The World Bank has issued a sobering warning about Bangladesh's economic outlook, projecting that the crisis could deepen in the 2025–26 fiscal year. Despite repeated efforts, the economy has not returned to stability by the end of the current fiscal year. On the contrary, the situation has deteriorated, with the revenue collection deficit crossing Tk 1 lakh crore and government borrowing from the banking sector exceeding original targets. At the same time, the burden of foreign debt continues to grow, with repayments adding further stress to the fragile fiscal structure.
While the decline in foreign exchange reserves has been contained, this stability comes at a cost. One of the key reasons is a significant drop in the import of capital machinery, which signals a slowdown in investment both domestically and internationally. This, in turn, is affecting employment generation across sectors. According to the World Bank’s latest World Economic Outlook, GDP growth is expected to fall below 3.5 percent by the end of FY2024–25. The report also warns that the crisis is likely to worsen in FY2025–26 unless urgent corrective measures are taken.
Geopolitical developments may aggravate the situation further. If the Iran-Israel war prolongs or escalates, especially with the potential closure of the Strait of Hormuz, Bangladesh’s economy could suffer serious setbacks due to disruptions in global energy supply chains and trade routes. The interim government has acknowledged these risks and listed them among key concerns addressed in the new national budget.
As the country prepares to enter the 2025–26 fiscal year, it faces a multitude of challenges, including sluggish economic activity, political uncertainty, high inflation, concerns over food and energy security, a stagnant job market, and declining investment. These issues are compounded by the need to ensure social safety, improve revenue generation, enhance the business climate, and prepare for graduation from Least Developed Country (LDC) status. The combined effect of these challenges has created a precarious situation for Bangladesh, and there are growing fears that the crisis may deepen further in the near future. Revenue collection continues to fall short, which is making budget implementation increasingly difficult.
The World Bank has put forward a set of recommendations aimed at restoring economic stability. It has urged the government to modernize and reform the revenue collection system to boost income, diversify export products to reduce dependence on a few sectors, ensure that social safety net programs are targeted and effective, increase infrastructure investments, and focus on employment generation. The Bank believes that if these reforms are implemented without delay, the economy could stabilize and gradually recover.
The government has already reflected some of these suggestions in the upcoming budget. Notably, there is a commitment to increasing revenue collection and reforming the fiscal framework, along with a Tk 10,000 crore rise in the allocation for social safety net programs. However, tangible steps to attract investment and generate employment are still lacking. According to the World Bank, the present crisis stems from a combination of internal and external pressures, including persistent inflation, reduced foreign trade, high import costs, and increased debt servicing.
Although Bangladesh is continuing to move forward, the economic wounds inflicted on public life remain unhealed. In order to recover, the government must accelerate economic activity and clear pathways for revenue growth and job creation. Finance Division Secretary Khairuzzaman Majumder, in a statement to Bangladesh Pratidin, expressed optimism that inflationary pressures will ease within the next two to three months, predicting a decline to 6.5 percent by June. He also expects progress in revenue reforms and better collection efficiency during this period.
The World Bank report also highlights vulnerabilities in Bangladesh’s foreign trade, particularly in the readymade garment (RMG) sector, which is the backbone of its export economy. Due to economic downturns in key markets such as Europe and North America, demand for Bangladeshi garments is declining. This fall in demand is expected to reduce foreign earnings significantly, creating further complications for the country’s trade balance. Additionally, the looming graduation from LDC status poses another major hurdle. Once Bangladesh exits this classification, its export sector will lose several preferential benefits, making competition tougher. The World Bank has advised the government to begin preparing for this transition immediately.
While Bangladesh has demonstrated resilience in navigating economic shocks, the current crisis is far from over. Without swift and comprehensive reforms, the nation risks deeper instability in the coming fiscal year. The challenge now lies in transforming cautious optimism into bold policy action.
Bd-pratidin English/ Jisan
