Big Reforms Needed to Rebuild Economy Alongside Bold Ambitions

An economy is not strengthened simply through large projects. It becomes stronger when ordinary people can expect higher incomes, better jobs for their children, affordable essentials and a business environment free from unnecessary delays.

Bangladesh now stands at such a crossroads. Its large market, young population, readymade garment industry, remittances, agriculture, seaports and strategic location offer enormous potential. But inflation, a weak banking sector, low tax collection, inadequate investment, pressure on employment and excessive dependence on garments for exports remain major challenges.

The World Bank, in its Bangladesh Development Update on April 8, 2026, forecast economic growth of 3.9 percent in FY26. It said inflation was around 8.5 percent, the poverty rate had risen to 21.4 percent in 2025, and the ratio of non-performing loans in the banking sector reached 30.6 percent in December 2025. Bangladesh’s tax-to-GDP ratio also fell below 7 percent in FY25 for the first time in 15 years.

These figures are not reasons for despair. They show where reforms are needed.

In my view, the new government’s first priority should be to address several fundamental areas of the economy. The most important is the banking sector. No economy can progress without a sound banking system. Weak banks caused by irregular lending, political influence or poor management discourage entrepreneurs, reduce industrial investment and ultimately hurt employment.

Publishing lists of loan defaulters will not be enough. Well-performing banks should be allowed to operate effectively, weak banks should be restructured and effective action should be taken against willful defaulters. The savings of small depositors must also be protected. On June 24, the World Bank approved $450 million in financing to strengthen Bangladesh’s banking sector, including measures on deposit protection, Bangladesh Bank’s supervisory capacity and the restructuring of weak banks.

The second major task is reforming the revenue system. Low state revenue limits investment in education, healthcare, transport, social protection and infrastructure. But increasing taxes should not mean putting more pressure on existing taxpayers. Those outside the tax system should gradually be brought under it through digital methods.

Lawful integration of information on national identity cards, bank accounts, business registrations, property and tax records could help reduce tax evasion. At the same time, taxpayers must be protected from harassment. The aim should be to expand the tax base, not create fear of taxation.

The third task is improving the investment climate. If investors have to wait for months for land, electricity, gas, environmental clearance, customs services and licences, tax incentives alone cannot attract investment.

The World Bank has also stressed easing the business environment, reducing regulatory costs, increasing competition and ensuring reliable electricity. A Single Window Investment System could be introduced for major investments, allowing investors to apply through one digital platform and track their applications. The government’s role should be to coordinate among agencies rather than make investors run from one office to another.

The fourth task is export diversification. The readymade garment industry is a source of pride and a major strength of Bangladesh’s economy. But excessive dependence on one export sector is risky in the long term.

Leather and leather goods, pharmaceuticals, agricultural and processed food products, light engineering, electronics, IT and digital services and shipbuilding should be developed further for the global market. Both the World Bank and the IMF have stressed the need for greater economic diversification. The IMF’s January 30, 2026 assessment also highlighted export diversification, a better investment climate and governance reforms as important for long-term growth.

The fifth task is human resource development. Around two million young people enter Bangladesh’s labour market every year, according to the World Bank. It is neither possible nor necessary to provide government jobs for all of them. The economy must instead create opportunities in private industry, technology, agriculture, construction, tourism, healthcare and international services.

Skills development should be aligned with industry needs rather than focusing only on university degrees. Technical training centres could be linked to major industrial zones, while incentives could be considered for companies that train skilled workers.

The sixth task is to view agriculture as an agro-based industry, not merely a food-producing sector. Bangladesh has yet to fully utilise the potential for adding value to rice, fruits, vegetables, fish, meat and dairy products. Cold-chain facilities, modern warehouses, processing plants and export infrastructure could raise farmers’ incomes and reduce food waste.

The seventh task is making better use of infrastructure. Padma Bridge, metro rail, ports, highways and economic zones cannot generate economic success simply by being built. Industries, logistics, warehouses, tourism and businesses must grow around them.

The China-Myanmar-Bangladesh corridor should also be part of this broader strategy. Chittagong and Mongla ports should be developed as regional trade hubs to maximise their economic impact.

The eighth task is energy and electricity. No investor can make long-term plans without affordable and reliable power. Alongside power generation, grid modernisation, renewable energy and efficient energy management are needed.

Above all, inflation must be brought under control. Even if GDP grows, people will not benefit if their purchasing power declines. The World Bank has said that wages of low-income people have failed to keep pace with rising prices. Food supply, import policy, market competition and social protection must therefore be addressed together.

Finally, Bangladesh needs a long-term national economic plan. Governments and ministers will change, but fundamental policies on industry, exports, ports, skills, banking and taxation should not change repeatedly.

In its July 16, 2026 review, the IMF said Bangladesh faces major challenges in revenue, banking and inflation, warning that delayed reforms could undermine growth.

Bangladesh now needs economic discipline and meaningful reforms. The government led by Prime Minister Tarique Rahman has an opportunity to use the coming years not merely to run the administration but to strengthen the foundations of the economy.

The goal should not simply be 6 or 7 percent growth. It should be growth that raises incomes, creates jobs, increases investment and exports, and strengthens the state’s revenue capacity.

A strong economy will emerge when entrepreneurs find it easy to do business, farmers receive fair prices, young people see a future in the country and ordinary citizens feel the benefits of economic growth.

We have big dreams. Now we need big reforms, difficult decisions and long-term economic thinking to turn those dreams into reality.

The writer is a politician and columnist.