Bangladesh’s economy has entered one of its most fragile phases in recent years, with investment falling to its lowest level in more than a decade, development spending slowing sharply, and pressure mounting from debt servicing, inflation, and political uncertainty.
Economists and business leaders attributed the erosion of confidence and the economic slowdown largely to mob violence and the government’s crackdown on political opposition.
While the interim government continues to emphasize “stability,” economists, business leaders, and workers describe an economy increasingly running on past momentum rather than new growth.
Development spending stalls, growth engine weakens
One of the clearest signals of stress is the collapse in public development spending. In its FY2024–25 first-half review, the Centre for Policy Dialogue reported that implementation of the Annual Development Program (ADP) during July–December stood at just 17.3 percent—the lowest level in the past ten years—citing data from the Implementation Monitoring and Evaluation Division.
CPD further noted that overall ADP utilization for the full FY2024–25 fiscal year, measured against the revised allocation, fell to around 67.85 percent—one of the weakest performances in recent fiscal history.
In its written assessment, released in January 2025 at a press briefing in Dhaka, the think tank warned that persistently low ADP execution constrains aggregate demand, delays infrastructure delivery, and weakens private-sector confidence at a time when public expenditure is critical for sustaining momentum.
Economists point out that in Bangladesh, development spending acts as a central demand anchor. When government-funded projects slow—roads, power, schools, hospitals, logistics—private investment and employment tend to follow.
Several analysts say the current economy is being sustained largely by infrastructure, reserves, and cash buffers accumulated during the previous Awami League government, while new initiatives remain limited.
Investment confidence erodes amid political and social strain
Investment—both domestic and foreign—has stagnated. Business leaders cite policy uncertainty, banking-sector stress, dollar shortages, import and letter-of-credit delays, and persistent problems with gas and electricity supply. These long-standing bottlenecks have been compounded by political instability since August 2024.
Investors also point to mob violence and politically charged campaigns as a growing concern. There have been repeated incidents of attacks on businesses, including mob assaults and vandalism at retail outlets of the global footwear brand Bata.
On December 22, leaders from a range of organizations—including the business community—joined a meeting titled ‘Bangladesh Affected by Mob Violence,’ hosted jointly by the Newspaper Owners’ Association of Bangladesh (NOAB) and the Editors’ Council at a city hotel.
Multiple data sources point to the scale of the violence. According to the Human Rights Support Society (HRSS), at least 237 lives were lost to mob attacks and political violence in nine months of 2025, as documented in its January–September Human Rights Observation Report released on October 9, 2025. A report from a Canadian agency, based on aggregated data, indicates that 637 individuals were killed in mob lynchings nationwide between August 2024 and July 2025. The trend persists, with casualties continuing to rise. These developments have had a serious impact on business and the broader economy.
Calls for boycotts—sometimes targeting Indian products, sometimes Israeli or French goods—linked to extremist political campaigns have further shaken confidence. Foreign investors, executives say, see these episodes as signals of elevated risk.
Several leading industrialists and countless small and medium investors have been arrested under what critics describe as a broader political crackdown. Others have gone into hiding or fled, fearing arrest or mob violence. As a result, factories have slowed, shops have closed, and job creation has weakened across sectors.
The inadequacy of exports compared to imports; strategic failures in trade with India and anti-India political rhetoric have affected border trade and endangered both the import and export sectors.
Investment summits: announcements without delivery
The interim government has highlighted investment summits as proof of progress. Yet economists caution that declarations and realized inflows are not the same.
While summits have produced headline figures, analysts stress that without land access, reliable utilities, tax clarity, contract enforcement, and guarantees on profit repatriation, most pledged investments fail to materialize.
Critics argue that more government attention has been directed toward suppressing Awami League leaders, activists, and business supporters than toward restoring an investment-friendly environment. The result, they say, is a widening gap between official messaging and on-the-ground reality.
Business groups have echoed similar concerns. In a formal position paper released in March 2025, the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) warned that private investment decisions were being delayed due to uncertainty in core economic enablers.
