Economic priorities the new government should focus on

The newly elected BNP government has inherited an economy with diverse challenges. The crises of persistent inflationary pressure, sluggish private investment, and unemployment needs to be dealt with simultaneously, with careful policy planning. In addition to such macro challenges, the country’s long-standing struggle with domestic resource mobilisation is another area for which policy emphasis is mandatory. Stabilising the economy against these challenges should, therefore, be the new government’s top priority.

In the aftermath of the July uprising in 2024, the hardest economic challenge faced by the interim government was taming the double digit inflation, which escalated to as high as 11.66 percent in July 2024. By employing contractionary monetary and fiscal policies, the almost uncontrollable trend of inflation was brought down within the range of eight to nine percent, with the Bangladesh Bureau of Statistics data of January 2026 showing point-to-point inflation at 8.58 percent (food inflation at 8.29 percent and non-food inflation as 8.81 percent). However, it should be noted that, with a slump in private investment and employment generation, monetary and fiscal instruments previously used to curb inflation no longer appear to be sustainable policy tools.

The newly elected government should, therefore, opt for a balanced mixture of monetary instruments and efficient market management. The latter means ensuring a competitive environment in the market and constraining non-competitive and collusive behaviour and hoarding practices. Additionally, ensuring the availability of demand and supply data, effective coordination among relevant authorities/ministries, reducing time lag of imports at ports, and the overall efficient management of supply chain should be considered.

From the economic management point of view, sluggish private sector investment stands as a major challenge, resulting in low GDP growth and job creation. The private sector credit growth plummeted to as low as 6.49 percent in 2024-25, according to the Bangladesh Bank. This has been caused by a wide range of factors, including infrastructural bottlenecks, high interest cost of borrowing, and high cost of doing business. The slowed pace of private sector investment correlates to sluggish industrialisation, which is argued to be linked with political uncertainty in the absence of an elected government. The new government should, therefore, prioritise ensuring stability in its policy design and a private sector-friendly environment.

An often overlooked yet fundamental economical challenge is persistent unemployment and low absorptive capacity of the economy. A fall in public and private sector investment, caused by contractionary policies, has arguably led to lack of job creation in recent years. The demand side story is, however, more complex: data of the employment elasticity of growth, which measures the pace of employment generation in relation to the growth of an economy, reveals low elasticity for the economy as a whole (0.34) with negative elasticity in the manufacturing sector (-0.05) from 2016-17 to 2022. On the other hand, there is a large youth population in the country who are unemployed (youth unemployment rate 8.07 percent) and a high prevalence of NEET (youth not in education, employment or training at 20.3 percent). Another important factor in the context of the labour market is a relatively high unemployment rate among those with tertiary education—13.54 percent, with the national rate being 3.66 percent, according to the Labour Force Survey 2024.

To tackle this, the new government needs to adopt a wide range of strategies primarily focusing on expanding the Cottage, Small and Medium Enterprises (CSME) sector by supplying credit at flexible rates and terms and conditions, establishing a strong linkage with the market, and strategising favourable policies for the sector as a whole. In addition, it must emphasise boosting up private investment and large-scale industrialisation, policies facilitating industry-academia collaboration to deal with skill mismatches, establishing start-up funds for young entrepreneurs and freelancers, and concentrating on modernising technical and vocational education.

Besides the macro challenges, a major concern for economic management in Bangladesh is persistently low domestic resource mobilisation. The tax-GDP ratio is argued to be one of the lowest in the world (less than seven percent in FY2024-25). Such a poor state of revenue mobilisation acts as an impediment towards government spending in critical sectors, i.e. education, healthcare, and safety net. Improving domestic resource mobilisation goals through suitable instruments while maintaining the inflation and inequality levels is crucial. To this end, greater emphasis should be given on direct taxation with digitalisation of the tax structure. Bringing all potential taxpayers into the tax bracket will be a complex task; the government must put all its efforts into achieving that.

In addition to these challenges, it must be noted that, despite successes in poverty reduction between 2010 and 2022, the pace has slowed down after 2016 and around one-third of the population are found to be at risk of falling below the poverty line (World Bank, 2025). This notion appears to be consistent with some recent estimates, which indicate a reversal of the poverty reduction trend. These statistics should be carefully considered, especially keeping in mind the challenges following the LDC graduation. Timely attention is needed not only to reduce reduction, but also to shrink inequality. Income inequality has increased over time, with the richest decile of the population holding 40.92 percent of income, according to the Household Income and Expenditure Survey 2022. Against this backdrop, generating productive employment, revitalising rural economy, increased and transparent allocation for social safety net programmes, and a progressive and equitable tax structure must be prioritised.

Having come to power through a landslide victory in the February 12 election, the BNP government should set its initial economic priorities by focusing on containing inflation, accelerating private sector investment, generating decent and productive employment, and mobilising domestic resources to attain the development goals. Strong political commitment as well as efficient and timely policy direction and resource mobilisation can accomplish such daunting tasks, thereby ensuring inclusive development for the entire population.

Dr Sayema Haque Bidisha is pro-vice chancellor and professor in the Department of Economics at the University of Dhaka.

Views expressed in this article are the author's own. 

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