New Delhi – Dec 7 (LatestNewsX)
Bangladesh, once hailed as a shining star of development among the world’s emerging economies, now stands at a crucial turning point. For many years, the country broke through the odds, consistently driving strong GDP growth, expanding garment exports, improving vital human‑development metrics, and cutting poverty rates impressively. Global analysts—from the World Bank to regional think tanks—praised what was labelled the “Bangladesh miracle.” Yet by mid‑2025 that positive image has dramatically shifted.
A mix of deep‑rooted structural flaws, political turbulence, and global shocks has dragged the nation into its worst economic downturn in decades. The decline is not a one‑off event but the result of years of postponed reforms, too much dependence on a handful of growth engines, and poor responsiveness to changing world conditions.
The consequences are stark: projected GDP growth will drop to a 36‑year low, private investment has collapsed, inflation remains stubbornly high, and the national debt is growing at an unsustainable pace. Falling foreign reserves, a weakening currency, and strained regional ties further aggravate the crisis.
Political uncertainty has also risen, especially after the controversial power transition in August 2024. The loss of institutional credibility, diplomatic frictions—particularly with India—and a cautious private sector all point to a wider confidence crisis. While short‑term reprieves, like the US tariff cut on garments, offer temporary relief, they are far from enough to fix the deeper structural woes.
Understanding Bangladesh’s ongoing crisis – through macro data, fiscal signals, and policy reviews – is essential. Internal vulnerabilities have been amplified by global headwinds, and without swift, coordinated, and reform‑driven actions, the country risks erasing two decades of hard‑earned progress.
GDP Growth Hits 36‑Year Low
The World Bank’s latest outlook paints a bleak picture: Bangladesh’s GDP growth is forecast to fall to 3.3 % in fiscal 2024‑25, down from an earlier 4.1 % estimate (World Bank, 2024). This would be the smallest rate in 36 years. For a nation that has enjoyed 6–7 % annual growth over the past twenty years, such a decline is alarming.
A shrinking economy directly cuts jobs. Analysts note that each percentage point drop in GDP could erase about one million jobs. With over 60 % of the population under 35, these losses could spark a demographic crisis.
Furthermore, the slowdown may push an extra 3 million people into extreme poverty—defined as living below $2.15 a day. The share of the population in extreme poverty could rise to 9.3 % from 7.7 % the year before (World Bank, 2024).
Private‑Sector Paralysis: Credit Growth Hits Decade‑Low
A key symptom of the deepening crisis is the steep drop in private‑sector investment. In January 2025, private‑sector credit growth sank to just 7.15 %, the lowest in a decade and well below the Bangladesh Bank’s target of 9.80 % (The Daily Star, 2025). This slowdown reflects fading business confidence and worsening fundamentals under the Yunus‑led interim government.
The central bank’s tight monetary stance, aimed at slashing inflation, has instead stifled capital flow. With the policy rate parked at 10 %, borrowing costs have surged, making it harder for firms to obtain affordable financing.
Political turbulence and policy uncertainty since the August 2024 change further discourage entrepreneurs, who are reluctant to invest in a climate lacking guarantees, transparency, and a clear direction (The Daily Star, 2025).
The fallout is far‑reaching. Stagnant private credit shrinks industrial output, reduces job creation, and trims tax revenue—fueling a self‑reinforcing downturn. Instead of fostering a stable investment environment, the Yunus administration has undermined the private sector through economic mismanagement and a lack of coherent reform.
This slump is not merely cyclical—it is structural and deeply political. Restoring investor faith, overhauling monetary policy, and ensuring political stability are essential to avert a prolonged recession. The current leadership’s inability to inspire resilience is not only disappointing but hazardous.
Export Sector: A Brief High Amid Deep‑Rooted Weakness
The US’s temporary tariff cut on Bangladeshi garments—from 35 % to 20 %—was hailed by the Yunus interim government as a major diplomatic and economic achievement. However, this success masks profound economic mismanagement and a distorted narrative championed by Dr. Muhammad Yunus and his allies. While large exporters such as Snowtex and DBL Group reported resumed orders, the overall picture is less encouraging.
The administration has failed to tackle systemic trade inefficiencies: disordered port operations, frequent power outages, and customs bottlenecks continue to erode competitiveness. Their policy appears more cosmetic than substantive—an attempt to gloss over failures with headline‑grabbing moves.
Moreover, the 40 % value‑addition clause tied to the tariff cut places many exporters at risk. The government has not negotiated sustainable terms or supported firms in meeting the requirement. Worse, the new tariffs, though technically on importers, are already being unfairly passed on to exporters.
Buyers are pressuring Bangladeshi suppliers to absorb the cost, driving smaller factories toward insolvency. A Fashion Industry Benchmarking Study by the University of Delaware (2025) found that 70 % of major US brands now see rising costs, shrinking margins, and order cancellations because of the new rules. Yet the Yunus regime continues to celebrate its “victory”.
