By S. M. Faiyaz Hossain
Bangladesh, once considered a poster child for development success among emerging economies, now finds itself at a critical crossroads. For years, the country defied odds, posting consistent GDP growth, expanding its garment exports, improving key human development indicators, and reducing poverty at a commendable rate. International observers from the World Bank to regional think tanks celebrated what many dubbed the “Bangladesh miracle.” However, by mid-2025, this narrative has shifted dramatically. A confluence of structural inefficiencies, political instability, and adverse global trends has plunged the country into its most severe economic crisis in decades.
Dr. Reza Kibria, a former economist at the IMF, discussed his views during an appearance on the Manchitro Talk Show on YouTube. While he maintained a critical stance toward Sheikh Hasina’s administration, he nonetheless believed that Bangladesh had the economic potential to catch up with countries such as Malaysia or Thailand. That said, following the so-called “Yunus takeover” and the subsequent implementation of Yunus’s policies, Dr. Kibria noted a marked decline in his optimism. He no longer anticipates that Bangladesh will achieve the same level of economic progress and blamed Yunus for the destruction of Bangladesh.
This downturn is neither sudden nor rooted in a single factor. Instead, it reflects years of deferred reforms, over-reliance on a few economic drivers, and inadequate responses to shifting global dynamics. The symptoms are now stark: GDP growth is forecasted to fall to a 36-year low, private investment has plummeted, inflation remains stubbornly high, and the national debt is mounting at an unsustainable rate. Meanwhile, declining foreign reserves, weakening currency, and strained regional relations further compound the crisis.
Adding to these economic concerns is the growing sense of political uncertainty following the controversial political changeover in August 2024. The erosion of institutional credibility, disruptions in regional diplomacy particularly with India and a visibly cautious private sector reflect a wider crisis of confidence. While temporary reliefs—such as the US tariff reduction on garments offer some breathing space, they are insufficient to offset the deeper structural challenges facing the country.
The dimensions of Bangladesh’s ongoing economic crisis, viewed through the lenses of macroeconomic data, fiscal indicators, and policy analysis, are crucial. Internal vulnerabilities have been magnified by global headwinds, and without swift, coordinated, and reform-driven actions, Bangladesh risks undoing decades of hard-earned development progress.
GDP Growth Hits a 36-Year Low
The World Bank’s latest economic outlook offers a grim forecast: Bangladesh’s GDP growth is expected to fall to 3.3% in the 2024–25 financial year, down from the earlier projection of 4.1% (World Bank, 2024). This would mark the country’s lowest growth rate in 36 years. For a nation that enjoyed 6–7% annual growth rates over the past two decades, this drop is alarming.
A shrinking GDP directly affects employment. Economists warn that each percentage point drop in GDP results in the loss of approximately one million jobs. With over 60% of the population under 35, such job losses could fuel a demographic crisis.
Moreover, this economic slowdown could push 3 million more people into extreme poverty, defined by the World Bank as living on less than $2.15 per day. The percentage of the population in extreme poverty is estimated to rise to 9.3%, up from 7.7% the previous year (World Bank, 2024).
Private Sector Paralysis: Credit Growth Hits Decade-Low
A key indicator of Bangladesh’s deepening economic crisis is the alarming stagnation in private sector investment. As of January 2025, private sector credit growth dropped to just 7.15%—the lowest in a decade and well below the Bangladesh Bank’s target of 9.80% (The Daily Star, 2025a). This dramatic slowdown is a clear reflection of waning business confidence and deteriorating economic fundamentals under the Yunus-led interim government.
The central bank’s tight monetary policy meant to curb inflation has instead choked the flow of capital. With the policy interest rate stuck at 10%, borrowing costs have surged, making it increasingly difficult for businesses to secure affordable financing. This is exacerbated by political instability and policy uncertainty in the wake of the August 2024 power shift. Entrepreneurs are unwilling to invest in an economy that offers no guarantees, no transparency, and no consistent direction (The Daily Star, 2025b).
The consequences are far-reaching. Stagnant private credit is translating into reduced industrial output, fewer job opportunities, and shrinking tax revenues—pushing the country into a self-reinforcing economic decline. Rather than creating a stable investment climate, the Yunus government has paralyzed the private sector through economic mismanagement and a lack of coherent reform.
This downturn is not merely cyclical, it is structural, and deeply political. Without restoring investor confidence, reforming monetary policy, and ensuring political stability, Bangladesh risks falling into a prolonged recession. The current leadership’s failure to inspire economic resilience is not just disappointing, it is dangerous.
Export Sector: Temporary Relief Amid Structural Insecurity
The temporary reduction of US tariffs on Bangladeshi garments from 35% to 20% was touted by the Yunus-led interim government as a major diplomatic and economic win. But this surface-level success masks the deep-rooted economic mismanagement and deceptive economic narrative promoted by Dr. Muhammad Yunus and his cronies. While big exporters like Snowtex and DBL Group reported the resumption of halted orders, the reality is far less rosy.
The Yunus administration has failed to address Bangladesh’s systemic trade inefficiencies: chaotic port operations, persistent power outages, and customs bottlenecks continue to eat away at exporters’ competitiveness. The government’s economic policy seems more like window dressing than reform attempting to whitewash failure with short-term headlines.
