On some days, Dolon simply stops taking her medicine. Not because her condition has improved or doctors advised her to. She stops because she is exhausted mentally, financially and emotionally.

Almost all her salary now disappears into medication and treatment. Every few months, prices rise again — quietly but relentlessly — outpacing her income and shrinking her choices.

"This is one of the reasons I don't even think about getting married," she said. "When I think about children, I feel scared. I can barely manage my own life."

However, for Saiful Islam, a thyroid cancer patient, daily medication is non-negotiable. Missing a single day once landed him in emergency care, with doctors fearing a relapse. But inflation has meant that life is shrinking inch by inch.

"I must undergo Tg, anti-Tg, serum calcium, scans, FT3 and FT4 tests every three months. Once the reports stabilised after a year, the tests became mandatory every six months. I must take three Thyronorm 50 tablets daily. Missing even one day causes complications. When I first started the medication, one strip cost Tk120. Then it became Tk180, and now it is Tk240. I have no choice but to take it," Saiful said.

"Earlier, I used to buy shirts worth Tk1,000; now I buy ones priced at Tk600. Where I once ate two kilograms of fish per week, I now eat one. This is how I am adjusting. There is no alternative," he added.

Since inflation accelerated after 2022, illness has become not just a health crisis in Bangladesh but a financial one. Families are cutting back on food, clothing, travel — even dignity — selling homes, skipping doses, and delaying treatment just to survive rising medical costs amid a broader cost-of-living squeeze.

Skipping doses, selling homes, taking loans

Bangladesh today bears one of the heaviest private healthcare burdens in the world. According to official data from the National Health Accounts, 68.5% of medical expenses were paid out of pocket in 2020, rising to around 73% in 2021. Only war-torn Afghanistan fares worse. The World Health Organization recommends a maximum of 20%.

Behind these numbers are people like Dolon and Saiful, recalibrating their lives around pills, test reports, and medical bills.

In Rajshahi, Nadim Abdullah runs a small shop that supports his father, younger sister, wife, and himself. When someone in the family falls sick, the business grinds to a halt.

"Sometimes we are supposed to take seven days' medicine, but we stretch it over three days," he said. "If I take medicine properly, the shop's cash will be gone."

Loans followed. NGO installments piled up. Eventually, Nadim sold his house.

"My wife has been suffering from gynaecological problems for four years," Nadim explained. "I can't afford proper treatment. I bring home homeopathic medicine just to give her some comfort. It doesn't work. This July, I sold my house. Over more than a decade, my inability to sustain and manage my business led me to accumulate debts of Tk5–7 lakh. I sold my house to repay them."

According to a 2022 survey by the Bangladesh Institute of Development Studies (BIDS), approximately 18% of the households face catastrophic health expenditures and more than 6.13 million people were pushed below the poverty line due to healthcare costs. Households cope by borrowing, selling assets, or simply avoiding treatment altogether.

My wife has been suffering from gynaecological complications for four years. I can't afford proper treatment. I bring home homeopathic medicine just to give her some comfort. It doesn't work. This July, I sold my house.
Nadim Abdullah, shopowner, Rajshahi

Rumana Huque, professor of Economics at the University of Dhaka and a public health specialist, believes that the crisis cannot be separated from the post-pandemic economy.

"Since Covid-19, people have been under immense pressure," she said. "Add to this the Ukraine–Russia war, the overall economic slowdown, and Bangladesh's political situation.

"What we see in labour force surveys is rising unemployment, especially among women. In this context, the macroeconomic situation is directly affecting people's ability to pay for healthcare from their own income," Rumana added.

Women's unemployment has risen the fastest, even as healthcare costs climb. For many families, women quietly absorb the shock — cutting their own needs first.

Medicines: The biggest drain

The largest share of out-of-pocket spending in Bangladesh goes to medicines. According to BIDS, 54.4% of the cost was spent on purchasing medicines, while the diagnostic cost is 27.52%, 10.31% for consultation and 7.77% for transport cost.

Rumana Huque said Bangladesh's medicine prices are unusually high compared to neighbouring countries.

"If we compare with India, Nepal or Pakistan, medicine prices in Bangladesh are relatively higher. This is often disputed by pharmacists, but comparative data shows clearly that prices here are significantly higher."

The absence of a structured referral system worsens the problem. Patients can buy many drugs over the counter without prescriptions. Self-medication rises. Costs spiral.

"People end up buying medicines on their own," Rumana explained. "That increases out-of-pocket expenditure even further."

In theory, essential medicines are free at public facilities. In reality, supplies dry up fast.

"In many upazila health complexes, medicines run out within 15 to 20 days. After that, patients must buy from their own pocket."

Shoayeb Mahmud from Manikganj knows this well. His mother's diabetes medication costs Tk3,600–4,000 a month. His father's medicines cost another Tk1,600. Their child's skin infection has already drained Tk20,000.

"We borrow from relatives for treatment," he said. "Still, we can't recover."

Doctors often prescribe medicines outside the Essential Drug List, even at public hospitals. Those drugs must be purchased privately, at market prices.

"This creates additional pressure," Rumana Huque mentioned. "Even when people go to government facilities, they still end up paying."

Urban patients face a different trap. Public hospitals are overcrowded and under-resourced, forcing people into private clinics.

"There is no prepayment mechanism, no insurance," Dr Huque said. "In urban areas, people depend heavily on private providers. That pushes costs much higher."

Even within cities, prices vary wildly between clinics. Medicines are often sold under brand names rather than generics, creating confusion and inequality.

"There is disparity between urban and rural areas," she said. "But also disparity within cities themselves."

A system stretched thin

According to the World Bank, financial hardship drops sharply when out-of-pocket spending falls below 20%. Bangladesh is nowhere near that threshold. The root problem lies in chronic underinvestment.

Bangladesh allocates around 1% of GDP to health, far below the WHO-recommended 5%. While health budgets have grown nominally, much of the money goes to salaries and routine expenses. A significant portion remains unspent due to weak implementation.

The result is a system where people with means seek treatment abroad — in India, Thailand, or Malaysia — draining foreign currency, while those without means delay care or fall into poverty.

Professor Rumana argued that the pharmaceutical industry and government both have roles to play.

"The pharmaceutical industry has an important role to play. If companies were willing to reduce their profit margins, prices could come down. Many raw materials and components for medicines are imported, and reducing import taxes on these inputs could also help lower costs. At present, the cost of doing business in Bangladesh — across industries, including pharmaceuticals — is very high," she said.

"If the government were to provide targeted incentives to pharmaceutical manufacturers — such as tax relief, support through export processing zones, or other facilities — particularly for life-saving medicines, prices could be brought down to a more affordable level. This would significantly reduce the financial burden on the public."

Until then, households will continue to absorb the shock.

