Economic stability returns, but poverty, inequality on the rise

Dr Zahid Hussain, former lead economist at the World Bank’s Dhaka office, said at a discussion on Saturday that economic activity in Bangladesh has picked up and overall stability has improved compared to FY23, but also cautioned that conditions at the household level have worsened, with rising poverty and inequality.

Economic stability has been restored mainly due to the removal of those responsible for previous instability, he said, adding that money laundering from the country has stopped, leading to a sharp fall in informal money transfers and a rise in foreign currency inflows.

He made the remarks while speaking at the “Moazzem Hossain Commemorative Lecture,” organized by the Economic Reporters’ Forum (ERF) in Dhaka in memory of its founder president, late Moazzem Hossain, who was also the founding editor of the Financial Express.

He noted, however, that the true condition of banks has yet to improve, as defaulted loans continue to mount, despite the cessation of large-scale looting in the sector.

Dr. Hossain also highlighted international developments favourable to Bangladesh’s economy, particularly the notable depreciation of the US dollar.

Addressing the role of policy, Dr. Zahid Hussain said it has not played a major part in the country’s current economic stability.

 “There has been a shift in economic management, with greater discipline in policymaking. But this does not mean all government decisions are correct,” he noted.

Despite some positive signs, he warned that Bangladesh remains stuck in the middle-income trap.

“Key obstacles include the ongoing power and energy crisis, a stressed banking sector, and weaknesses in the logistics system, underdeveloped labour markets, and institutional decay,” he said.

The higher tariffs on India and China imposed by the United States could divert $1.27–$2.32 billion in export orders from these countries to Bangladesh in the current FY26, said Dr Zahid Hussain.

The economist added that a 30% higher tariff on India alone could divert $1.2–2.07 billion in orders, while those from China could range from $74 million to $250 million.

Mahbubur Rahman, chairman of International Publications Limited (IPL), the parent company of the Financial Express, addressed the event at the ERF auditorium, which was presided over by ERF president Doulot Akter Mala.

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