Inflation control, revenue and investment top govt challenges

The Citizen’s Platform for SDGs, Bangladesh has identified curbing inflation, boosting revenue and reviving private investment as the new government’s key economic challenges.

At a media briefing titled “Starting Point of the New Government: An Economic Review” at the BRAC Inn Centre in the capital on Thursday, the platform said fragile macroeconomic stability, weak private investment, an employment crisis and shrinking revenue capacity demand urgent and coordinated action.

Taufiqul Islam Khan, additional research director at the Centre for Policy Dialogue, presented the keynote paper. CPD Distinguished Fellow Prof Mustafizur Rahman and Citizen’s Platform Convenor Dr Debapriya Bhattacharya also attended the event.

Debapriya urged the government to review procurement decisions and foreign agreements signed during the interim administration to ensure compliance with rules. He also advised forming a transition team to assess financial management during the Awami League and interim periods and prepare a briefing document to guide corrective steps. He called for a financial statement in Parliament by the end of March to strengthen transparency under the Public Money and Budget Management Ordinance, 2009.

He recommended fiscal restraint for the remainder of the current fiscal year and careful preparation for the next budget instead of rushing to implement a 180-day action plan. He also asked the government to dismantle politically backed syndicates that influence essential commodity supply chains.

Taufiqul Islam Khan said inflation remains high in Bangladesh despite some global easing. The 12-month average inflation rate stood at 8.77% in January, well above the central bank’s 7% target. Although food inflation has eased slightly, non-food inflation remains elevated, and slow wage growth continues to erode real incomes.

The briefing noted that exchange rate stability and higher foreign exchange reserves have reduced pressure on the balance of payments. However, rising bank borrowing to finance the budget deficit and central bank purchases of foreign currency from the open market have expanded money supply, increasing inflationary risks.

Weak private investment has worsened employment conditions. The paper reported that about 2.1 million jobs disappeared in the first half of fiscal 2025 due to slower growth in industry and services. Reviving these sectors will pose a major challenge in accelerating growth, Khan said.

The platform also highlighted shrinking revenue capacity. Domestic revenue no longer covers recurrent expenditure, forcing the government to borrow to repay existing debt. Weak tax collection and spending outside the Annual Development Programme have narrowed policy space. ADP implementation has fallen to historic lows in fiscal 2025 and 2026.

The platform recommended strict budget ceilings for the remaining months of the fiscal year, adoption of an economic stabilisation plan, preparation of a realistic budget framework for the next fiscal year and formulation of a time-bound reform roadmap.

On the proposed Family Card programme, the paper estimated that providing Tk2,000 to Tk2,500 per month to 5 million rural families would cost between Tk96 billion and Tk120 billion annually, or about 0.15 to 0.20% of GDP. While the initiative could expand social protection, beneficiary selection would pose a major challenge. The platform suggested adopting a scientific proxy means test instead of traditional administrative or political methods.

The paper also referred to the government’s goal of raising GDP to $1 trillion by 2034. With GDP at $462 billion in fiscal 2025, achieving that target would require average dollar-based growth of about 9%, alongside stronger revenue mobilisation. The tax-to-GDP ratio stood at 6.8 percent in fiscal 2025.

Khan said that even strong revenue growth may not suffice if the government seeks to limit the budget deficit to 4 to 5% of GDP while fulfilling election pledges. He stressed that economic stability, effective reforms and sound revenue management will determine success.