Bangladesh's economic success under the previous political regime rested on fragile foundations, with structural weaknesses masked by headline growth. These distortions fuelled a build-up of public debt and one of the world's highest non-performing loan ratios, estimated at 35.7 percent, reflecting deep abuse in the banking sector.

As confidence eroded, foreign exchange reserves fell by nearly 40 percent between end-2022 and mid-2024, while inflation rose to a 12-year high. An artificially low interest rate cap and aggressive monetary expansion by the Bangladesh Bank intensified price pressures, with weak data transparency obscuring the scale of deterioration and contributing to political upheaval.

The interim government has made progress in stabilising the macroeconomy. Foreign exchange reserves rebounded by more than 30 percent, supported by restrictive import policies and a recovery in remittance inflows following the shift to a market-driven exchange rate. Inflation has moderated, and initial steps have been taken to address the NPL crisis. Yet the recovery remains fragile, with GDP growth slowing to 3.69 percent in FY2025 amid weak business confidence, declining equity-related foreign direct investment and lingering political uncertainty.

Political clarity has therefore emerged as a decisive factor shaping the outlook. While uncertainty surrounding the transition to an elected government has weighed on investor sentiment, the return of Tarique Rahman after a prolonged exile has reduced electoral ambiguity. His emphasis on stability and national unity has improved expectations of policy continuity, supporting a more constructive medium-term outlook, with the IMF projecting growth to rebound to 4.9 percent in 2026.

Despite these stabilisation gains, Bangladesh's capital market continues to underperform. The DSEX remains near multi-year lows, valuations are deeply compressed and foreign participation has declined sharply, even as regional peers have rallied. This underperformance is structural, driven by a prolonged IPO drought, regulatory inefficiencies, the dominance of bank financing, elevated fixed-income yields and an underdeveloped institutional investor base. These weaknesses reinforce a cycle of low liquidity and weak participation.

Bangladesh now stands at a critical juncture. Macroeconomic stabilisation, improving reserves and emerging political clarity offer a narrow but meaningful window for capital market revival. Sustained recovery, however, will depend on a coordinated reform agenda that addresses structural bottlenecks, restores institutional credibility and realigns incentives towards long-term market development.

On the fiscal front, restoring listing incentives is essential. Expanding the corporate tax differential between listed and non-listed companies to 10 to 15 percentage points would reward transparency, while tax-free dividend income could redirect household savings towards equities.

Regulatory reforms are equally important. Streamlined, digitised financial reporting and a fast-tracked IPO process would help revive the listing pipeline, while stronger corporate governance and improved stock exchange oversight would enhance market integrity and investor protection.

Institutional strengthening remains central. Enhancing the effectiveness and accountability of the BSEC, alongside revitalising the Investment Corporation of Bangladesh, would restore regulatory credibility and provide counter-cyclical market support. Progress also depends on stronger inter-agency coordination, improved financial literacy and a better balance between bank financing and capital markets through incentives for private listings and rationalised savings instrument yields.

Sustainable capital market growth ultimately depends on building a strong institutional investor base, particularly through the development of the mutual fund industry. Greater mutual fund participation would help reduce volatility by reinforcing disciplined, long-term investment practices. Yet the sector remains underdeveloped.

Achieving durable, fundamentals-driven growth will require targeted policy support, including higher tax rebates on mutual fund investments, limited tax exemptions on dividend income, larger IPO quotas and the removal of the 15 percent bank investment cap on mutual funds. If implemented consistently, these measures could reposition the Bangladesh capital market as a credible engine of long-term economic growth.

The writer is managing director and CEO of Vanguard Asset Management Limited

Artificial intelligence is affecting the way the central bank core activities towards price and financial stability are conducted. AI is changing the financial system, productivity, consumption, investment and labor markets as mentioned in BIS Annual Report 2024. These changes have direct impact on price and financial stability. As rapid adoption of AI enables firms to quickly adjust prices in response to macroeconomic changes, central bank now must think about its implications. Central banks around the world are increasingly using AI tools in monetary policy, supervision and financial stability.

For better monetary policy, the application of AI is no longer a future-oriented idea, it is now a reality. The sooner we get ourselves ready for this, the better.

Central banks need to adapt to cope with the new challenges posed by AI and it needs to upgrade its capabilities both as an informed observers of the AI effects as well as the user of the technology itself. Central banks need to stay ahead of the impact of AI on economic activity through its effects on aggregate supply and demand. Besides this, it needs to use AI tools to deal with non-traditional data in their analytical models. Collaboration and the sharing of experiences are now the key avenues for central banks to reduce the demands on information technology infrastructure and human capital. It needs to rethink its traditional roles as a compiler, user and provider of data.

AI brings new opportunities and risks to the financial system. Artificial intelligence software, algorithms and tools are continuously being used to improve risk management, investment management, fraud detection, anti-money laundering compliance, lending, trading, payments, and customer service. But it may undermine financial stability by increasing cybersecurity risk and concentration risk. The sophisticated algorithmic trading system may cause flash crashes. Criminal organizations may identify loopholes and manipulate financial systems for illegal profit. Terrorist groups may orchestrate synchronized attack on the financial infrastructure. There is a defender's dilemma whereby the attackers just need one single vulnerability to gain the illegal advantage from the system whereby the defenders need to protect the entire financial system. This dilemma may get worse with the rapid adoption of artificial intelligence in the financial sector. The central bank needs to be very cautious about this and be prepared to tackle such challenges.

AI is traced back to the late 1950s, machine learning in the 1990s and deep learning in 2010s. Machine learning helps pattern recognition from a vast number of datasets and predict based on the pattern, deep learning works with unstructured data and acts like human brain through artificial neurons. This evolution of AI is making the central bank bound to rethink the way it works.

AI is having impact on financial system in four key areas – payment, lending, insurance and asset management. Use of AI in these four key areas helps to achieve efficiency and lower costs in back-end processing, regulatory compliance, fraud detection and customer service. But AI can trigger financial crisis as there are probabilities of the rise of herding behavior or herd mentality, rise of misleading interpretation and explainability of AI-assisted decisions, worsening of an existing crisis, scarcity of historical financial crisis data, risk of digital bank runs.

Data availability and data governance are a prerequisite for the implementation of machine learning and AI in central bank policy. Two most pivotal challenges for the central bank policy are model and data. Central banks need to make a balance between whether to use in-house models or external models in their policy decisions. Reliance on external models from the private sector is cost effective in the short run but it may expose the central bank to a few external providers leading to concentration and operational risk to innovation and economic dynamism. Some of the biggest challenges in the implementation of AI in the central bank policy are data governance framework, tradeoff between off-the-shelf model and in-house model, set up of necessary IT infrastructure, lack of computing power, storage and software, lack of training for the staff, hiring and retaining staff, rising cost of commercial data.