Dr. Yunus’s legacy—anchored in micro‑credit mythology and donor‑friendly rhetoric—has not served the real economy. Relying on fragile trade deals, while ignoring deep structural weaknesses, amounts to economic deception. Unless exporters unite against unfair buyer pressure and a fair trade environment is enforced, the apparel sector—and the jobs it supports—remain on the brink of collapse.
Public Debt Spiral: A Looming Fiscal Time Bomb
Bangladesh’s debt situation worsens steadily. In fiscal year 2023‑24, the debt‑to‑GDP ratio rose to 37.62 %, up from 27 % in 2014‑15 (The Financial Express, 2025). The IMF projects a jump to 40.3 % by 2025, moving closer to the risk zone for developing economies.
While this figure is below the IMF’s 55 % threshold, the rate of increase and the debt composition raise alarms. A greater portion of borrowing is non‑concessional, meaning higher interest and shorter maturities. Much of the borrowed capital has financed large infrastructure projects that have yet to deliver tangible benefits.
The tax‑to‑GDP ratio sits at a mere 7.4 %, one of the lowest in the world, illustrating the government’s dependence on borrowing rather than domestic revenue. Without stronger tax collection or export diversification, servicing the expanding debt burden grows shakier.
Bangladesh could face a full‑blown debt crisis within five years if the trend continues, citing dwindling forex reserves, low tax revenues, and weak governance as the main risks (The Financial Express, 2025).
Inflation, Currency Instability, and Cost‑of‑Living Hardship
While South Asian neighbors have made strides in reducing food inflation, Bangladesh remains trapped in a cost‑of‑living crisis fueled by poor governance and policy failures. The World Bank reports that the country has been in the ‘red’ category for food inflation for two consecutive years—meaning persistently high prices that hit the poor and middle class hardest.
As of March 2025, food inflation stands near 9 %, while overall inflation is at 9.35 % (Bangladesh Bureau of Statistics). In contrast, India’s food inflation has fallen below 6 %, and Pakistan and Afghanistan have entered deflationary territory. Sri Lanka, Nepal, and the Maldives maintain food inflation below 8 %.
Real‑world price pressures remain severe. The costs of staples—rice, lentils, cooking oil—continue to climb, tightening household budgets. Simultaneously, the Bangladeshi Taka has depreciated significantly against the US dollar, raising the price of imported goods and aggravating consumer distress.
The central bank’s response—a tight monetary policy and high rates—has failed to curb inflation and instead strangled credit and private investment, creating a counter‑productive environment. The World Bank’s food inflation index ranks Bangladesh alongside struggling economies such as Congo, Angola, and Ethiopia, reflecting delayed policy action and exchange‑rate indecision under the previous administration. The interim Yunus‑led government has acknowledged the issue, but the response is too little, too late.
Corruption, lack of market oversight, and weak law enforcement persist. As millions struggle to afford basic needs, the deepening crisis exposes a glaring leadership failure and demands urgent, structural reforms. Political instability and growing isolation from regional powers further compound the situation.
Since the political shift in August 2024, ties with India have deteriorated, leading to lost trade advantages and strategic backing. Meanwhile, China has tilted its attention toward India, especially after the US‑China trade war, leaving Bangladesh isolated in regional diplomacy and reducing leverage for favourable trade or investment deals.
Call for Structural Reforms and Political Stability
Bangladesh now faces a pivotal moment. Without immediate, comprehensive reforms, the country risks prolonged stagnation—or even a full‑blown crisis.
To navigate this precarious path, the nation must prioritize restoring private‑sector credit by stabilising monetary policy and reducing political uncertainty. At the same time, revamping tax administration is crucial to improving the tax‑to‑GDP ratio and diminishing reliance on borrowing.
Improving export competitiveness requires addressing logistical and energy shortcomings and streamlining cumbersome regulations. Unproductive public spending should be trimmed in favour of high‑return infrastructure investments that can drive long‑term growth.
Rebuilding and strengthening international relationships, particularly with regional powers like India and key global markets such as the European Union and the United States, is equally vital.
At the core of all these reforms lies the need for a steady political environment. Without it, investor confidence cannot be restored, and sustainable economic recovery is unlikely. The road ahead is challenging, but decisive leadership and sound governance can steer Bangladesh back toward resilient growth.
[Dr. Sreoshi Sinha is Senior Fellow, Centre for Joint Warfare Studies (CENJOWS); Abu Obaidha Arin is a student at the University of Delhi]
Stay informed on all the latest news, real-time breaking news updates, and follow all the important headlines in world News on Latest NewsX. Follow us on social media Facebook, Twitter(X), Gettr and subscribe our Youtube Channel.
