EVERY evening in a Dhaka slum, 32-year-old Fatima skips dinner so her children can have a hot meal. Her husband鈥檚 rickshaw fares, once sufficient to feed his family of five, now barely cover half the cost of rice and lentils. This is not an isolated tragedy but a symptom of a broader crisis: Bangladesh鈥檚 economy, once celebrated for rapid growth and rising living standards, is now buckling under the weight of runaway inflation, a plunging taka, depleting foreign reserves, and a debt burden that threatens our hard-won progress.
Headline inflation, which breached 11 per cent in late 2024, still hovered near 9.4 per cent by March 2025 鈥� far above the central bank鈥檚 comfort zone of 5鈥�6 per cent. As the taka slid from roughly Tk 85/$ in 2020 to a staggering Tk 127 on the informal market by year鈥檚 end, imported staples 鈥� from cooking oil to medical supplies 鈥� became luxuries for many. The consequence is a brutal stagflation: prices soar even as GDP growth slows to an IMF-estimated 3.8 per cent for FY2024-25. Wages stagnate, savings evaporate, and the ranks of the newly poor swell 鈥� among them garment workers fainting at their machines from hunger, children pulled from school because families can no longer afford fees, and smallholder farmers selling a day鈥檚 labour for less rice than it once yielded.
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Foreign reserves, debt pressure
BETWEEN 2021 and late 2024, Bangladesh鈥檚 foreign exchange reserves plunged from over $40 billion to about $24.3 billion 鈥� barely enough to cover a few months of imports. This erosion of our buffer has left us perilously exposed to external shocks. With export growth faltering and debt repayments looming, the government turned to the IMF for a $4.7 billion ECF/EFF/RSF package 鈥� yet progress stalled as Dhaka resisted key conditions on tax reform and exchange-rate flexibility.
Meanwhile, Moody鈥檚 downgrade of Bangladesh鈥檚 sovereign rating to B2 in late 2024 underscored rising liquidity and banking risks tied to increasing short-term domestic borrowing. China, in the meantime, has emerged as a crucial lifeline; in March 2025, Beijing pledged $2.1 billion in fresh loans and grants, even as it mulled rate cuts on existing credit. But such support comes with geopolitical strings, and leaning too heavily on a single partner risks compromising our strategic autonomy. China鈥檚 support for the airport in Lalmonirhat and upgrading Chittagong and Mongla ports with special economic zones require strategic scrutiny from a sovereign perspective.
These are clear, quick strategic gains for China in South Asia that significantly affect Indian national security interests in the region. The interim government鈥檚 foreign policy acceding to China鈥檚 demands clearly pushes Bangladesh on a knife鈥檚 edge, as we start to see the trade embargoes from India followed by stern warnings against Bangladesh. South Asian geopolitical tensions are already heightened, and we hope we are not put in the crosshairs between the two superpowers. At the same time, Western creditors like the IMF and multilateral lenders insist on further governance and transparency reforms in Bangladesh as preconditions for aid. We can only hope the different branches of the foreign ministry and the finance ministry are working in tandem for the national interest.
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Tax reform that favours few
THE interim government under Muhammad Yunus touted progressive change, but its approach to tax reform has been deeply misguided. Instead of broadening the tax base and slashing exemptions for the wealthy, the regime tinkered around the edges 鈥� promising to remove 鈥榮ome鈥� concessions but failing to tackle the deep-rooted capture of fiscal policy by elite interests. The result is continued revenue under-performance, with tax-to-GDP ratios stuck below 10 per cent despite the fiscal squeeze. Worse still, reports emerged that Grameen Bank 鈥� Yunus鈥檚 own creation 鈥� received a new five-year tax exemption shortly after his advisers granted it, raising uncomfortable questions about whose interests are really being protected. Ordinary Bangladeshis bear the burden: as prices of everyday goods climb, the poor shoulder the full weight of adjustment, while cronies and well-connected enterprises enjoy modest relief.
In Narayanganj, garment worker Reshma, 22, fainted mid-shift when her factory鈥檚 meagre wage could no longer stretch beyond two meals a day. In rural Rangpur, day labourer Abdul Halim calculates that his daily Tk 300 now buys barely 6 kilograms of rice 鈥� a third less than two years ago. For these families, the debate over fiscal consolidation or IMF compliance is not abstract economics; it is a question of whether their children will go hungry tonight. Yunus inherited an economy in turmoil and, to his credit, maintained tighter monetary policy and allowed a gradual depreciation of the taka. Yet the interim government鈥檚 inability to secure legislative backing for comprehensive reforms has exposed its limitations as an interim administration.
Its anti-corruption drive has been selective, prosecuting former ruling party figures while shielding allies and advisers accused of misusing state resources 鈥� undermining public trust at a moment when credibility is most needed. Energy sector interventions 鈥� expediting payments to independent producers and pledging to curb gas losses 鈥� have provided some relief but skirted the key issue of sectoral profiteering. Tariff dialogues may sound inclusive, but delaying adjustments only compounds subsidy burdens that ultimately fall on taxpayers and weaken the state鈥檚 capacity to invest in social support.
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Social-justice agenda for recovery
To avoid a descent into deeper crisis, Bangladesh must reorient economic policy around social justice:
Progressive taxation: Enact genuine reform that eliminates discriminatory exemptions, closes loopholes, and ensures the wealthy and corporations pay their fair share. A broader and fairer tax base can fund vital safety nets 鈥� cash transfers, food rations, and healthcare subsidies 鈥� for the most vulnerable.
Defending real wages: Enact an immediate minimum-wage review indexed to inflation, protecting workers from further erosion of purchasing power. Guarantee that garment and construction workers receive living wages, coupled with strengthened labour inspection to enforce compliance.
Accountable debt management: Publish all loan agreements and IMF conditions for public debate. Insist that debt-financed projects prioritise social and environmental returns, not opaque contracts that enrich intermediaries. Diversify borrowing sources to avoid over-reliance on any single partner.
Strengthening public institutions: Empower parliament to play its budgetary role, end executive rule by ordinance, and adopt a transparent procurement framework. Bolster anti-corruption agencies and invite civil-society monitoring of public spending.
Prioritising essential services: Ring-fence energy and food subsidies for low-income households while phasing out wasteful subsidies to large industrial and commercial consumers. Invest saved resources in rural electrification, water infrastructure, and primary healthcare.
Bangladesh鈥檚 economic ship is taking on water from multiple breaches: currency devaluation, inflation, dwindling reserves, and unchecked debt. The interim administration has demonstrated technical capacity but lacks the political mandate to enact the deep structural reforms required. Without decisive, socially just policies 鈥� centred on equity, inclusion, and accountability 鈥� the mother in the slum, the rickshaw puller, and the garment worker will continue to pay the highest price for failures they did not create. As we look towards the elections that must restore democratic legitimacy, we must demand an economic agenda that places people above profit. Only then can Bangladesh navigate the fiscal storm of 2025 and emerge with an economy that serves all its citizens, not just the privileged few.
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Rayyan Hassan is executive director, NGO Forum on ADB.