To resolve these challenges, the most immediate need is sound data governance practices. Developing country central banks lag in data governance compared to those of the developed country. Central banks need to develop a community of practices to share knowledge, data, best practices and AI tools to overcome these challenges. For the better monetary policy implementation and maintenance of central bank dual mandate, the application of AI is no longer a future-oriented idea, it is now a reality. The sooner we get ourselves ready for this, the better it will be for the central bank.

Moazzem was a former deputy director at the central bank of Bangladesh.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.

Foreign direct investment (FDI) is essential to curb inflation in Bangladesh, Lutfey Siddiqi, special envoy to the chief adviser on international affairs, has said.

"Foreign investment is a 'mathematical reality' for Bangladesh's economy," he said at a conference titled "Future Outlook of Bangladesh Economy: FDI, Financial Reforms and LDC Graduation", in Chattogram yesterday (12 December).

Explaining the term, he said, "Bangladesh has vast investment opportunities and a young, capable workforce. To align these two, foreign investment is indispensable."

He warned that without FDI, the only option is to print money. "This will inevitably drive up inflation, increase debt, and keep interest rates high. There is no room for debate. Bangladesh's longstanding failure to attract FDI is a matter of shame."

Siddiqi also cautioned that the largest portion of the current government budget is spent on interest payments. Around 21% of the National Board of Revenue's total revenue is consumed by interest alone, amounting to roughly Tk14 crore every hour.

"Borrowing is not inherently bad, but it must be channelled into productive investment rather than mere expenditure," added Lutfey Siddiqi.

To illustrate the impact of inefficiency and corruption on the economy, he cited a garment factory operating in both Vietnam and Bangladesh.

Despite paying nearly 50% higher wages in Vietnam, the factory earns more profit there. In Bangladesh, he said, half of the lost potential profit is eaten up by inefficiencies in logistics, roads, and port operations, while the remaining half disappears into corruption.

"These problems are solvable, and we must not confine reforms to institutional discussions. The entire system needs transformation," he said.

The conference was organised by the Chattogram branch of the Institute of Cost and Management Accountants of Bangladesh (ICMAB) at a hotel in the port city.

NBR Chairman Md Abdur Rahman Khan and Eastern Bank's Additional Managing Director Ahmed Shaheen attended as special guests.

In his speech, the NBR chairman highlighted government measures on tax policy, structural reforms, and steps to attract foreign investment.

Keynote papers were presented by Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue (CPD), and Professor SM Shohorabuddin of the Finance Department at Chattogram University.

Banking is going through a rapid global transformation unlike anything seen before. Large international banks are shifting from retail banking to wealth management. In recent years, large global banks such as Citi and HSBC have exited retail banking in many markets and focused instead on wealth management and private banking in major wealth hubs, including Hong Kong, Singapore, the UAE, the UK and the US.

Their attention is now on clients at the top tier of the wealth pyramid, offering curated services such as wealth and investment advice and legacy planning. These are delivered through experienced bankers and mobile apps. They are also earning higher fee income by acting as sales agents for structured investment products issued by other banks and financial institutions. Although banks hold vast amounts of data on consumer spending patterns, they rarely use this data to offer tailored solutions. This remains a clear opportunity for banks to differentiate themselves by personalising services based on client spending behaviour.

Global banks are also moving into the field of digital currencies. Domestic payments in most countries are already digital to varying degrees. The challenge lies in cross-border payments, which are affected by differing regulations and time zones. Tokenised money could reshape this space, whether through central bank digital currencies, stablecoins, or bank-issued tokenised deposits. This presents an opportunity for our central bank and local banks to work with counterparts abroad to speed up the inflow of remittances.

The UAE recently introduced the "Jisr" platform, bringing together Emirati and Chinese banks to carry out the first cross-border payment between the UAE and China using digital currencies issued by central banks. As the UAE is one of the largest sources of remittances for Bangladesh, this is a significant opportunity. Interlinking instant payment systems across borders, as the UAE has done with China, could transform cross-border transfers.

Global banks are already deploying generative AI and investing in agentic AI. Many banking processes remain highly manual despite years of technology investment. Client onboarding and AML or KYC checks are examples. AI can pre-fill account opening forms, and clients can complete the rest on their device. Connectivity with NID and NBR servers can allow real-time identity verification and automated collection of tax documents.

Credit appraisal and portfolio reviews are also heavily manual. With AI, banks can automate credit scoring for retail and small business clients. Instead of rushing to assess portfolios during adverse or black swan events, banks can use AI to receive early warnings about deteriorating conditions in a client's environment. Another potential area is sales and client relationship management. While many banks use CRM platforms to track clients, AI can enhance this data by identifying cross-selling opportunities and highlighting promising prospective clients.

In future, clients will rely on their own AI agents to engage with banks and support financial and investment decisions. Banks that prepare for these emerging global trends and invest in them now will lead the market in the next decade.

The writer worked as a senior executive at global banks in Bangladesh and Singapore

If we want to judge the interim government fairly, the place to start is not with slogans or selective comparisons but with the data — the data candidly laid out in the State of the Economy report launched by the General Economics Division on 8 December. Read it dispassionately and a simple truth emerges: the record speaks for itself. And it speaks more clearly than the refrain that "we're doing better than Indonesia in 1998 or Sri Lanka in 2022."

It is an attractive line, but one like congratulating yourself for not driving into a ditch when the car was already skidding. Still, credit where it is due. The interim government did manage things that matter — and matter deeply — even if they don't fit neatly into a triumphalist narrative.

The IG's report card

Take the political transition. Many observers quietly doubted whether the country could be steered toward a February 2026 election without the usual theatrics. Yet the interim administration coaxed, nudged, and occasionally herded the political actors toward a workable process. In Bangladesh, where transitions often resemble a high-wire act performed during an earthquake, simply keeping the dialogue on the rails is no mean achievement. Political stability may not appear in macroeconomic equations, but it is the soil in which every macroeconomic variable grows.

Then there was the remarkable episode of August 5–8, 2024—three days when the country had no functioning government and the police were effectively absent. Yet Bangladesh did not descend into the Hobbesian nightmare we are so often warned about: "war of each against all". There were political violences for sure, but none like the anarchy that would have horrified Hobbes.

Locke would have smiled knowingly. Rousseau would have claimed vindication. And Hobbes, poor man, would have been forced to add a sheepish footnote to Leviathan admitting that under certain conditions, society can behave better without the state than the state behaves with itself. But let's not stretch three days of civic restraint into a grand theory of Bangladeshi exceptionalism. Social resilience is real, but it is not infinite. It buys time; it does not resolve structural tensions.

