagued development projects, including megaprojects, during the previous regime. This report is a major call for the interim government to take decisive actions against these entrenched practices. By implementing key recommendations from the report, the government can begin to address the root causes of inefficiency and corruption. This includes reforms in critical economic, political, administrative, and judicial domains—reforms that must be reflected in the government's allocations and priorities.
While the mass uprising in July-August created optimism about a unified national effort towards reforms and nation-building, the reality increasingly looks beset on all sides. Political tensions and disagreements over the scope of reforms, duration of the interim government, and the timing of the next national election threaten to derail the focus on economic priorities. A confrontational political climate risks diverting attention from critical issues, including the persistent inflation that continues eroding ordinary citizens' purchasing power.
With these challenges in mind, policymakers must take actions that offer immediate economic relief and facilitate broader reform measures. They include coordinated efforts to contain inflation, to cushion the effects of inflation on the most vulnerable groups through expanded social safety nets, and to address supply-side drivers of inflation through investment in agriculture, energy, and transportation infrastructure.
At the same time, policymakers should lay a solid foundation for far-reaching reforms in key economic, political, administrative, and judicial domains. Apparently, there is some consensus on the direction of economic reforms, such as fixing the systemic inefficiency in public finance management, overhauling the taxation sector, restructuring the banking sector, and modernising trade and investment policies. However, the directions of political, administrative, and judicial reforms remain far more contentious and marked by disagreement.
The challenge is to make sure that debates and disputes on reforms in the political, administrative, and judicial domains do not weaken the momentum to move ahead with economic reforms. These disagreements, if not carefully managed, risk overshadowing or derailing efforts to address structural economic challenges that are essential for ensuring stability and growth.
It is, therefore, incumbent upon the interim government to stay focused on economic reforms with the same intensity as opening up dialogue and consensus-building on general institutional reforms. All these competing priorities require clear leadership, effective communication, and a commitment to incremental progress.
Dr Selim Raihan is professor in the Department of Economics at the University of Dhaka and executive director of South Asian Network on Economic Modeling (SANEM). He can be reached at selim.raihan@econdu.ac.bd.
Views expressed in this article are the author's own.
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