Bangladesh’s economy is not collapsing but undergoing a necessary reset

The caller question of pessimism surrounding Bangladesh’s system nether its interim administration, overmuch of it amplified by selectively framed section commentary, offers an incomplete and often misleading representation of the country’s existent economical trajectory. Much of this interest is overstated, arsenic the header indicators bespeak a indispensable structural correction alternatively than an economical collapse.

While elevated ostentation and a battered banking assemblage are existent and superior challenges, they bash not magnitude to grounds of an system successful escaped fall.

A much cautious reading, 1 that accounts for the disruptive bequest of the erstwhile medication and the corrective measures undertaken aft the governmental transition, reveals a hard but indispensable play of structural rebalancing.

The assertion that the caller authorities is inheriting a crippled system overlooks the information that the erstwhile medication near down a fiscal strategy that resembled a location of cards, propped up by manipulated information and systematic concealment of risk.

To represent the existent system arsenic stagnant is to disregard Bangladesh’s longer arc of resilience successful South Asia. Despite the planetary shocks that followed COVID-19 and the Russia-Ukraine war, the state delivered stronger maturation than astir of its determination peers.

It registered 3.5 percent maturation successful 2020, followed by 6.9 percent successful 2021 and 7.1 percent successful 2022. Today’s slower maturation reflects deliberate fiscal tightening aimed astatine restoring macroeconomic equilibrium aft years of excess.

Rather than a motion of decay, this is the predictable cooling that follows the extremity of artificial stimulus.

The anxiousness astir nonperforming loans and backstage assemblage recognition tells an adjacent much revealing story, not of caller accent but of long-buried weaknesses yet exposed.

The alarming emergence successful nonperforming loans, with figures ranging from implicit 20 percent successful ADB assessments to much than 35 percent nether the cardinal bank’s revised classification rules, stems from a long-overdue committedness to honorable accounting.

For years, the erstwhile authorities reportedly pressured regulators to gloss implicit defaults, unbend classification standards, and widen indebtedness rescheduling indefinitely. The effect was a banking assemblage that looked superficially steadfast portion softly deteriorating.

The surge successful nonperforming loans is truthful the terms of confronting the system’s existent condition.

The compression successful backstage recognition growth, which dipped to astir 6.29 percent successful precocious 2025, indispensable besides beryllium understood successful context. Previous double-digit recognition maturation was inflated by massive, politically connected borrowing that produced small existent economical instrumentality and yet fed into the ballooning nonperforming indebtedness crisis.

Many of these loans were ne'er intended to beryllium repaid and were allegedly funnelled into overseas existent property oregon offshore accounts. In contrast, banks contiguous are much cautious, with recognition flowing into sectors little susceptible to default.

The measurement of lending has decreased, but the prime has improved. An system cannot physique sustainable maturation connected a upland of atrocious debt. The existent accommodation reflects a displacement towards stableness alternatively than a illness successful concern appetite.

These corrections successful the fiscal assemblage are lone 1 portion of the broader adjustment. The astir decisive rebuttal to claims of stagnation is the translation nether mode successful the fiscal and outer sectors. In an antithetic amusement of discipline, the authorities has sharply reversed the longstanding wont of borrowing heavy from the banking system.

Between July and October of the 2025-26 fiscal year, it repaid much than 5 cardinal taka (about $40.9m) to banks, successful stark opposition to the much than 150 cardinal taka ($1.23bn) borrowed during the aforesaid play a twelvemonth earlier.

Economists enactment that this displacement eases unit connected involvement rates and frees up liquidity for backstage borrowers, marking a important interruption with a past wherever the authorities crowded retired the backstage sector.

For a state agelong accustomed to fiscal indiscipline, this determination signals a meaningful displacement towards stability.

Foreign nonstop concern (FDI) tells a likewise counterintuitive story. Against the presumption that governmental upheaval deters investors, Bangladesh experienced astir 20 percent maturation successful FDI successful the 2024-25 fiscal year.

For a post-transition system emerging from a monolithic uprising that resulted successful much than 1,400 deaths, this is highly rare. Countries emerging from governmental uprisings typically endure crisp drops successful overseas concern for years.

In Bangladesh’s case, planetary firms not lone remained but besides reinvested their earnings. This reflects a deeper assurance successful the country’s semipermanent prospects.

Perhaps the astir striking displacement has occurred successful the outer sector. After months of dependable erosion, overseas currency reserves person stabilised and past strengthened, climbing from little than $20bn successful mid-2024 to much than $30bn a twelvemonth later.

Remittances surged to a grounds $30.33bn successful the 2024-25 fiscal year, a 26.8 percent summation attributed to renewed assurance successful the ceremonial fiscal system, the crackdown connected wealth laundering, and the instrumentality to a market-based speech rate.

Expatriates who erstwhile relied connected hundi networks are present sending wealth legally, responding to a much transparent and predictable currency regime. This operation of rising reserves, beardown remittance inflows, and exchange-rate stabilisation forms 1 of Bangladesh’s strongest macroeconomic buffers successful years.

Inflation remains the astir potent concern, and rightly so. With rates supra 8 percent, higher than immoderate state successful South Asia, the cost-of-living unit is severe.

But present again, comparisons necessitate nuance. Sri Lanka’s debased ostentation follows a implicit economical meltdown and draconian monetary tightening nether an IMF programme.

Bangladesh’s ostentation is structurally different, driven partially by proviso concatenation constraints, lingering marketplace distortions, and the aftereffects of earlier monetary expansion. It is difficult, but not destabilising.

Similarly, the poorness fig of 28 percent often cited by critics originates from a limited-sample backstage study. World Bank projections bespeak that poorness is apt to proceed falling modestly this fiscal year, adjacent amid inflation.

The conflict up is not simply astir preserving maturation rates, but astir dismantling entrenched corruption, extortion networks, and bureaucratic bottlenecks that person acted arsenic invisible taxes connected the mediocre for years.

Bangladesh’s system contiguous is not collapsing; it is undergoing a hard but indispensable reconstruction aft much than a decennary of governance that preferred cosmetic stableness implicit organization health.

High nonperforming loans, slower recognition growth, and persistent ostentation are symptoms of structural problems yet being confronted. That confrontation was inevitable and overdue.

What stands retired alternatively is simply a acceptable of achievements seldom seen successful a post-transition economy: a accelerated rebound successful reserves, a grounds surge successful remittances, astir 20 percent maturation successful FDI, and an unprecedented objection of fiscal restraint.

These are not the markers of stagnation, but the aboriginal foundations of a much transparent, durable economical future. Whether Bangladesh completes this modulation volition beryllium connected the governmental volition to prolong reform, particularly successful the banking sector. The communicative of the system contiguous is not 1 of collapse; it is the communicative of corrective surgery. Whether the state tin decorativeness the cognition remains the cardinal question.

The views expressed successful this nonfiction are the author’s ain and bash not needfully bespeak Al Jazeera’s editorial policy.