The interim government needed every hour of that borrowed time. They did not inherit a functioning control room. They walked into a ship already taking water — hollowed-out institutions, jittery markets, mountain of arrears (in local and foreign currencies) and correspondent banks that slammed the brakes the moment the transition began, to mention just some. The banking system was distressed enough that even optimism needed collateral. Their first job was not to chart a bold new course but to keep the vessel from capsizing. Expecting sweeping structural reform from a government juggling existential threats, political reform, justice for state-sponsored violence, and the logistics of a credible election is not analysis; it's fantasy.

Economy at 'critical juncture' despite regaining macroeconomic stability, warns Planning Commission report

One quiet but telling achievement of the interim government is the thinning of the ambient fear that once wrapped public expression like barbed wire. People haven't become fearless overnight, but they are no longer terrified of intelligence agencies pouncing on every raised eyebrow or inconvenient footnote. The old ritual of triple-checking a Facebook post as if it were a state secret has eased. Critics now worry more about trolls than midnight knocks, which, in Bangladesh's political climate, counts as progress.

Fifteen months is not fifteen years. Within that window, they kept the ship afloat long enough for the country to breathe again. They began nudging the economy back toward tighter monetary policy, a more realistic exchange rate, a willingness to confront fiscal imbalances, and initiated long overdue structural reforms in trade logistics, labor, energy, financial regulation and so on. These moves didn't solve everything, but they stopped the bleeding.

Tight monetary policy strains banking sector, slows deposit and credit growth: Planning Commission report

In macroeconomics, stopping the bleeding is sometimes the most important first step. This shift is evident across several key indicators—remittance, reserves, exchange rate, illicit outflows, electricity, and revenues. These green shoots suggest that the foundations for cautious optimism are being laid.

A comparison we don't need

But here's where we need to stay grounded. Many of the reforms being cited as progress are still somewhere between "in progress" and "under consideration." Implementation remains the Achilles' heel of Bangladeshi policymaking, as it has been for decades. This is precisely why the "we're doing better than Indonesia and Sri Lanka" line needs a reality check. Bangladesh looks better not because of what the interim government prevented, but because the country did not begin its post-uprising journey from the same cliff edge.

Indonesia in 1998 was already in freefall — a banking implosion, capital flight, and a currency collapse all happening at once. Sri Lanka in 2022 was in a full-blown sovereign default with fuel lines stretching for miles. Bangladesh, by contrast, inherited a slow-burn structural crisis: high inflation, distressed banks, low reserves, and pervasive corruption. Serious, yes—but not remotely comparable in scale or immediacy. We didn't have a banking collapse. We didn't have hyperinflation.

A fair reading also requires acknowledging that Bangladesh did not glide into its transition on calm waters. The country spent much of the year inside a rolling protest bubble that repeatedly disrupted activity, mobility, and welfare. Streets were blocked, supply chains were strained, and uncertainty became a daily companion.

So it's not that Bangladesh enjoyed a sturdier political "tectonic plate" than Indonesia or Sri Lanka. The real difference lay in how quickly authority was restored once the old order collapsed—and why that speed was possible. Indonesia in 1998 endured weeks of drift after Suharto's fall, with no functioning executive and a fractured state arguing over succession. Sri Lanka in 2022 saw its president flee, its cabinet evaporate, and ministries abandoned while the country waited for someone—anyone—to take charge.

Bangladesh's vacuum, by contrast, was chaotic but short-lived, in part because Professor Muhammad Yunus's global stature and broad acceptability nationally provided an immediate focal point around which an interim government—however imperfect—could be assembled. That speed mattered. It prevented the kind of prolonged institutional paralysis that turns economic stress into economic collapse.

That personality mattered too. Professor Yunus is not your typical head of government. One aide joked, "He's the only leader who quotes Tagore, talks about blockchain, and asks about your mother—all in the same breath." He wears his signature Grameen check Panjabi and the same pair of sneakers he has reportedly owned for years irrespective of whether he is in the Chief Advisers Office, the UN or the Vatican!

So the relief we feel today is evidence of a different starting point. That is why the Indonesia–Sri Lanka comparison, however comforting, is ultimately a distraction. It obscures the real question: not whether we avoided someone else's disaster, but whether we are building our own success.

Building the best

That brings us to the heart of the matter. What held the interim government back from doing better? Time, mandate, and institutional capacity—the three constraints that shape every transitional administration. You cannot rebuild institutions at the same time you are relying on them to manage a crisis. Reform is not a sprint. It is a marathon. Running a marathon requires not only the will to start but the stamina to stay the course.

The interim government deserves credit—for stabilising the political process, for preventing economic freefall, and for navigating a period when society, not the state, held the line. But doing better than a disaster is not a development success. It is simply the first step toward one. History will ultimately judge, but having avoided the worst, we need to crave the best.

Building the best must begin with the election ahead—an election that is, in effect, a national referendum on the kind of political order we want to stand on. The choices made there will determine whether reform becomes a sustained journey or another interrupted promise.

Bangladesh's economy is under strain but has avoided a far worse outcome, former World Bank lead economist Dr Zahid Hussain said today (8 December), stressing that sustained reform and an uninterrupted electoral process are now essential for stability.

Speaking at a seminar on the publications Bangladesh State of the Economy 2025 and Sustainable Development Goals: Bangladesh Progress Report 2025, held at the Planning Commission in the capital, Zahid Hussain said the economy shows both strengths and weaknesses, with the negative indicators still outweighing the positive.

He said remittance inflows have reached new highs, illicit financial outflows have slowed, revenue mobilisation has improved slightly, and electricity supply has remained stable.
Bangladesh also managed recent natural disasters better than expected, he said, adding, "These are the indicators in my positive basket."

However, inflation remains very high, growth is subdued, real wages have fallen, employment has stagnated, exports have weakened in recent months, investment remains depressed, and poverty has increased, according to recent World Bank assessments.

"Overall, the negative basket outweighs the positive one. The economy is struggling, and so are livelihoods. But it could have been much worse," he said.

Zahid Hussain outlined three factors that helped prevent a deeper crisis.

The first, he said, is Bangladesh's "deep social resilience", which became evident during the three days of the August 2024 upheaval when state institutions temporarily collapsed.

There was no government, no police on the streets, no secretaries, no vice-chancellor, no central bank governor — and yet society did not collapse," he said.

The second factor, he added, is the interim government's approach to political management, which has helped reduce the intensity of partisan hostility. He described this as a cultural shift where political actors express criticism without naming individuals directly.

He said sustained dialogue and inclusive political engagement over the past nine months have contributed to this change.

He noted that all political parties criticising the interim government for bias is, paradoxically, "a sign of neutrality". Zahid Hussain warned that only a major political shock could now halt the electoral process. "Elections will take place — unless there is a six-magnitude political quake," he said.

The third factor he identified is macroeconomic management and the ongoing reform agenda. He argued that Bangladesh had long engaged in "self-destructive" economic practices that became institutionalised.

