While the new government's first six months show some positive changes, negative trends still dominate the path to economic recovery, according to the Centre for Policy Dialogue (CPD).
The think tank noted that despite minor improvements in inflation and foreign exchange reserves, deep concerns persist over revenue collection, investment, industrial production, employment, and the energy sector.
At a media dialogue in the capital on Monday, CPD distinguished fellow Dr Debapriya Bhattacharya stated that the performance presents a mixed picture tilted heavily toward negative trends, with most of these challenges being structural in nature.
Debapriya highlighted that the 6-month evaluation analyzed 362 observations across nine sectors: governance and administration, public finance management, industry and trade, banking and financial services, energy and transport, agriculture, education, health, and social protection.
The evaluation exclusively focused on actionable steps taken rather than mere announcements.
CPD's analysis showed headline inflation dropping from 9.1% to 8.3% between February and July, while food inflation eased from 9.3% to 7.2%.
However, pressure on ordinary citizens remains severe due to the high prices of essential commodities.
Furthermore, real wage growth remains negative, meaning the dip in inflation has not translated into the expected boost in purchasing power.
Concerns over revenue, investment, and industry
CPD identified weak tax collection as a primary bottleneck in economic recovery efforts.
Total tax revenue growth decelerated from 12.3% to 4.9% between March and May.
They warned that meeting the revenue target for the current fiscal year will be difficult, forecasting a potential revenue shortfall of nearly Tk130,000 crore to Tk140,000 crore in FY27.
However, CPD advised the government to safeguard allocations for education, health, and social safety nets.
Investment figures remain equally disappointing. Private sector credit growth slowed from 6% to 4.5% between February and June, while letter of credit (LC) openings for capital machinery fell into negative territory. Net foreign direct investment (FDI) also declined—signaling no clear path toward a swift private investment rebound.
The ongoing gas crisis was highlighted as a major risk factor.
Technical glitches at the Maheshkhali LNG terminal, complications in procuring spot-market LNG cargoes, and weak supply planning severely hit gas-dependent industries, including textiles, steel, paper, particle board, and ceramics.
During March–April, growth in both the general index of industrial production and the manufacturing sector index ground to zero. Gas consumption within the industrial sector also contracted.
To address this, CPD recommended time-bound domestic gas exploration, strategic fuel reserves, source diversification, and a review of power purchase agreements (PPAs) to ease subsidy burdens.
Banking sector reforms initiated
CPD acknowledged a few positive regulatory steps, such as the decision to merge five troubled Islamic banks and applying the Bank Resolution Act to failing financial institutions.
However, lingering concerns remain regarding the independence of Bangladesh Bank, top-level leadership appointments, and structural reforms. CPD emphasized that restoring confidence requires a comprehensive structural roadmap.
The external sector offers a mixed picture.
Gross foreign reserves calculated under BPM6 rose from $30.1 billion to $32.3 billion between February 19 and August 12.
However, the trade deficit widened, the current account shifted from surplus into deficit, and growth in remittances and overseas employment slowed—impacted significantly by ongoing geopolitical tensions in the Middle East.
Why Recovery Is Lagging
Dr Debapriya outlined key reasons for the sluggish recovery:
- Lack of an integrated, comprehensive reform program
- Fragile fiscal and revenue structures
- Global energy and commodity price shocks driven by Middle East conflicts
- Pressure from influential vested interest groups
- Law and order challenges and insufficient institutional capacity building
CPD stressed that economic recovery cannot be defined solely by lower inflation; it demands stability across exchange and interest rates alongside visible gains in GDP growth, private investment, and job creation.
To support sustained recovery, CPD advised preparing a realistic core budget for the October–June period built on real-time data and credible fiscal parameters.
It called for an integrated reform package covering energy, banking, revenue administration, development expenditure rationalization, security, supply chain management, and digitalization—backed by effective inter-institutional coordination and regular parliamentary accountability.
CPD concluded that while the government took several reformative and welfare-oriented steps during its first six months, core structural vulnerabilities remain unaddressed.
Moving forward, substituting isolated measures with an integrated, realistic, and accountable reform program represents the government's single biggest challenge.
