Originally posted in The Business Standard on 18 August 2026
Macroeconomic stability returns, recovery yet to gain pace
BNP govt inherited an economy that had stopped deteriorating rapidly but remained deeply fragile, and six months later some external indicators have improved while the real economy continues to struggle
An assessment of the first six months of the government is a mixed picture. The government has taken several steps to strengthen macroeconomic stability, address weaknesses in the financial sector, and support vulnerable families and the private sector. Given the difficult economic conditions it inherited, these initiatives provide a foundation for further progress.
The most visible improvement has been in the external sector. Foreign exchange reserves have strengthened, while the exchange rate has remained relatively stable despite occasional volatility. These developments can help reduce uncertainty for importers, exporters and investors.
Several reforms and initiatives have also been undertaken in the banking sector. These include stricter loan-classification and provisioning requirements, asset-quality reviews of weak banks, restructuring the boards of troubled institutions, strengthening risk-based supervision, and developing a framework for bank resolution and consolidation. Efforts to trace and recover stolen assets are ongoing. The government has announced a Tk 60,000 crore fund to revive viable closed factories, which is expected to help restore production and protect employment. Of course, the success will depend on whether it is managed with transparency, sound due diligence and effective monitoring.
The government has also recognised the need to modernise revenue administration, including through the proposed transformation of the National Board of Revenue into two separate divisions. If implemented properly, with clear responsibilities and strong coordination, this reform could improve efficiency, accountability and taxpayer services.
The government also deserves credit for formulating the budget for FY2027 within three months of taking office. The budget has put forward several tax opportunities for encouraging investment. Now, it is to be seen how the ambition is materialised.
On the other hand, the economy continues to face several important challenges. Inflation and the rising cost of living remain major concerns for households. Although inflation declined slightly in July, the price level remains high. Also, the purchasing power of low-income families has not increased. Higher energy prices, supply disruptions and weaknesses in market management continue to contribute to price pressures. Monetary policy therefore needs to be supported by measures to improve food and energy supplies, strengthen market monitoring and reduce unnecessary costs across supply chains.
It is also important to maintain coordination between fiscal and monetary policies. Public expenditure should increasingly be directed towards productive investment, employment generation and essential infrastructure. Without strict fiscal discipline, productivity and employment generation will not be possible. Reducing waste and improving the quality of spending should be a major government task to boost economic activity.
The energy crisis is now one of the most pressing economic concerns. Although its roots lie in longstanding structural weaknesses, timely action is needed to ensure reliable supplies of gas and electricity for industry, agriculture and essential services. The government should also implement supply management immediately. The government should invest in domestic gas exploration, renewable energy, energy efficiency and transmission infrastructure. A credible medium-term energy-security plan would provide greater confidence to businesses and investors.
Revenue mobilisation also requires sustained attention. The proposed institutional reforms should be accompanied by wider use of technology, improved tax administration, expansion of the tax base and greater efforts to reduce tax avoidance. Higher revenue collection will be essential for financing development priorities without creating excessive pressure on borrowing.
Restoring investment will require a combination of political stability, policy predictability and improvements in the business environment. Investors remain concerned about energy availability, financing costs, taxation and regulatory uncertainty. The government will have to provide a concrete roadmap to build confidence among investors – both domestic and foreign,
In the coming six months, the government will be judged by its success in delivering on the major problematic areas. Some of these include containing inflation, addressing the energy shortage, advancing banking and revenue reforms, improving the quality of public expenditure, and creating a more supportive environment for investment and employment. The initiatives already undertaken offer a useful starting point. Their effectiveness will depend on consistent implementation, institutional coordination and regular assessment of outcomes.