Although efforts over the past 18 months have attempted to correct this, significant progress remains limited. He said the belief that "where there is political will, there is a way" needs revisiting.

"Willingness alone is not enough. There is no guarantee of success simply because the intention exists," he said.

Despite numerous commissions, consultations and reports signalling reform intent, the number of ordinances and Cabinet decisions implementing them remains "very small".

"We still do not see major visible results on the ground," he added. The economist stressed that reforms require not only political will but political stamina.

Without stamina, reforms stall "like a computer that suddenly hangs".

He cautioned that without sustained reforms, achieving stronger economic performance will be "extremely difficult".

The seminar was attended by senior economists, policymakers and development practitioners who discussed the economic outlook and progress toward the Sustainable Development Goals.

For more than forty years, Bangladesh has carried a remarkable story of economic transformation. A country rooted in agriculture built one of the world's most influential apparel industries through grit, discipline and a willingness to learn. The label "Made in Bangladesh" travelled across continents because workers and entrepreneurs believed they could do something bigger than their circumstances. That belief helped reshape the national economy and identity.

But today the landscape looks more uncertain. Export earnings have been falling for four consecutive months, a sign that the long-trusted engine is facing pressure. In November, Bangladesh exported goods worth $3.89 billion, about five and a half percent lower than the same month a year earlier, when the figure was $4.12 billion. According to the Export Promotion Bureau (EPB), almost all major sectors saw declines in November. Apparel, jute, agricultural processed goods, home textiles, non-leather footwear, frozen food and plastics all registered drops. Only leather and leather goods managed to grow. Even apparel, the strongest pillar, was down by five percent.

These shifts are not happening in isolation. Global markets are adjusting to changing tariff regimes, political tensions and evolving consumption patterns. Buyers in key regions are reassessing costs, placing smaller orders and negotiating harder. A combination of price adjustments and softer demand has created a slowdown that is affecting several producing countries, including Bangladesh. This is a reminder that no matter how strong an industry may be, its fortunes can still be shaped by geopolitical forces beyond national control.

This is why the conversation on diversifying the export base feels more urgent than it did a decade ago. Bangladesh cannot rely on a single sector to sustain long-term growth. The apparel industry will remain a cornerstone, but it cannot be the only path to resilience. There are promising alternatives emerging. Plastics and packaging, furniture and light engineering, frozen and processed foods and software and digital services all show real potential. Some Bangladeshi companies in these sectors have already reached international markets, often with little coordinated support. Their progress suggests what is possible if the country takes a more organised approach.

To chart that path, it helps to recall how the apparel sector rose in the first place. In the early years, Bangladesh did not have world-class factories or ready access to buyers. What it did have was ambition and a willingness to build partnerships. Entrepreneurs collaborated with experienced international firms, and groups of young Bangladeshis travelled abroad for hands-on training. They returned with knowledge that reshaped the sector. These early professionals later became managers, production specialists and eventually, for some of them, entrepreneurs. Their learning created the backbone of a national industry.

The principle remains relevant today. Countries rarely diversify by working alone. New sectors grow when skills, technology and market access move across borders through partnerships that are commercially aligned. Bangladesh has the foundation for this model. Universities, institutes and NGOs have long experience in delivering training at scale. Development finance institutions are increasingly interested in supporting sectors that can mature into export industries. IFC and FCDO both came forward in the recent past. What is needed now is focus and coordination.

Diversification works best when a country chooses a few priority sectors and invests with discipline. That means building technical capacity, shaping supportive regulation, reducing friction for exporters and ensuring that early movers have the room to grow. When the focus is clear, industries can mature faster and attract stronger partnerships.

The apparel sector still has room to expand through new materials, automation, sustainability and access to emerging markets. But it cannot remain the only driver of an economy approaching half a trillion dollars. The recent decline in export earnings is not a crisis. It is a signal that the time has come to widen national horizons and move beyond a single engine.

The writer is an economic analyst and chairman at Financial Excellence Ltd

In principle, there is nothing wrong with cash financial transactions. The problem arises when they are used to evade tax, launder money, facilitate illegal deals or pay bribes. In such cases, the transactions become questionable.

A clear definition of cash transactions is essential. Issuing cash cheques and moving funds outside banking channels are common examples. The government has tried through various regulations to reduce reliance on cash, yet the impact has been limited.

As a result, financial statements are drifting away from reality, and personal finances are being pushed into the informal economy. These practices have fuelled large-scale tax evasion and corruption. The use of illegal funds for criminal activities adds another layer of concern that cannot be ignored.

Cash transactions are widespread in property deals, where a large portion of the payment takes place in cash outside the official deed value. Similarly, cash sales are often not deposited into company bank accounts and remain outside the books. Cash payments to suppliers are another area where tax evasion is a key motivation.

Recently, some bank officials have begun questioning ordinary clients about withdrawals exceeding Taka five hundred thousand. Yet it is striking that, within this environment, billions have been siphoned out of banks, apparently without similar scrutiny.

The government has introduced various measures to bring untaxed black money into the formal economy, but these have shown little success.

With the introduction of document verification, ICAB has ended the practice of maintaining multiple sets of financial statements. If cash transactions can be reduced or controlled, the quality of financial reporting will improve, and government revenue will be better protected, which in turn will help support economic growth.

There is also an irrational rule in the country. Any individual, regardless of income, tax history, social standing or financial position, is entitled to the same foreign currency quota, including international credit card limits. Money exchange houses operate largely on a cash basis, and the extent to which these are effectively monitored is unclear. Only account holders under the export retention quota receive some flexibility, and students are allowed to remit funds for overseas education. These narrow opportunities encourage further cash transactions.

Foreign currency quotas for overseas travel should vary according to income, frequency of foreign trips and annual personal tax contribution. In many countries, cash payments beyond petty purchases in small shops or street markets are rare. Some argue that cash cannot be avoided in retail trade. Yet daily sales can be deposited by evening or the next working morning. Bank branches are now widespread across the country.

Many companies, particularly foreign ones, already follow such practices. Salaries and wages can be paid through banks, as can student allowances, overtime and local travel costs, which is standard in all CA firms under ICAB requirements. No supplier should receive cash payments in any corporate entity. Auditors can attach a certificate to cash transactions with tax returns to ensure transparency. In property acquisitions, all payments, whether within or beyond deed value, should be subject to tax and penalties where evasion is detected.

Ultimately, digitalisation is a crucial tool for correcting these irregularities. Like many developing countries, Bangladesh must reduce cash transactions to remove a significant barrier to economic growth, and the sooner the better.

The writer is a senior partner of Hoda Vasi Chowdhury and Co, and past president of ICAB

Approximately half of the population in Bangladesh seeks medical care from unqualified providers, according to a recent survey from the Bangladesh Bureau of Statistics (BBS).

