Bangladesh's economy, amidst a recovery from the impact of the Covid-19 pandemic, has been grappling with persistent high inflation rates approaching 10% in recent months. The resignation of Prime Minister Sheikh Hasina and the subsequent military takeover have raised concerns about further economic challenges in a backdrop already troubled by liquidity issues and forex reserve problems. Despite these difficulties, Bangladesh has been identified as one of the fastest-growing economies globally, boasting a high GDP per capita.
The passing of the Budget in June saw the country targeting a 6% inflation rate and a 6.75% GDP growth rate, with reports indicating budget spending cuts. In a positive development, Bangladesh received a $1.15 billion disbursement from the IMF in late June as part of a larger loan package, indicating external financial support during these challenging times. International agencies, including the World Bank, have been advocating for structural reforms to enhance growth momentum and bolster economic stability in Bangladesh.
The World Bank's Bangladesh Development Update report highlighted the country's economic prospects, projecting a GDP growth of 5.7% in the upcoming fiscal year, a slight increase from the previous period. Urgent calls for monetary reform and a unified exchange rate system were emphasized in the report to bolster foreign exchange reserves and alleviate inflation pressures. The IMF has been actively involved in providing guidance on restoring macroeconomic stability in Bangladesh, advocating for tighter monetary policies, neutral fiscal policies, and increased exchange rate flexibility. Their focus is on unlocking Bangladesh's growth potential, harnessing demographic dividend, and promoting long-term sustainable growth.
Despite encountering challenges like inflation peaks and external shocks, Bangladesh's economy has demonstrated resilience, showcasing consistent growth rates annually. However, concerns remain about managing inflation levels and ensuring sustainable growth trajectories. The IMF's projections for moderating inflation towards the end of 2024 are a positive sign, offering hope for economic stabilisation in the near future.