Bangladesh Government Targets Lofty 34.5 Percent Investment-GDP Ratio for FY27

Dhaka, August 21, 2026 — Bangladesh wants to expand its investment-to-GDP ratio by 6.57 percentage points within a year as it has set the aspiration in the newly approved five-year development strategy and framework, analysts say. Economists have termed this "over-ambitious", saying the target is almost impossible to achieve given the current economic conditions.

Prime Minister Tarique Rahman formally unveiled the cover of the "Five-Year Strategic Framework for Reform and Development-FYSFRD (July 2026 to June 2031)" alongside its complementary Strategic Action Matrix. Several economic targets, including the investment-to-GDP ratio increase goal, were set there. The framework was prepared by the General Economics Division (GED) under the Planning Commission.

📊 Investment-GDP Ratio Targets

• 📉 FY25 (actual): 28.54%
• 📉 FY26 (actual): 27.93% (declined)
• 📈 FY27 (target): 34.5% (+6.57 percentage points)
• 📈 FY28 (target): 35.6%
• 📈 FY29 (target): 36.8%
• 📈 FY30 (target): 37.6%
• 📈 FY31 (target): 40%

🏛 Public Investment Target

Amid the ongoing austerity and low expenditure capacity of the government, the strategy paper has set a target to increase public investment by one percentage point to 5.6 percent of GDP within this year from 4.6 percent estimated in FY26. The strategy says: "Prudent macroeconomic policies, appropriate supply side measures, and political stability are expected to stabilise the macroeconomic imbalances and reduce vulnerabilities in the near term."

Consequently, real GDP growth is expected to rise from the recent 4.0 percent to 6.5 percent in FY27, while CPI inflation is expected to ease to 7.5 percent. Economic growth is projected to accelerate thereafter, reaching 8.5 percent by the beginning of the next decade, while inflation is projected to decline to 5.0 percent by FY31.

🤔 Expert Assessment: Over-Ambitious

Professor Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue (CPD), told The Financial Express that he thinks the target is very ambitious and impossible to achieve. "Bangladesh's business climate is traditionally very poor. Besides, the energy crisis has been added in recent months. So it is really difficult to achieve the target within a year."

Policy Exchange Bangladesh Chairman Dr Masrur Reaz said since the Bangladesh investment climate has not improved and lots of changes have been added in recent times, it is almost impossible to push the investment-to-GDP ratio up to 34.5 percent. The energy crisis, banking sector stress, and the broader economic slowdown identified by the CPD's assessment (19 of 31 indicators deteriorating) all point to an environment that is not conducive to the kind of investment surge needed to achieve a 6.57 percentage point increase in a single year.

🏭 Industry Sector Context

The GED framework notes that the industry sector's contribution to growth has been steadily declining in recent years owing to shocks and mismanagement. "This is projected to reverse in the acceleration phase of the strategy. Further, a stylised production function estimate finds that capital's contribution to economic growth has also become negative as private investment has ground to a halt because of economic disruptions."

As the economy stabilises and then accelerates, growth is projected to rely more on employment and total factor productivity than had been the case in the past. The GED claims the macroeconomic and sectoral growth projections are made using the dynamic CGE (Computable General Equilibrium) model.

🌐 Strategic Context for Bangladesh's Export Economy

For Bangladesh's export economy, the investment-GDP target is directly connected to the country's ability to diversify beyond RMG and build the manufacturing capacity needed for post-LDC competitiveness. The target of 34.5 percent investment-to-GDP would represent a significant increase from the current 27.93 percent, requiring both public investment (from 4.6% to 5.6% of GDP) and private investment to surge simultaneously. However, with private-sector credit growth at an all-time low of 4.5 percent, 95 factory closures resulting in 61,881 job losses, and the gas crisis affecting all manufacturing sectors, the conditions for a private investment surge are not currently in place.

The government's plan to launch a $2 billion equity fund in Hong Kong and issue dollar, panda, and samurai bonds represents one pathway to mobilising the investment capital needed. The Invest Bangladesh Authority formation and the Tk 683 crore freelancing training project represent other elements of the investment promotion strategy. However, as both Prof Mustafizur Rahman and Dr Masrur Reaz have noted, without resolving the energy crisis, improving the investment climate, and restoring banking sector health, the 34.5 percent target will remain aspirational rather than achievable. The gap between the government's ambitious targets and the economic reality on the ground — as documented by the CPD's 19 deteriorating indicators — represents the central challenge for the BNP government's economic reform agenda as it approaches LDC graduation in November 2026.