Originally posted in The Daily Star on 18 August 2026
It’s been six months since the BNP-led government took office after winning the national election on February 12, right in the middle of high inflation, weak revenue mobilisation, banking sector weaknesses, stagnant private investment, an employment crisis, and a vulnerable energy sector. It followed the interim government in the aftermath of the July uprising, which had attempted reforms in a number of sectors, including banking and the National Board of Revenue (NBR). But the interim regime did not have the political mandate to restore the country’s economic momentum. The elected government does, and it has a unique opportunity and the difficult responsibility to pull the economy up from its lowest point in decades.
On the positive side, the country’s foreign exchange reserves have strengthened further since February. As of August 12, 2026, forex reserves stood at $32.26 billion (BPM6), up from $30.06 billion on February 19, 2026 and $20.49 billion on July 31, 2024. Much of this improvement is due to increased remittance inflows.
The launch of Family Card, one of the election pledges made by the BNP, is another positive initiative. In fact, it’s among the fastest commitments met by the government following the election. Under the Family Card programme, poor families will receive Tk 2,500 per month. The card will be issued to women to reduce poverty and empower them.
However, this programme’s success depends on whether the support reaches the truly needy families, whether it’s adequate and regular, and whether the card distribution is done with full transparency and accountability. This concern stems from past experiences where social safety net programmes were marked by political patronage, nepotism, and inaccurate income information. This led to ineligible families being included and deserving families being excluded from the beneficiary lists due to a lack of connections and documentation. To avoid this situation, an integrated social registry is required, and it should be updated regularly.
In June, the government prepared the national budget FY2026-27. This deserves appreciation as preparing the annual budget of the country in less than three months of taking office is a difficult task. Focused on investment-led growth, the budget highlights export diversification, industrial expansion, and support for entrepreneurship. Several fiscal measures have been proposed for investors, which are expected to have a positive impact.
Another positive move that the government made was requesting the deferment of Bangladesh’s graduation from the Least Developed Country (LDC) status right after it took office, asking for an extension of the preparatory period until November 24, 2029. Of course, if the request is accepted, the country will have to prepare immediately for a smooth transition in order to absorb the loss of various trade benefits and flexibilities it currently enjoys as an LDC.
For this government, one of the most challenging tasks is reducing the inflation rate, which has remained stubbornly high over the past four years. In July 2024, inflation had shot to 11.7 percent; it came down to 9.13 percent in February 2026. In July 2026, inflation dropped to 8.32 percent from 9.16 percent the month before—a positive sign. However, it’s still too early to draw conclusions about the decline in inflation since it has been fluctuating in recent months. Furthermore, a lower inflation rate does not mean lower prices; it only means the prices of goods and services are increasing at a lower rate than before. Many low- and middle-income families have been facing a shrinking purchasing power due to the prolonged inflationary pressure. The wage index remained lower than inflation: at around 8.11 percent in FY2025-26. These families would not feel the change in the inflation rate when prices of commodities such as rice, edible oil, pulses, vegetables and other essentials remain higher than their income.
One of the factors causing the decline in purchasing power is the lack of jobs, largely due to inadequate private investment, which was 21.53 percent of GDP in FY2025-26, according to the provisional estimates of Bangladesh Bureau of Statistics (BBS). The government aims to increase it to 21.33 percent in FY2026-27. Since it’s aiming for investment-led growth and thus seeking to raise the total investment further by FY2030-31, the growth must be at a higher rate. Over the past six months, there have been many discussions on investment enhancement, but substantive results are still not visible.
Another challenge before the government is revenue mobilisation. With an abysmally low tax-GDP ratio, which stands below 7 percent, efforts must be multiplied through deep reforms. The ambitious revenue target for the ongoing fiscal year will have to be realised through a strong tax administration, a broader tax base, reduced unjustified exemptions, curbed tax evasion, and improved customs and VAT compliance through digitisation in the coming months.
The energy crisis has become more critical due to the geopolitical situation, disruptions in the global LNG supply, and the technical fault at Moheshkhali floating LNG terminal. But internal policies such as import dependency, inadequate domestic energy investment, and the absence of a credible medium-term plan during the previous political government are also responsible for the power sector’s critical condition. Many power plants are underutilised, while heavy capacity charges weigh on the economy. While the long-term structural weaknesses stem from past policy errors, the BNP government needs to act promptly and prepare contingencies to face the crisis and sustain economic activity. In the medium and long terms, the government must develop an energy security strategy that ensures accessibility, affordability, efficiency, and sustainability.
In the banking sector, several key reforms have been made. Parliament passed the Bank Resolution Act, 2026, which grants the Bangladesh Bank an enhanced authority to restructure, recapitalise, merge or resolve troubled banks. A dedicated Bank Resolution Department has been created. The Deposit Insurance Act, 2026 has improved safeguards for small depositors. The central bank has also finalised a framework for the Bank Restructuring and Resolution Fund. Additionally, it is progressing in risk-based supervision, enhancing forensic oversight, and preparing for International Financial Reporting Standard 9 (IFRS 9)-based Expected Credit-Loss provisioning. Efforts to recover and repatriate illicit assets have been bolstered through an inter-agency mechanism and international cooperation. The Bangladesh Bank is working on an integrated digital payment ecosystem through the expansion of Bangla QR, development of a unified payment interface, promotion of cashless transactions, and introduction of an Instant Interoperable Payment System by June 2027.
However, the banking sector’s inherent weaknesses are being revealed through various weak indicators, most notably the high non-performing loans (NPLs). The Bangladesh Bank’s Financial Stability Report 2025 indicates that by the end of 2025, NPLs stood at about Tk 5.57 lakh crore, equivalent to 30.6 percent of total loans. Loans under court stay orders stood at more than Tk 1.82 lakh crore. Deeper weaknesses in asset quality and loan recovery are reflected in several banks through large loan provision shortfalls and substantial written-off but unrecovered loans.
Overall, after six months of the BNP government, the economy has yet to show a promising performance. The February 12 election has ensured political legitimacy of the government. But economic recovery and rejuvenation will require stronger institutions, rules-based governance, policy predictability, and improved investor confidence. The government will have to pursue these goals over the next six months.
Dr Fahmida Khatun is an economist and executive director at the Centre for Policy Dialogue (CPD). Views expressed in this article are the author’s own.
