CPD's Fahmida calls for 'comprehensive economic reforms'

Centre for Policy Dialogue (CPD) Executive Director Dr Fahmida Khatun today (9 February) underscored the need for comprehensive economic reforms, stronger institutions and a greater focus on employment generation to sustain Bangladesh's development momentum.

She said this while speaking at a programme titled "Macroeconomic Insights: An Economic Reform Agenda for the Elected Government" held at a hotel in the capital this afternoon (9 February).

The Policy Research Institute of Bangladesh (PRI) and the Department of Foreign Affairs and Trade (DFAT) of the Australian Government jointly organised the event.

The discussion was attended by Finance Adviser Dr Salehuddin Ahmed as chief guest, along with leading economists, policymakers and representatives from development partners.

Presided over by Chairman of the PRI Dr Zaidi Sattar, Dr KAS Murshid, Former Director General of Bangladesh Institute of Development Studies (BIDS), Clinton Pobke, Deputy High Commissioner, High Commission of Australia to Bangladesh, spoke as special guests. Dr Ashikur Rahman, Principal Economist, PRI, made the keynote presentation. Dr M. Masrur Reaz, Chairman and CEO, Policy Exchange Bangladesh (PEB), spoke as distinguished panelists.

Dr Khatun said Bangladesh's development achievements over the years — including reductions in poverty, improvements in per capita income and social progress — had long been recognised internationally as a success story. Despite governance limitations, the country managed to make notable gains in economic and social indicators.

"But the momentum weakened over time due to inherent structural weaknesses," she said, pointing to low investment efficiency, a weak tax system and inadequate attention to reforms. She observed that reforms are often unpopular and require strong political commitment and bold leadership to implement successfully.

Referring to ambitious economic targets set by political parties, she said achieving a one trillion-dollar economy by 2034 would require around 9 percent sustained annual growth for nearly a decade. Similarly, reaching a two trillion-dollar economy by 2040 would demand even higher growth over a longer period.

She questioned whether Bangladesh currently has the institutional strength, governance standards, skilled human resources and technological readiness needed to sustain such high growth rates.

"Without structural reforms, these targets will remain difficult to achieve, and the economy will continue to move in circles," she said.

Highlighting key reform areas, Dr Fahmida Khatun mentioned public finance management, fiscal framework, trade and investment climate, and the financial sector. She, however, placed special emphasis on employment, describing it as one of the most pressing challenges.

She said recent public movements had been largely driven by demands for jobs, noting that the public sector can absorb only about 5 percent of total job seekers, while the economy has failed to generate sufficient employment opportunities.

"Growth without jobs has little meaning," she said, adding that inequality has also increased alongside economic expansion. She referred to the Gini coefficient approaching 0.5, indicating widening income disparity.

She pointed out that about 40% of the labour force is still engaged in agriculture, much of it seasonal and informal. While the service sector contributes over half of GDP, it has not created enough quality jobs. The manufacturing sector, which could provide stable and better-paid employment, has also fallen short in generating adequate opportunities.

She noted that a significant portion of Bangladeshi migrant workers are employed abroad in low-skilled or semi-skilled roles, which limits income potential and long-term benefits.

Stressing the need for labour market reform, she said the country must prioritise manufacturing expansion and skill development to create decent jobs.

She also raised concerns about the mismatch between education and employment. Although about two million young people enter the job market each year, employers often struggle to find suitably skilled candidates. Youth unemployment remains significantly higher than the national average, and the rate among those not in employment, education or training is even higher.

"The higher the level of education, the higher the unemployment rate in some cases. This shows a serious skills mismatch," she said.

Dr Fahmida Khatun called for increased budget allocations for education and improvements in quality, governance and training facilities. She made similar observations about the health sector, saying low spending and poor utilisation of resources weaken the workforce's productivity.

She also highlighted the importance of social protection, particularly at a time when inflation has remained high since 2023 while wages have not increased at the same pace. With investment slowing and job creation lagging, she said support for low-income groups is essential.

However, she warned that expanding social protection requires adequate fiscal space. The declining tax-to-GDP ratio remains a major challenge in mobilising resources for social programmes.

Referring to various election pledges, including family cards and farmer support schemes, she said such initiatives would require a strong fiscal strategy and comprehensive public finance reforms to ensure sustainable funding.

Dr Fahmida Khatun concluded by stressing the need for an integrated reform agenda focused on employment, education, health and fiscal management to support long-term economic stability and inclusive growth.