Economic crisis to deepen in Bangladesh next year: WB

Bangladesh’s overall economy has yet to return to stability even in the final phase of the ongoing 2024–25 fiscal year, according to the latest reports by the World Bank.

Rather than improving, the economic crisis has deepened — resulting in a revenue shortfall exceeding Tk1 lakh crore. Simultaneously, the government has borrowed more from the banking sector than its initial target to manage the crisis.

The burden of foreign loans has also increased, adding further pressure on the economy as repayment obligations grow. Although the decline in foreign exchange reserves has been somewhat controlled, this was mainly due to a significant drop in capital machinery imports.

This slowdown has affected both domestic and foreign investments, which in turn is impacting employment. As a result, the World Bank forecasts that GDP growth may fall below 3.5% by the end of the current fiscal year. The crisis is also expected to worsen in the upcoming 2025–26 fiscal year, it warned.

These projections were found in the World Bank’s latest World Economic Outlook and several other related reports. The ongoing Iran-Israel conflict also poses a potential threat to the economy. If Iran blocks the Strait of Hormuz, Bangladesh’s economy could face a serious negative impact.

Like the World Bank, the interim government has identified several major challenges for the next fiscal year, prioritising them in the proposed 2025–26 budget. These include sluggish economic activity, political uncertainty, controlling inflation, ensuring food and energy security, developing skilled manpower and employment, expanding the social safety net, boosting revenue collection, improving the business and investment climate, preparing for graduation from LDC status, and enhancing industrial production capacity.

The government is preparing to begin FY2025–26 amid these multiple challenges, with fears that the economic strain may worsen further. Ongoing recessionary trends have already affected revenue collection, making budget implementation increasingly difficult.

To tackle the crisis, the World Bank has made several key recommendations for Bangladesh. These include major reforms to increase revenue collection, diversifying export products, improving the efficiency and targeting of social safety net programmes, increasing investment in infrastructure, and generating employment. The World Bank believes that quick and effective implementation of these measures could help the economy recover.

Some of these priorities have already been addressed in the new budget. Among them, revenue reform and increasing tax collection have received special emphasis. The government has also proposed an additional allocation of Tk10,000 crore for the social safety sector.

However, no effective steps have yet been taken to significantly boost investment and employment, the World Bank noted. According to the global lender, Bangladesh’s crisis stems from a combination of internal and global factors — including high inflation, declining foreign trade, rising import costs, and mounting debt repayment obligations.

Although the country is moving forward in the face of these challenges, their impact on public life remains unresolved. The government must therefore expand economic activities and create pathways for increasing revenue and employment opportunities.

Finance Division Secretary Khairuzzaman Mozumder, speaking to Bangladesh Pratidin, said inflationary pressure is already beginning to ease and is expected to drop to 6.5% by the end of June. He also expressed optimism that progress would be made in revenue sector reforms and tax collection during this time.

The World Bank also highlighted that the readymade garments (RMG) sector remains the driving force behind Bangladesh’s foreign trade. However, due to economic downturns in Europe and North America, demand from buyers has dropped significantly — leading to reduced apparel exports and shrinking income from those regions.

This has raised concerns over future complications in the sector. Moreover, Bangladesh's upcoming graduation from the list of Least Developed Countries (LDCs) will further challenge its export competitiveness. The World Bank advised that preparations to tackle these upcoming challenges must begin immediately.