Dhaka,  Wednesday
18 February 2026 , 06:20

Donik Barta

New Government Faces Tough Test to Revive a Fragile Economy

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Published At: 10:16:15am, 16 February 2026

Updated At : 10:16:15am, 16 February 2026

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With the thirteenth parliamentary election marking the return of a democratic process after nearly 17 years, the incoming administration now stands before a daunting economic reality, where stabilizing a fragile macroeconomic structure has become its most urgent task. Public expectations are especially high from the newly elected government and the young prime minister-in-waiting, Tarique Rahman, but the economic indicators present a difficult landscape. Persistent high inflation, widening revenue and budget deficits, stagnant investment, and a lack of job creation have created pressure across nearly all sectors of the economy. The banking sector, burdened by years of irregularities and a large volume of defaulted loans, adds further strain. In its election manifesto, the Bangladesh Nationalist Party pledged to restore the rule of law, reestablish financial discipline, and build national unity, but achieving those goals will require swift and effective policy action. With the holy month of Ramadan approaching, keeping prices of essential commodities under control has emerged as an immediate priority. Economist Dr. Hossain Zillur Rahman believes that economic reforms and inflation control should be the top focus at this stage. The new government has already outlined plans to improve law and order, strengthen governance, rebuild international relations, and carry out institutional reforms, yet all these objectives demand timely and far-sighted decisions. Bangladesh is also set to graduate from the least developed country category within months, a transition that will expose the economy to tougher global trade conditions. Although business groups have requested an extension of the deadline, international bodies have shown little inclination to grant such relief. The interim administration managed to prevent further economic deterioration and keep foreign exchange reserves at a tolerable level, but it failed to revive investment or create new employment opportunities. The impact of the July movement dealt a severe blow to export-oriented industries, leaving export earnings on a negative trajectory. Revenue collection has also fallen short, creating a significant deficit that will complicate budget management by the end of the fiscal year. Data from Bangladesh Bank show that private sector credit growth fell from 6.58 percent in November 2025 to 6.10 percent in December, the lowest level in four years. Net foreign direct investment also remained below expectations, reflecting diminished investor confidence amid prolonged political uncertainty. Inflation continues to hover near double digits, intensifying hardship for ordinary citizens. According to the Bangladesh Bureau of Statistics, the national poverty rate has risen to 27.93 percent from 18.7 percent in 2022, while extreme poverty has increased to 9.35 percent from 5.6 percent. Former lead economist of the World Bank in Dhaka, Zahid Hossain, noted that people are going through a difficult period and emphasized that restoring financial stability and public security should be the government’s primary priorities. The banking sector, weakened by years of mismanagement, is nearing a critical point, with a large share of distributed loans turning into defaults. Although some banks have been merged and measures taken to curb money laundering, deeper structural reforms remain essential. Economists argue that reducing poverty and reviving the economy will require significant job creation, which in turn depends on increased investment and a stronger business environment. In this context, restoring economic stability has become the new government’s toughest test, and its success will depend on swift decision-making, effective reforms, and the ability to foster political unity across the country.

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