Citizen's Platform for SDGs, Bangladesh, today said the new government must address macroeconomic constraints to steer the economy out of troubled waters.
The civil society initiative identified fragile macroeconomic stability, weakened private investment and employment, and diminishing fiscal space as major challenges for the government sworn in on February 17.
The Citizen's Platform said inflation is a major source of macroeconomic instability as it remains persistently high, even though global inflation has fallen.
In January, the 12-month average inflation stood at 8.77 percent, much higher than the central bank's target of bringing it down to 7 percent.
On the other hand, global inflation declined by 4.6 percent in the financial year (FY) 2025 and by a further 7.3 percent in the July–January period of FY2026, said Towfiqul Islam Khan, Additional Director (Research) at the Centre for Policy Dialogue (CPD), in a presentation at the media briefing at the BRAC Centre Inn in Dhaka.
The Citizen's Platform organised the event on ‘Macroeconomic Benchmark for the New Government.’ The Convenor of the Citizen's Platform, Debapriya Bhattacharya, and CPD Distinguished Fellow Mustafizur Rahman were also present at the event.
Khan said that although food inflation moderated in Bangladesh, non-food inflation did not ease significantly.
“Wage inflation remained low, denting the real income of the labouring class,” he said.
The paper said stability in the exchange rate provided some relief. Foreign exchange reserves improved and eased pressure on the country's balance of payments.
But the reliance of the government on bank borrowing to service the budget deficit and the augmentation of the foreign exchange reserves by the central bank from the open market are driving money supply growth.
At the same time, a lack of private investment has reduced employment opportunities. In the first half of FY2025, nationally, about 21 lakh jobs were lost, he said.
On diminishing fiscal space, Khan said Bangladesh is now unable to meet recurrent operating expenditure through domestic revenue mobilisation. Borrowing for debt repayment has increased significantly.
Weak revenue generation, coupled with pressure from non-Annual Development Programme (ADP) expenditure, is squeezing policy space. ADP expenditure is hitting an all-time low in FY2025 and FY2026.
In this context, the platform recommended implementing an economic stabilisation plan with a hard budget constraint for the remainder of the current financial year, including a realistic revision of the existing budget.
It also recommended preparing a credible framework for the national budget for the next financial year and convening a multi-stakeholder development forum.
The recommendations further suggested rolling out an economic reform pathway with specific timelines, including operationalising a robust LDC transition strategy and pursuing a coherent mid-term plan with realistic targets.