Moreover, the 40% value addition clause attached to the tariff cut puts many exporters in jeopardy. The government has shown no foresight in negotiating sustainable terms or supporting the industry in meeting such requirements. Worse, the burden of new tariffs, though officially on importers, is already being unfairly passed onto exporters. Many buyers are pressuring Bangladeshi suppliers to absorb the cost, pushing factories especially smaller ones at risk of bankruptcy.
As exposed in the University of Delaware’s 2025 Fashion Industry Benchmarking Study, 70% of major US brands report rising costs, shrinking profits, and canceled orders due to these new policies. Yet the Yunus government continues to celebrate its minor “victory.”
Dr. Yunus’s neoliberal legacy, rooted in microcredit mythology and donor-friendly optics, has failed the real economy. His team’s reliance on fragile trade deals, without addressing structural weaknesses, amounts to economic cheating. This is not development; it’s deception. Unless exporters collectively resist unethical buyer pressures and the government enforces a fairer trade environment, the apparel sector and with it, millions of jobs risk remain on the edge of collapse.
Public Debt Spiral: A Looming Fiscal Time Bomb
The public debt situation is another alarming aspect of Bangladesh’s economic crisis. As of FY 2023–24, the debt-to-GDP ratio has surged to 37.62%, up from 27% in 2014–15 (The Financial Express, 2025). The IMF forecasts this will rise to 40.3% by 2025, inching closer to the danger zone for developing economies.
Although this figure remains below the IMF’s 55% threshold, the pace of increase and the composition of the debt are concerning. A growing share of the borrowing is non-concessional, which carries higher interest rates and shorter maturities. Much of the debt has been used to finance infrastructure megaprojects, many of which are yet to yield tangible returns.
The tax-to-GDP ratio is just 7.4%, one of the lowest globally, highlighting the government’s reliance on debt rather than domestic revenue generation. Without boosting tax collection or export diversification, Bangladesh’s ability to service its growing debt burden is becoming increasingly fragile.
Bangladesh could face a full-blown debt crisis within five years if current trends continue. He cites stagnant forex reserves, low tax revenues, and poor governance as key risk factors (The Financial Express, 2025).
Inflation, Currency Instability, and Cost-of-Living Crisis
While South Asian neighbors have made strides in curbing food inflation, Bangladesh remains trapped in a cost-of-living crisis marked by poor governance and policy failures. According to the World Bank, Bangladesh has been in the ‘red’ category for food inflation for two consecutive years indicating persistently high prices that disproportionately affect the poor and middle class.
As of March 2025, food inflation stands at nearly 9%, while overall inflation is at 9.35% (Bangladesh Bureau of Statistics). By contrast, India’s food inflation has fallen below 6%, and Pakistan and Afghanistan have entered deflationary territory. Sri Lanka, Nepal, and the Maldives have maintained food inflation below 8%.
Real-life price pressures remain severe. The prices of essentials like rice, lentils, cooking oil continue to climb, squeezing household budgets. At the same time, the Bangladeshi Taka has significantly depreciated against the US dollar, driving up the cost of imported goods and worsening consumer distress.
The central bank’s response to tight monetary policy and high interest rates has failed to contain inflation but has effectively strangled credit growth and private investment, leading to an economically counterproductive environment.
The World Bank’s food inflation index categorizes Bangladesh with struggling economies like Congo, Angola, and Ethiopia, the delayed policy action and exchange rate indecision under the previous government. The interim Yunus-led administration has acknowledged the issue, but it’s too little, too late.
Corruption, lack of market oversight, and ineffective law enforcement persist. As millions struggle to afford basic needs, the deepening crisis exposes a glaring failure of leadership and economic mismanagement, demanding urgent, structural reforms. The economic crisis is further worsened by political instability and growing isolation from regional powers. Since the political changeover in August 2024, relations with India have deteriorated, leading to a loss of trade advantages and regional strategic backing.
Meanwhile, China’s strategic attention has shifted towards India, especially in the wake of the US-China trade war. This has left Bangladesh isolated in regional diplomacy, reducing its leverage for favorable trade or investment deals.
The Need for inclusive Politics and Stability
Dr. Brahma Chellaney, writing a column for The Hill, described the July Uprising surrounding Yunus in Bangladesh as a “quiet military coup.” His analysis revealed the events of July, marked by significant unrest, were reportedly instigated by students and supported by Islamist factions. In response, the interim government implemented a ban on Awami League activities, bypassing a public referendum and disregarding the official recommendation of the United Nations. This move effectively excluded the Awami League from participating in any reforms or future elections, resulting in a political environment lacking inclusivity. While the interim government currently benefits from increased remittances, this advantage remains precarious. Should the Awami League, now in exile, encourage expatriates to withhold remittances, the government could face substantial financial challenges. Additionally, Australia’s commitment of AUD2 million to support the Interim Government’s Ballot project for inclusive elections in Bangladesh has sparked controversy, particularly as a Voice of America survey revealed that 57% of Bangladeshis oppose the banning of the Awami League. Ultimately, the practice of non-inclusive governance in Bangladesh risks exacerbating crime and corruption hindering economic growth and deterring foreign direct investment. The Interim Government and International organizations must work to implement inclusive policies and create a social contract among political parties, to foster future stability.
Contributing Author: S M Faiyaz Hossain is a Bengali columnist and political commentator. His academic research focuses on business and supply chain management, and he is currently pursuing his second master’s degree in Australia. He has authored and co-authored research journals and conference proceedings. Additionally, he has written several columns and opinion editorials for various news outlets, focusing on business, geopolitics, and counter-extremism. He tweets at @FaiyazBengali.
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