From uncertainty to resilience: Bangladesh’s economic comeback after a political transition

Since the July uprising last year, Bangladesh's economic story has, at its core, been one of resilience meeting reform. Within a year, the country has stabilised inflation, rebuilt confidence in its currency regime, revived exports and remittances, and secured renewed backing from international partners.

The momentum is no accident; it reflects policy choices—on exchange-rate flexibility, monetary discipline, fiscal prioritisation, and energy management—that are beginning to pay off in the real economy. The results are evident in the data and, increasingly, on factory floors, in logistics hubs, and across the financial system.

Growth has been slower than the rapid pace seen before Covid-19, but it has steadied despite global challenges. Early data shows that real GDP grew by about 3.97% in FY2024–25, slightly lower than last year. This reflects an economy intentionally slowing inflation while boosting investment, and it is likely to pick up once confidence and credit conditions return to normal.

The fact that the Bangladesh Bureau of Statistics released this estimate in May 2025 is itself part of a welcome return to predictable macroeconomic reporting after a volatile period. 

Inflation, the most immediate pressure on households, has eased from last year's peak. Point-to-point CPI stood at 8.55% in July 2025, down from 11.66% in July 2024, while the twelve-month average is drifting lower as food and energy bottlenecks recede. 

The trend is not linear and will require vigilance—sudden food-price spikes could disrupt progress—but overall, the trend is positive, reflecting tighter monetary policy and a more stable exchange rate. 

The most uplifting development has been in the external accounts. Exports rebounded strongly, with FY2024–25 merchandise earnings reaching around $48.28 billion—an 8.6% year-on-year rise, driven by knitwear and woven apparel. 

Amid tariff uncertainties and changing buyer strategies, Bangladesh's manufacturing sector has shown resilience, maintaining its important role in global supply chains. The country's ongoing improvements in compliance, energy efficiency, and faster delivery help it secure orders, even when costs rise in other markets.

Remittances, the other pillar of foreign-exchange earnings, have reached record highs. Bangladesh Bank's monthly data show inflows of about $30.33 billion in FY2024–25, with several months exceeding the $2 billion mark and a historic $3.30 billion in March. 

A more market-based exchange rate, the 2.5% government cash incentive, alignment with kerb-market rates, and a crackdown on hundi networks have all helped move money back into formal channels. For millions of households, this means more reliable income, easier access to banking, and better protection against price shocks.

Foreign reserves have stabilised as the policy mix has improved. According to the central bank's official dashboard, gross reserves in July 2025 stood between $29.8 and $31.8 billion, with IMF-consistent BPM6 reserves ranging from $24.8 to $26.7 billion across June–July. 

By late August, local media reported that reserves were about $30.85 billion, with BPM6 reserves around $25.86 billion. Although still below pre-2022 levels, this reflects stronger remittances, steadier exports, and a move toward a more flexible currency system. Importantly, the interbank dollar rate now reflects market levels—around Tk122.77 per US dollar at the end of June—reducing distortions and boosting credibility.

The exchange-rate adjustment has been a key, if understated, factor in stabilisation. Bangladesh moved to a crawling-peg system in May 2024 as a step toward more flexibility, and by May 2025, interbank rates were allowed to float freely, with the central bank providing reference rates to guide expectations.

This reform, a key part of the IMF programme's third and fourth reviews completed in June 2025, has reduced the gap between formal and informal markets, improved dollar liquidity, and eased speculative pressures. Consequently, banks can price trade finance more reasonably, exporters face less uncertainty, and remitters benefit more from using official channels.

The reform momentum goes beyond foreign exchange. The government has strengthened its fiscal approach—focusing on energy security, social protection, and key infrastructure—while keeping the deficit in line with the IMF's augmented ECF/EFF/RSF programme.

World Bank and other partners have expanded programmatic support, including for climate resilience, grid modernisation, and improvements in service delivery. This alignment of domestic policy and external financing creates space to invest without reigniting inflationary pressures or straining the balance of payments. 

Energy remains a delicate issue but is being managed through a practical mix of short-term and long-term measures. To meet the summer demand surge, authorities secured extra LNG shipments and optimized distribution, keeping power cuts less severe than expected.

Meanwhile, a June 2025 directive to install rooftop solar on public buildings—such as schools, hospitals, and government offices—aims to accelerate renewable energy deployment. This 'grid-light, speed-first' approach, complementing larger land-based solar projects, diversifies energy supply, saves foreign currency over time, and encourages private investment in clean energy.

The labour market and the diaspora remain key stabilisers. Outbound workers have stayed high in recent years, and in the first month of FY2025–26, remittances rose about 30% year-on-year, boosting formal inflows. With over 40 lakh Bangladeshis working abroad in the past four years, the diaspora supports domestic demand and strengthens external accounts. Maintaining ethical, skill-focused recruitment will enhance these benefits in the future.

However, challenges remain, and acknowledging them is essential to sustaining the positive trajectory. 

The banking sector entered 2025 with high non-performing loans—about Tk4.20 lakh crore, or a quarter of total credit. Policies are now improving the situation: stricter rules, resolution tools, and better governance are being implemented. While cleanup takes time, stronger disclosure and higher provisioning each quarter gradually reduce risks and strengthen the financial system for future investment.

The turbulence of political transition and a challenging global environment had temporarily slowed foreign investment, but that phase now appears to have been a trough rather than a trend. Recent flows and project announcements show recovery, with renewed interest in sectors like energy, logistics, medical technology, textiles, furniture, and Halal food processing.

As stability returns, Bangladesh's large workforce, established manufacturing, trade advantages, and supply chains are gradually drawing investors again. With improved governance, the country is well placed to regain its appeal for long-term investment.

So, what does all of this add up to for the year ahead? First, a resilient economy that can rebuild macroeconomic stability without compromising its export engine. Second, a more market-oriented approach—especially in foreign exchange and interest rates—reducing distortions that once drained dollars and hurt confidence. Third, a practical energy strategy combining fast-deploy rooftop solar with better fuel management to keep factories running as longer-term projects develop. Finally, a development model that leverages its people at home and abroad—workers, entrepreneurs, and remitters—turning stability into growth.

With the investor mapping in place, Bangladesh must establish a system for proactive engagement. This involves not waiting for investors to approach, but continuously reaching out through roadshows, bilateral meetings, investment summits, and digital platforms. 

Equally important is aftercare: once an investor shows interest or makes a commitment, a dedicated system should guide them, resolve concerns, ease approvals, and link them with local partners. This keeps the investment pipeline active, with new prospects entering and others moving toward deal closure.

If Bangladesh can stay on this path, growth can become faster and more inclusive. The economy is projected to exceed $500 billion in FY2025–26, but the true gain lies in higher-quality growth: more diversified exports, greater involvement in green and digital value chains, and improved social mobility. The past year has shown that resilience is not just an ideal—it is a real capability—and the coming years can show its rewards.

Sketch: TBS

Imran Hossain is a Senior Business Development Manager at Bangladesh Investment Development Authority (BIDA). Email: imranprince195@gmail.com 

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