The findings, shared yesterday at a dissemination event for the Health and Morbidity Status Survey (HMSS) 2025, show that 54% of patients sought treatment from drugstore salespersons or practised self-medication, rather than consulting qualified medical practitioners. Only 11.5% visited government health facilities, while about 20% turned to private providers.

Conducted on 1,89,986 individuals across 47,040 households between November and December last year, the survey also recorded widespread patient dissatisfaction and highlighted systemic challenges affecting health outcomes.

Hypertension tops among 10 common diseases

The survey reveals that hypertension tops the list of the country's 10 most common diseases, affecting 78.28 per 1,000 people, followed by peptic ulcer, diabetes, arthritis, skin diseases, heart disease, asthma, osteoporosis, hepatitis and diarrhoea.

In the 90 days preceding the survey, 332 per 1,000 people (33%) reported falling ill, with women reporting a slightly higher illness rate than men. Experts warn that dependence on untrained providers has contributed to delayed diagnosis of chronic illnesses and rampant misuse of antibiotics.

Dr Abdus Shakur, registrar at the National Institute of Kidney Diseases and Urology, told The Business Standard that medication is not "magical"—its effectiveness requires correct dosage and clinical judgment.

"Taking medicines—especially antibiotics—on a shopkeeper's advice is extremely harmful. Drugs like meropenem were once considered revolutionary, but resistance has now become common in Bangladesh," he said.

He added that many kidney patients are unknowingly worsening their condition by taking unnecessary painkillers for prolonged periods based on pharmacy advice. Even for minor ailments, he stressed the need for at least one consultation with a qualified MBBS doctor to avoid irreversible complications.
Infograph: TBS
Infograph: TBS

Low hypertension control rate fuels health risks

Professor Dr Sohel Reza Choudhury, head of the Department of Epidemiology & Research at the National Heart Foundation, said that "Nearly one in four adults in Bangladesh lives with hypertension, yet only 16% manage to keep it under control—leaving 84% either undiagnosed, untreated, or poorly treated."

He said many patients stop taking medication once their blood pressure stabilises, increasing the risk of heart attacks, strokes and kidney disease. Weak screening mechanisms and treatment gaps further aggravate the situation.

He recommended bolstering primary healthcare services, ensuring uninterrupted medicine supply, training community health workers for early screening, encouraging routine blood pressure checks for people aged 30 and above, and expanding telemedicine access.

Average treatment cost Tk2,487 per person

The survey also sheds light on the financial burden of healthcare. In the three months preceding the survey, the average medical expenditure per person stood at Tk2,487, with women spending slightly more (Tk2,576) than men (Tk2,387). Despite greater reliance on public facilities, women incurred higher overall expenses.

Among women aged 15–49, the national Caesarean section rate reached 49.3%, rising to 53.3% in urban areas and standing at 48.1% in rural settings.

The average cost of childbirth was Tk22,655, including Tk5,658 for antenatal care and Tk13,060 for delivery. Urban mothers spent more—Tk26,360, compared to Tk21,554 in rural areas.

Disability, tobacco use remain major concerns

The HMSS 2025 found that 5.2% of the population lives with a physical or mental disability, with the rate rising slightly to 5.6% in urban areas. Among people aged 18 and above, the disability rate jumped to 7.1%, with treatment expenses averaging Tk7,269 in rural areas and Tk5,417 in urban areas.

Tobacco consumption remains widespread, with 26.7% of individuals aged 15+ using tobacco products. Usage was higher in rural areas (27.7%) than in urban ones (24.1%). The survey recorded tobacco use among 37.9% of males and 16.5% of females.

The findings collectively point to urgent gaps in healthcare access, awareness and preventive practices—issues experts say require immediate policy attention to avert worsening health outcomes nationwide.

Over the past five years, Bangladesh's banking sector has undergone a significant transformation. Mobile apps have brought almost every banking service directly into people's hands, allowing customers to conduct their daily financial activities from home instead of visiting branches.

Today, nearly all private commercial banks have launched their own mobile apps for everyday banking. This widespread adoption has fuelled a sharp rise in digital transactions, creating a win-win situation for both customers and banks. According to Bangladesh Bank data, internet banking — mostly conducted through mobile apps — accounted for over 40% of all monthly banking transactions in July.

Rising smartphone use and smart banking apps are accelerating Bangladesh's move toward a cash-light economy. Digital payments now support every layer of commerce, from micro-merchants to major corporations

In that same month, transactions through internet banking amounted to Tk1.13 lakh crore, compared to Tk1.57 lakh crore through cheque clearing. Banks say the surge in mobile app usage has been driven by the digital payment ecosystem they have built, which has made online transactions particularly popular among younger users.

From paying bills and rent to sending money, opening accounts, checking statements, downloading tax certificates, or simply recharging a phone balance, mobile banking has placed everything just a few taps away. No queues, no banking hours, and no need to be physically present at a branch.

A striking example is City Bank's Citytouch, one of the earliest digital banking platforms launched in 2013. For the first seven years, progress was slow, with only 72,000 users. But the next four and a half years witnessed an extraordinary surge. The user base jumped to 8.82 lakh, growing at a compound annual growth rate (CAGR) of 65.4%. The Covid-19 pandemic acted as a major catalyst, as lockdowns and social distancing pushed people towards digital services for daily needs.

The jump in transactions is even more revealing. In 2020, Citytouch recorded daily transactions worth Tk27 crore. By July this year, that figure had skyrocketed to Tk400 crore — a CAGR of 73.6%. This massive shift has allowed City Bank to save around Tk20 crore every month on staff costs. More importantly, it shows how rapidly Bangladeshis are embracing digital money management.

BRAC Bank's Astha app has seen similar success, surpassing 10 lakh users and now crossing 12 lakh. Managing Director and CEO Tareq Refat Ullah Khan called it a "significant milestone," noting that customers conduct Tk20,000 crore in transactions each month — nearly Tk700 crore daily. He said digital banking has grown from being a convenience to becoming a central part of everyday financial life.

Today, 71% of BRAC Bank's total transactions take place through the Astha app. Tasks that once required hours — paying bills, applying for deposits, collecting bank statements for income tax, redeeming reward points, updating nominee details, or adjusting card settings — can now be done within minutes. Customers can also pay insurance premiums, manage education fees, activate auto-pay instructions, and operate DPS, FDR, or consumer loans directly through the app. This ease has made financial management far more intuitive, allowing people to spend less time on routine banking.

The shift is also helping Bangladesh move toward a cash-light society. Astha now facilitates digital payments at every level of the economy — from micro-merchants using BanglaQR to large corporate transactions. Annual transactions through the app soared from Tk12,000 crore in 2021 to more than Tk134,000 crore in 2024, reflecting a major behavioural change and growing trust in secure, traceable digital channels.

