Bangladesh’s economy is ending the year on a divided note, with hard-won stability in the external sector offset by a deepening crisis of confidence at home, as weak investment, soaring bad loans and political uncertainty continue to restrain growth.
Analysts say decisive policy actions have helped calm foreign exchange markets and rebuild reserves, but the broader economy remains trapped in a cycle of high inflation, tight credit and a fragile banking system, delaying any meaningful recovery.
The taka has strengthened markedly after touching Tk132 per US dollar under the previous administration, now trading near Tk122.
Authorities have tightened oversight on money laundering and intensified action against illegal hundi networks, driving more remittances through formal channels.
Remittance inflows grew 27 percent in the last fiscal year and remained robust at more than 17 percent through November 2025, according to economist Mamun Rashid.
As a result, he said, net foreign exchange reserves have rebounded sharply, rising from a precarious $17 billion to nearly $28 billion, with gross reserves exceeding $32 billion.
The stronger reserve position has allowed the government to clear a significant portion of its external liabilities, easing pressure on the balance of payments and improving Bangladesh’s standing with international lenders and investors.
Bangladesh economy under pressure despite signs of gradual rebound: Report
Yet the gains on the external front contrast sharply with mounting stress within the domestic banking system.
As governance failures of the previous government come into clearer view, non-performing loans have surged to unprecedented levels, said Dr Zahid Hussain, former chief economist of the World Bank’s Dhaka office.
Bad loans, which stood at Tk1.82 lakh crore at the end of the Awami League’s tenure, have ballooned to Tk6.44 lakh crore in just 15 months — an increase of Tk4.63 lakh crore.
Although deposit inflows have improved slightly, liquidity remains strained, prompting banks to adopt an ultra-cautious lending approach that has left even established businesses struggling to access credit.
Political uncertainty ahead of the national election has further dampened sentiment, pushing both local and foreign investors into a wait-and-see mode.
Private sector credit growth has collapsed to a record low of 0.67 percent, down from 9.1 percent a year earlier, stalling job creation and business expansion.
Bangladesh economy rebounds strongly in latter half of FY25: WB
Compounding the problem is a persistent erosion of confidence, with sporadic mob violence and targeted attacks on institutions unsettling the business community, economists say.
In its battle against inflation, the central bank has maintained a contractionary monetary stance for four consecutive years, driving interest rates sharply higher — from around 8–9 percent to as much as 12–18 percent. While headline inflation has eased from a peak of 11.66 percent to 8.29 percent, the relief has yet to reach most households.
Stagnant wages and elevated food and energy prices have depleted savings among low-income families, pushing many deeper into debt.
The outlook for exports remains cautious. Imports of raw materials used in export-oriented industries fell 14 percent, raising concerns about weaker shipments in the months ahead. At the same time, higher imports of industrial machinery point to some investment in future capacity, offering a limited source of optimism.
Bangladesh economy grows faster in September as PMI rises to 59.1: Report
Economists also warn that IMF-backed tax increases have added to consumer pressures, while revenue mobilisation continues to fall short of targets.
Looking ahead, policymakers face twin challenges: ensuring political stability during the election period and pushing through long-delayed banking sector reforms.
Analysts say the real economic payoff from recent stabilisation efforts will only materialise if the transition to a new government is smooth and investor confidence is decisively restored.