Economic reforms to rebuild the future

Bangladesh today carries all the markers of a young growth economy. Rising per capita income, gradually improving disposable income, and the slow but noticeable expansion of the consumer market all point in the same direction. 

The question we face is how to make this growth both inclusive and sustainable. That answer is still unfolding, and the decisions we take in the coming months will shape our trajectory for years.

The country is standing at a moment of political and economic reckoning. The upcoming general election, now paired with a referendum on constitutional reforms, is not just another political event. It is an opportunity to reset the system and to give the incoming government a clear mandate to address long-overdue economic issues. 

The International Monetary Fund's (IMF) recent decision to pause its review under the $5.5 billion loan programme and wait for a newly elected administration signals how critical this transition is. Stability and clarity are essential for the next phase of reforms.

Our economic worries are not just temporary shocks. Persistent inflation, slowing growth, and fragile investor sentiment are the outcomes of long-standing vulnerabilities that were left unaddressed. 

The IMF's main requirements are not surprising. A simpler and fairer tax system and decisive banking sector reforms were needed for years, yet past governments hesitated. 

After the change in political leadership, the interim government moved quickly with support from development partners. They tightened both fiscal and monetary policies to contain inflation and manage external pressures. The exchange rate reform introduced in May helped stabilise the foreign exchange reserve, which has slowly begun to improve.

However, these measures, while important, do not resolve deeper structural weaknesses. The economy still suffers from chronically low tax revenue and a financial sector carrying more risk than it should. These issues will not disappear on their own and will immediately confront the new administration.

This is exactly why the next government must act from day one. Political transitions often tempt leaders to delay difficult decisions. Bangladesh cannot afford such delays any more. Cleaning up state-owned banks, reforming the tax system, and maintaining strict monetary discipline are not optional. The IMF has already warned against complacency, and ignoring that warning would be costly for the economy and the people.

IMF's guidance can be viewed through three actionable priorities. The first is tax reform. Bangladesh cannot continue with a tax structure full of loopholes, unnecessary exemptions, and poorly targeted subsidies. Reforming this system will require standing up to groups that benefit from the status quo. But a stronger tax base will give the government the capacity to invest in social safety nets, public services, and infrastructure that support broad-based growth even from the bottom of the pyramid.

The second priority is banking reform. This will be politically sensitive, as it requires confronting vested interests that have influenced banking decisions for years. But without a healthier and diversified financial sector, no amount of policy ambition will translate into real economic progress.

The third priority is safeguarding the central bank's independence. Monetary policy must remain insulated from political pressures, especially now when Bangladesh has taken steps toward a more flexible exchange rate regime. Any reversal or interference would undermine recent gains and weaken market confidence.

If actions on these fronts are delayed or watered down, the risks are clear. Growth would slow further, inflation would rise, and the overall macro-financial environment would become more fragile. The success of the next government will be measured by its willingness to confront these hard choices and to stand firm even when the decisions are unpopular.

At the same time, reform is not only about fixing current issues. It also requires looking back and revisiting decisions made by previous administrations. Any growing economy reaches moments when it must rethink its approach, question old assumptions, and adopt new frameworks. Bangladesh now needs a shift in economic thinking. 

Instead of relying only on poverty reduction models or the hope that benefits will 'trickle down', we must focus on building national capital. That includes strengthening local industries, modernising institutions, and creating the foundation for long-term economic resilience.

The road ahead will not be easy, but it is necessary. With the right leadership and the courage to act, Bangladesh can move toward a future where growth is not only fast but also fair and sustainable.

Mamun Rashid is the Chairman at Financial Excellence Ltd and founding Managing Partner of PwC Bangladesh. 

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.