BRAC Bank has invested heavily in building a strong digital infrastructure to support this momentum. "With the Astha app, we've empowered customers to open an account or apply for a loan in the time it takes to enjoy a cup of tea. We're offering more than a service — we're creating instant access to opportunity. That's the very essence of genuine financial inclusion," said the bank's MD.

Dutch-Bangla Bank's NexusPay is another major driver of this shift. With nearly 70 lakh users as of August, monthly transactions through NexusPay exceed Tk21,000 crore, placing DBBL at the centre of the country's digital payment network.

According to Managing Director Abul Kashem Md Shirin, mobile banking did more than modernise the banking system — it created a parallel, mobile-first financial ecosystem that reached people traditional banks could not. In rural areas without physical branches, agent banking supported by apps or even simple USSD codes became the local "branch." Farmers, day labourers, and small shop owners suddenly had access to services once limited to urban customers.

As one of the pioneers of MFS, DBBL's Rocket changed customer behaviour early on. Before Rocket, banking meant cash. But with simple services like Cash-In/Cash-Out, P2P transfers, and merchant payments, people began to treat their mobile phone as a safe wallet. For garment workers, small business owners, and remittance recipients, this instant access to funds was transformative — no more losing a day's wage travelling to a bank branch.

bKash, the largest mobile financial services provider in Bangladesh, now has 8.2 crore customers using its app for transactions. Users can also add money directly from their bank accounts, making digital payments even smoother.

Azmal Huda, Chief Product & Technology Officer of bKash, said, "We designed the app to be a lifestyle enabler, not just a financial tool. We moved away from text-heavy interfaces to an engaging visual, icon-driven design that bridges literacy gaps. The reason bKash has become the preferred choice for millions is that it works intuitively; users don't have to 'learn' the app — the app guides them. Whether it is the clean layout or the one-tap access to essential services, every pixel is designed to reduce cognitive load and make financial freedom accessible to everyone."

Eastern Bank's Skybanking, though smaller in scale with 4.5 lakh users and Tk120 crore in daily transactions, has shown one of the fastest growth trajectories. In the last five years, users increased by 437%, transaction volume by 775%, and total transaction value by 2,695% — showing how quickly the bank is catching up.

Ali Reza Iftekhar, Managing Director and CEO of EBL, said, "Today, nearly half a million people use Skybanking, with a Bank-to-App conversion rate close to 50% — among the highest in Bangladesh. This shift reflects more than adoption; it represents a mindset change. Customers are no longer 'trying out' digital banking — they are relying on it as their primary mode of financial interaction."

He added, "Mobile banking is one of the strongest catalysts in Bangladesh's journey toward a cashless society. Every digital payment, every QR transaction, every online transfer chips away at our dependence on cash."

Mutual Trust Bank's MTB Neo app offers 24/7 access to services such as balance checks, fund transfers, bill payments, account opening, and more. Its user base has been growing by 35% annually, now reaching nearly 2.5 lakh users. Monthly transactions have seen a 90% year-on-year increase, totalling around Tk2,000 crore.

MTB Managing Director and CEO Syed Mahbubur Rahman said, "MTB Neo didn't just digitise banking; it changed how our customers think about banking altogether. Our philosophy has been simple: if a customer can do something at a branch, they should be able to do it from MTB Neo as well. Whether it's paying utility bills, sending money to a friend, paying school fees, purchasing essentials, making business-related transfers, or even applying for loans — our goal is to place everything within the customer's reach."

At the launch of the World Bank's report, Bangladesh Poverty and Equity Assessment 2025, the country's leading economists delivered a stark warning: Bangladesh is entering a phase where long-held assumptions about growth, jobs, and poverty no longer hold.

They said the World Bank's findings reflect a deeper national concern – growth is becoming less inclusive, repeated shocks have eroded earlier gains, and the institutional foundations of poverty reduction are weakening.

'Mega projects boost GDP but fail to create jobs, reduce poverty'

Hossain Zillur Rahman, executive chairman of the Power and Participation Research Centre (PPRC) and chief guest at the WB report's launch at a Dhaka hotel yesterday, said the findings can be understood only by examining three distinct political-economic periods: 2010-16, 2016-22 and 2022-25.

After 2016, governance incentives shifted, rule-based systems weakened, corruption incentives deepened, and inclusiveness eroded.
Hossain Zillur Rahman, Executive Chairman, PPRC

"The first period still reflected the old growth poverty reduction model, but after 2016, governance incentives shifted, rule-based systems weakened, corruption incentives deepened, and inclusiveness eroded.

"During this period, the government focused heavily on mega projects and headlines of growth. But it did not consider the implications for employment and poverty reduction. Mega projects have boosted growth, but that growth has not been inclusive," he added.

Citing the example of the Padma Bridge, he said the project did contribute to GDP growth, but it did not generate employment on a comparable scale. Its implementation relied heavily on technology, limiting job creation.

He warned that the 2022-25 period marks a real structural reversal, not a short-term disruption. Poverty has risen to around 27%, extreme poverty is climbing, and 2.1 million jobs were lost in late 2024 – 1.5 million of them women.

Agriculture's renewed prominence, he said, stems not from rural strength but from stagnation elsewhere: "We must ask whether rural dynamism reflects productivity or simply low-paid informal work."

He emphasised three state failures: corruption, everyday bureaucratic "hayrani", and weak security for women as critical barriers to inclusive growth.

"Education is expanding, yet not translating into human capital. Unless we solve this paradox, new skill programmes will only reinforce the existing mismatch," he added.

'Distorted data masked true poverty slowdown'

Speaking with TBS about the World Bank report, Zahid Hussain, former lead economist at the World Bank's Dhaka office, said that while the report correctly notes a slowdown in poverty reduction after 2016, it fails to explain why. He said the key issue is that the "elasticity of poverty reduction to growth" dropped sharply because the growth data itself became distorted.

Although GDP growth appeared higher in 2016-2022 compared to 2010-16, poverty fell more slowly, largely due to manipulation of growth figures.
Zahid Hussain, former lead economist at the World Bank's Dhaka office

Although GDP growth appeared higher between 2016 and 2022 compared to 2010-16, poverty fell more slowly. According to him, this is largely due to statistical manipulation – growth figures were inflated in a "blatantly visible" way during this period, a point the report does not address.

Zahid noted that the World Bank's 2022 Country Economic Memorandum even raised questions about Bangladesh's growth statistics, but the new poverty report overlooks this critical factor.

He also linked the issue to a broader decline in democratic governance after 2014, arguing that with reduced electoral competition, the government sought legitimacy by showcasing mega projects and "mega statistics," including overstated GDP growth. These projects, he said, did little to raise labour incomes or industrial growth.

In reality, he concluded, actual growth weakened after 2016, but this was not reflected in official data, making the slowdown in poverty reduction unsurprising.

'Where are the jobs?'