The MCCI document noted, “Frequent policy shifts, stress in the banking sector, uncertainty in energy supply, and weak institutional predictability are discouraging new investment and expansion decisions in the private sector.”
The chamber emphasized that investment confidence depends not on summits or announcements, but on consistent policy execution and institutional stability.
Debt pressure tightens fiscal space
At the macro level, rising debt-service obligations have become a major vulnerability. According to the World Bank’s International Debt Statistics, released in December 2024, Bangladesh’s total external debt reached approximately $104.49 billion in 2024.
The World Bank warned that higher debt servicing is absorbing a growing share of export earnings and government revenue, reducing fiscal space for development and social spending.
The International Monetary Fund, in its Article IV Consultation Report on Bangladesh, released in May 2025, has echoed similar concerns, urging policy discipline and structural reforms to stabilize macroeconomic conditions.
Business leaders say the debt squeeze is already visible at the micro level. Because of arrests, disruptions, and business closures, many entrepreneurs are struggling to repay loan installments. Rising interest costs and debt servicing have become one of Bangladesh’s most serious macroeconomic weaknesses.
Inflation puzzle: global prices fall, local prices rise
Food inflation, particularly rice, remains one of the most politically sensitive issues. Globally, rice prices have fallen sharply. According to the Food and Agriculture Organization, the FAO All Rice Price Index in 2025 averaged more than 35 percent lower than in 2024, driven by improved supply and the easing of export restrictions.
Yet in Bangladesh, rice prices have continued to climb. The Bangladesh Bureau of Statistics has repeatedly shown that rice is the single largest contributor to food inflation.
In its CPI Analytical Note for February 2025, the Bangladesh Bureau of Statistics (BBS) stated, “Rice remains the single largest contributor to food inflation, exerting sustained upward pressure on the overall consumer price index.”
BBS officials attribute the divergence from global trends to higher domestic production costs, weak market monitoring, delayed import decisions, dollar shortages, and depreciation of the taka.
For households, the impact is immediate. “If rice prices go up, everything collapses,” said Sabiha Akhter, a garment worker in Ashulia. “Rent, transport, school fees—nothing adjusts downward.”
Traders, manufacturers, and workers feel the squeeze
Across markets and industrial zones, the slowdown is increasingly visible. Abdul Hannan, a rice wholesaler in Kushtia, said sales volumes have dropped while costs continue to rise. “Transport, labor, and storage costs have all increased, yet customers are buying less,” he said.
Small retailers echo similar concerns. Tuhin Hossain, a clothing shop owner in Mirpur, told The Voice, “Customers are cutting back on non-essential spending as food prices rise. Manufacturers are also holding back.”
Mominul Hossain Mridha, a garment factory owner in Gazipur, told The Voice that uncertainty over gas supply, export orders, and access to credit has forced him to delay expansion. “We are surviving on existing orders. Expansion is not even on the table right now,” he said.
For workers, the slowdown translates directly into insecurity. In industrial belts around Narayanganj and Savar, labor organizers report fewer overtime hours and growing fear of layoffs.
Tarikul Islam, a construction worker in Keraniganj who has worked on government-linked projects for years, described stalled payments and intermittent work. “When there is no work, there is no income,” he told The Voice.
Confidence deficit and medium-term risks
Economists warn that while Bangladesh has not yet fallen into a middle-income trap, warning signs are multiplying. Persistent low investment, weak productivity growth, rising debt servicing, and constrained spending on education and health could, over time, lock the economy into a low-growth path.
Since the political transition of August 2024, administrative reshuffles, law-and-order concerns, and allegations of rights abuses have raised the “risk premium” demanded by investors and affected Bangladesh’s international image. Analysts stress that confidence—rooted in institutional stability, rule-based governance, and predictable policy—is now the missing ingredient.
For now, Bangladesh’s economy appears to be coasting on foundations built over the previous decade: infrastructure expansion, export capacity, and accumulated reserves. Whether it can regain forward momentum will depend on restoring investor trust, accelerating development spending, and turning policy commitments into tangible outcomes—before today’s pressures harden into long-term structural damage.
