Longer Road to Recovery: 19 Economic Indicators Worsen in Bangladesh, Says CPD

Dhaka, August 25, 2026 — Bangladesh's economic stabilisation remains fragile, and the recovery is likely to take longer than the government expects, said Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue (CPD). "Although several government leaders have said the recovery will take one to two years, the country is heading for a prolonged recovery," he said while presenting a paper at a CPD media dialogue on the government's performance over its first six months on 24 August 2026.

📊 31 Indicators Assessed: 19 Deteriorated, 12 Improved

Over the past six months, the CPD found that 19 of 31 economic indicators deteriorated, and many of the negative trends were structural rather than cyclical. Debapriya said a longer recovery will require a core fiscal budget and the effective implementation of an integrated and coordinated reform package.

• 🔴 19 indicators deteriorated — revenue growth, government bank borrowing, remittance growth, overseas employment, balance of payments
• 🟢 12 indicators improved — foreign exchange reserves, export growth, food inflation, ADP implementation
• 💰 362 measures reviewed across nine areas to assess government performance
• 👥 95 factories permanently shut down in Gazipur, Savar-Ashulia, Narayanganj-Narsingdi (January-August 2026)
• 💼 61,881 direct job losses from factory closures

🏛 Inherited Challenges and External Shocks

According to CPD, the government inherited weak banks, poor revenue mobilisation, fiscal constraints, subdued investment, and an adverse global environment. The US-Israel war on Iran and volatility around the Strait of Hormuz have also sent energy shock waves across the world, compounding Bangladesh's domestic economic challenges.

✅ Positive Measures Identified

Among the positive measures identified by CPD were:

• 💰 Austerity efforts, including the PM depositing 10% of salary into the treasury
• 🚧 Abolition of duty-free vehicle entitlements for MPs
• 💻 Introduction of AI-based traffic management system in Dhaka
• 📜 Launch of e-Return for tax filing
• 💰 Withdrawal of budgetary provision allowing undisclosed money legalisation
• 🏭 Expansion of bonded warehouse facilities beyond RMG
• 🌾 Waiver of agricultural loans up to Tk 10,000

⚠ Concerns Raised by CPD

• 🏢 No concrete steps to assess public debt stress
• 🚧 95 factory closures with 61,881 job losses in three industrial belts
• 🏛 Abrupt removal of Bangladesh Bank governor — questions about central bank independence
• ⛽ Prolonged gas crisis exposing weaknesses in crisis management and supply planning
• 👥 Political appointments to universities, state institutions, and courts

⛽ Energy Sector Assessment

The government's decision to withdraw a proposed electricity tariff increase for low-income and low-use residential consumers was positive. The decision to invite international bids for offshore oil and gas exploration was also encouraging, said CPD. But the prolonged gas crisis has exposed weaknesses in crisis management and supply planning, affecting the textile, steel, paper, and ceramics industries. Technical disruptions at Moheshkhali LNG terminals, difficulties in securing replacement LNG cargoes, and problems accepting cargoes have prolonged supply shortages.

💰 Fiscal Outlook: Revenue Shortfall Expected

On the fiscal front, the CPD said the government should prepare for a revenue shortfall of about Tk 1.30-Tk 1.40 lakh crore in fiscal year 2026-27, as the target is unrealistically high. The government is unlikely to exceed the programmed budget deficit limit of 3.6 percent of GDP. The question is how public spending can be recalibrated. Historically, no more than Tk 40,000 crore could be cut from non-ADP spending, which accounts for about two-thirds of the total budget allocation.

Two other areas could put pressure on spending: a decision on implementing a new pay scale and growing demands for subsidies. Debapriya recommended a core budget for October 2026 to June 2027 based on real-time data and a credible fiscal framework, aligned with the Five-Year Strategic Framework for Reform and Development (July 2026 to June 2031).

🤝 Integrated Reform Package Recommended

Debapriya called for an integrated reform package focused on:

• ⛽ Energy security — deliver a credible energy-security package instead of repeated emergency, no-tender imports
• 🏢 Banking sector restructuring
• 📜 NBR bifurcation (policy vs administration)
• 💰 Public spending rationalisation
• 🛣 ADP rationalisation and logistics improvement
• 💻 Digitalisation
• 👥 Wage commission implementation

He urged the finance minister to place the reform action plan and key economic issues before parliament for scrutiny. Prof Mustafizur Rahman, distinguished fellow of CPD, and Towfiqul Islam Khan, additional director for research at CPD, were also present at the dialogue.

🌐 Strategic Context for Bangladesh's Export Economy

The CPD's assessment carries direct implications for Bangladesh's export economy. The 95 factory closures and 61,881 job losses in the country's three major industrial belts represent a significant erosion of export manufacturing capacity — affecting not just current production but also the skilled workforce that underpins future export growth. The deterioration of revenue growth and government bank borrowing constrains the fiscal space available for the trade-enabling infrastructure investment that the export economy depends on.

For the BNP government, the CPD's diagnosis is both a warning and a call to action. The 12 indicators that improved — including foreign exchange reserves, export growth, and ADP implementation — demonstrate that progress is possible when the right measures are implemented. The challenge for the coming months is converting that progress into the kind of sustained, structural improvement that can reverse the 19 deteriorating indicators and build the foundation for the export-led, diversified economic growth that the GED's five-year strategic framework envisions by 2031. Without this reversal, Bangladesh risks entering its post-LDC era with a weakening industrial base, constrained fiscal capacity, and an export economy that continues to depend on a single sector (RMG) that is itself under pressure from global competition, energy costs, and the structural changes that LDC graduation will bring.