Zaidi Sattar, chairman of Policy Research Institute of Bangladesh (PRI), raised a set of pointed questions on how Bangladesh can make economic growth more employment-rich and inclusive. Referring to the report's focus on strengthening foundations for productive jobs.

"Where are those better jobs?" he asked.

He argued that simply expanding access or enabling markets for the rural poor is insufficient without clarity on which markets can realistically generate large-scale employment.

Sattar noted that the domestic market, supported by a $460 billion GDP, cannot alone absorb the roughly 2 million new entrants to the labour force each year. Although around 1 million workers migrate abroad annually for temporary employment, easing some pressure, domestic job creation still remains constrained.

Agriculture, which employs 45% of the workforce, cannot be the source of high-quality, high-wage jobs, he said. "Wage employment is not available in agriculture. Wage employment comes from industry." Bangladesh, he stressed, is still in its industrialisation phase, not deindustrialisation and therefore must continue expanding its industrial base to generate jobs."

Drawing on three decades of experience since the 1990s, Sattar emphasised that Bangladesh's most inclusive growth periods came from integration with global markets. "If you want job creation, we have to continue industrialising with the global market in our region," he said.

He argued forcefully that Bangladesh must continue industrialising with global markets, warning that rising protectionism is undermining job creation.

"We have one of the most restrictive trade regimes in the world," he said.

He called for an open trade regime and stronger integration between rural and urban economies, an area where China and Vietnam have shown the way. Sattar concluded by commending the report's analytical strength but urged the inclusion of a sharper policy lens: "Growth will not be inclusive or job-creating unless our policies are more open than they are today."

'Poverty trends need deeper explanation, not just data'

Mustafizur Rahman, distinguished Fellow at CPD, said the World Bank's report offers a strong analytical foundation but leaves critical poverty-related questions unanswered.

He welcomed its detailed mapping of structural drivers yet noted that the Household Income and Expenditure Survey 2022 was surprisingly silent on Covid-19, despite the pandemic's major economic shock.

Surveys by South Asian Network on Economic Modelling (SANEM), BRAC Institute of Governance and Development (BIGD), PPRC and CPD had clearly shown a sharp though temporary rise in poverty during 2020-21, he reminded.

Mustafizur said any serious poverty assessment must account for the combined impacts of Covid, the Russia-Ukraine war, and three years of persistent inflation, which reshaped household welfare nationwide.

While agreeing that growth alone cannot reduce poverty, he argued that Bangladesh must confront the institutional and political-economic constraints behind slowing job creation and weakening inclusiveness. "These questions are critical," he said, urging deeper debate to ensure effective policy reform.

'Poverty assessment must address structural barriers'

Moderating the report launching event, Selim Raihan, executive director of SANEM, said that while the report presents a strong analysis of poverty drivers and structural vulnerabilities, it leaves several critical gaps.

His foremost concern was the absence of Covid-19 impacts in the 2022 BBS survey, which, he noted, portrayed poverty trends "as if there was no pandemic in the world." This omission stands in contrast to rapid surveys by SANEM, BIGD, PPRC, CPD and others that documented a clear spike in poverty during 2020-21.

Selim Raihan added that other major shocks, such as the Russia-Ukraine war, prolonged price volatility, and three years of high inflation, must be integrated into any meaningful poverty narrative.

While endorsing the report's message that growth alone cannot reduce poverty, he stressed that Bangladesh must confront the institutional and political-economic constraints behind slowing poverty reduction and stagnant job creation. Without addressing these deeper issues, he warned, policy responses will remain incomplete.

Though I spent my banking life with foreign banks, I was mostly half-hearted about knowing the courtroom performance of local lawyers. Many were seen arriving without having done enough homework before defending their clients.

Bangladesh banking is now at a critical juncture. With non-performing loans (NPLs) rising sharply, the question is whether stronger legal action by banks can help reverse the trend. The burden of bad loans is far heavier than in many other countries. The NPL ratio reached more than 20 percent of total loans by December 2024. More alarmingly, that ratio rose to 24 percent by March 2025 and even higher in June 2025. In state-owned commercial banks, the figure peaked at 43 percent in the second quarter of fiscal 2025.
By contrast, in Asia more broadly, the average NPL ratio is much lower. For example, banks in India reported a gross bad-loan ratio of around 2.3 percent in March 2025. In China, the ratio stood at just 1.56 percent at the end of June 2024. These comparisons underline the scale of the challenge. If other countries maintain NPLs in the 1-3 percent range, then Bangladesh, at 20-25 percent, is operating with a huge volume of distressed loans.

If government reforms alone are not sufficient, then banks must ask themselves what more they can do. Litigation and recovery processes emerge as essential parts of the solution. When borrowers stop servicing loans, steps such as court filings, asset seizures and legal enforcement become necessary. Bangladesh now has specialised money loan courts under the Money Loan Court Act 2003, along with directives by the central bank requiring banks to build stronger legal divisions. But having a court system is one thing; using it effectively is another.

When a bank spots early signs of a troubled loan, swift escalation to its legal team matters. If the legal division lacks qualified staff or monitoring systems, cases may drag. Delay means that defaults deepen, collateral values may decline, and recoveries shrink. In contrast, when a bank legal team and its panel lawyers coordinate seamlessly, reviewing in depth, filing early, tracking hearings and executing judgments, the cost of delay drops and bad loans start to shrink. International research shows that high NPLs hurt bank assets and income growth.

The regulator has prescribed specific standards. Banks must appoint chief legal officers with law degrees and experience. At least one-third of legal department staff must hold legal qualifications and banking experience. Panel lawyers must be enrolled advocates with an active practice. These requirements aim to strengthen the legal machinery inside banks. Yet structural challenges persist, including delays in filing, weak coordination between internal teams and outside counsel, overloaded courts and the increasing classification of loans under newer, stricter regulations. For example, the classification period is being reduced to three months from March 2025.

What does this mean for the banking sector? A high NPL level restricts banks' ability to lend. The Bangladesh Bank has noted that the bad loan surge is limiting banks' credit capacity. If banks are saddled with large unrecovered loans, then they must set aside more provisions, profitability suffers, capital buffers are eroded, and economic growth slows. For this reason, litigation must be treated not as a one-off measure but as part of the overall risk-management structure: monitor early, escalate quickly, litigate efficiently, recover assets and redeploy capital into new lending.

Litigation can reduce default loans, but only if banks strengthen their legal divisions, embed recovery procedures into their operations, coordinate with courts and lawyers, and act with speed and precision. Government and regulatory reforms may set the stage, but banks are the ones who must use it. If internal legal strength aligns with external legal infrastructure, then the tide of defaults can be stemmed and the economy can breathe easier. What is needed now is decisive commitment from bank boards and senior management, a clear push to invest in legal capabilities, enforce accountability and prioritise rapid recovery.