Bangladesh: How the interim government can steer an economic turnaround
Addressing inflation and unemployment is crucial. Increased public spending and foreign investments and cutting reliance on garment exports are starting points.
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The current political turmoil in Bangladesh, which has seen the government collapse in the face of widespread protests, will pose a fresh set of challenges for the country’s economy. One of the most immediate impacts will be a slowdown in economic growth, as instability creates uncertainty and undermines investor confidence.
According to government statistics, the country’s average annual growth in gross domestic product over the past decade has been around 6.6%. Moody’s ratings agency predicts that this growth will fall well below 6% for the year ending June 2025.
The interim government, which is led by Nobel laureate Muhammad Yunus, must facilitate political stability and restore law and order to put the country’s economy back on track.
Bangladesh was already facing a series of economic challenges before the recent bout of unrest. These have included a prolonged phase of high inflationary pressure since 2022. The rate of inflation reached a 12-year high of 11.66% in July, with food inflation spiking at a record 14.1%.
This situation is set to continue. The restrictions on movement that were imposed during the unrest, as well as the disorder itself, disrupted supply chains and has led to shortages. There is no doubt that high inflationary pressure disproportionately affects low-income households.
Slow growth in job creation and unemployment, especially among educated youths, has also long been an issue in Bangladesh. Around 40% of...
