Experts at a discussion on Thursday said that the budget passed for FY26 had no bold trade policy reform strategy to encourage economic growth, rebuild investor confidence, and address ongoing economic slowdown.
They further said that it even missed a critical opportunity to address the challenges of Bangladesh’s upcoming LDC graduation in November 2026 and the USTR’s reciprocal tariff demands.
They made the remarks during a post-budget analysis organized by the Policy Research Institute of Bangladesh (PRI) in partnership with the Department of Foreign Affairs and Trade (DFAT) of the Australian Government, which also featured the unveiling of its Monthly Macroeconomic Insights (MMI) under the Centre for Macroeconomic Analysis (CMEA).
Economists and businesses also raised concerns about household purchasing power weakening, because real wages continue to erode as the wage rate index has grown more slowly than prices.
Zaidi Sattar, chairman of PRI, and Ashikur Rahman, principal economist at PRI, delivered the keynote presentation.
Sattar remarked: “No bold trade policy reforms were introduced, missing a critical opportunity to address the challenges of Bangladesh’s upcoming LDC graduation in November 2026 and the USTR’s reciprocal tariff demands.”
He also noted that the budget included only marginal para-tariff reductions, which are unlikely to drive export diversification. Given the mounting external pressures, strategic and urgent trade reforms are essential.
Aligning with USTR requirements could catalyze broader modernization of trade policy. Simultaneously, Bangladesh must expand its revenue base while reducing reliance on trade-based taxes, he also said.
Ashikur Rahman said: “Real wages continue to erode as the wage rate index has grown more slowly than prices, weakening household purchasing power and deepening concerns about the cost of living across income groups.”
He argued that fiscal stress has emerged as the Achilles heel of Bangladesh’s macroeconomic management. The situation has deteriorated to the extent that the Treasury is now compelled to borrow simply to meet recurring obligations—including segments of the public sector wage bill, ballooning subsidy costs, and escalating interest payments.
This acute absence of fiscal space is not just a macroeconomic concern; it has paralyzed the government’s ability to undertake essential corrective actions—most notably, the recapitalization of fragile banks grappling with a deepening non-performing loan (NPL) crisis. In effect, the inability to mobilize fiscal resources is compromising financial sector stability and undermining the resilience of the broader economy, he added.
The keynote presentation also stated that provisional GDP growth for the outgoing fiscal year has been estimated below 4%, the lowest rate since the Covid-19 shock in FY20, with private investment dropping to just 22.48% of the GDP.
Investment drop
It also highlighted that this investment decline—along with falling FDI and weak capital goods imports—signals diminished investor confidence, driven by high interest rates, inflation risks, and worsening governance challenges.
Regarding inflation, it is said that inflation remains elevated, with a 12-month average of 10.21% in April, while the central bank has kept its policy rate unchanged at 10% for the seventh consecutive month to curb inflation.
The session began with opening remarks from Khurshid Alam, executive director of PRI.
Sheik Moinuddin, special assistant to the chief adviser (rank of state minister), Ministry of Road Transport and Bridges, was chief guest.
He said: “We need a comprehensive infrastructure plan that addresses our existing assets and future needs. But ultimately, the goal is sustainable economic development. A well-coordinated plan will allow all stakeholders to work together under a unified framework.”
He also pointed to Bangladesh’s lengthy procurement process, where some projects take over five years for approval, inflating costs significantly.
Australian Deputy Head of Mission to Bangladesh, Clinton Pobke, was present as the special guest and reiterated Australia’s ongoing support for Bangladesh’s economic development.
Partnerships built on sound policy dialogue are central to inclusive and resilient growth. Initiatives like PRI’s MMI are vital for informed discourse, he stated.
