Cool prices, create new jobs

After assuming office, the new government should focus immediately on taming red-hot prices, restoring law and order, and creating a favourable environment for investment to generate new jobs, say economists.

They came up with the call as BNP prepares to form the new administration this week after a landslide victory in the February 12 national election.

Experts say the incoming government will inherit an economy that, despite showing signs of recovery, struggles with stubbornly high inflation, slowing private investment, a vulnerable financial sector, and declining exports.

The economy grew only 3.97 percent in fiscal year 2024-25, the lowest in five years, and subdued growth is expected to continue in 2026.

Economists highlighted supply-side constraints as a major driver of the rising cost of living. The tight monetary policy maintained by the Bangladesh Bank has so far failed to curb inflation.

They recommended keeping import tariffs low on essential goods, ensuring sufficient supply, and strengthening market monitoring. Monetary policy alone, such as maintaining high interest rates, will not be enough to rein in prices.

“Inflation is impacting all amid the erosion of their real wages.

So, the new government should pay attention to this problem,” said Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD).

Overall inflation rose to 8.58 percent in January, with the 12-month average at 8.66 percent, remaining elevated for more than three years, according to the Bangladesh Bureau of Statistics (BBS).

Private-sector businesses are also feeling the pinch as rising costs undermine profitability.

Fahmida called for coordinated monetary and fiscal policies, prioritising supply-side issues. Another key task, she said, for the next government is to improve the investment climate.

The economist said that while reforming the business environment is a long-term process, measures such as establishing effective one-stop services for entrepreneurs and reducing bureaucratic red tape could deliver results quickly.

She said the third agenda of the incoming government should be creating fiscal space.

Implementing the interim government’s recommendations, including pay scale adjustments, will require a huge expenditure. With the country’s debt burden rising, increasing revenue must be a priority. Reform efforts across sectors, especially in taxation and banking, should continue, said Fahmida.

“Improving the environment and building trust are essential to raising private investment,” said AK Enamul Haque, director general of the Bangladesh Institute of Development Studies (BIDS).

He urged the incoming government to continue economic reforms initiated by the interim administration and implement key promises from the BNP’s election manifesto.

Haque said controlling corruption and extortion must also remain a priority.

Private investment accounted for just 22.48 percent of GDP in 2024-25, the lowest in five years and well short of the 28.2 percent target set under the Eighth Five-Year Plan, according to the government’s statistical agency.

Restoring law and order will be crucial to encourage investment, said Prof Mohammed Helal Uddin, member secretary of the Bangladesh Economic Association.

“The government must stop mobocracy and tackle extortion seriously so that people can invest without fear,” he added.

He also called for policy clarity, enabling entrepreneurs to anticipate which policies will continue and which will change.

When making administrative replacements, experience, knowledge and intent should take precedence over political ideology, said Prof Helal.

A dedicated coordination mechanism at the highest level of government is essential to overcome the fragmentation that characterises current development policy programming, said KAS Murshid, a former director general of the BIDS.

Such a body should have convening authority across relevant ministries and the mandate to independently monitor implementation against clear benchmarks. 

Beneficiary participation structures at local, district, and national levels would ensure that people themselves contribute to policy design and oversight, he said. 

Institutions are demoralised, weakened and moribund. We need to begin by finding competent, professional experts to head those institutions and initiate reforms that would depoliticise the bureaucracy, introduce merit-based appointments and promotions based on results, and establish the basis for carrying out much-discussed reforms, he said.

Prioritisation is key, but project selection may be even more crucial. Select a set of high-impact, economic or public-service-oriented projects and back these up with resources and political backing to ensure success.

“If needed, do a pilot run before scaling. Failure cannot be an option,” he added.