On July 21, a fire during a ship-to-ship transfer damaged the cabling on one boiler aboard a leased floating terminal off Moheshkhali. That fault removed 450 million cubic feet of gas per day from the grid. Within a fortnight, load shedding was averaging 3,000 megawatts, and CNG queues ran three rows deep.

Commentary has rerun a familiar argument: too little exploration on one side, an unaffordable import bill on the other. Both points have merit, but neither explains why one boiler could do this much damage. It could, because Bangladesh’s entire imported-gas channel floats on two ships. Both were disconnected during Cyclone Mocha in 2023. Cyclone Remal damaged one in 2024, cutting capacity for nearly four months. The July fire is the third systemic outage in four years. The binding constraint is not the molecule; it is the infrastructure that lands it.

The official response has been fast and floating. On July 28, the cabinet committee approved in principle a third FSRU at Kutubjom under a government-to-government arrangement, adding 600 million cubic feet per day, and, by expert estimates, for three to four years. A third ship, built by a Chinese contractor, adds capacity in the same fragile form, exposed to cyclones and single-vessel risk. Floating units were chosen to avoid capital spending. That saving has been repaid several times over in spot cargoes above $21 per million British thermal units and idled factories: the country has paid for a fixed terminal without owning one.

The land-based terminal at Matarbari, discussed since 2014, would bring storage measured in days rather than hours, but the complex and pipeline are the better part of a decade away. The stronger candidate is the gravity-based structure: a concrete terminal resting on the seabed, LNG tanks built inside it, offering the resilience of a fixed terminal in less time. Italy has operated one fifteen kilometres offshore since 2009, supplying 14 percent of Italian gas, financed privately against a 25-year capacity contract. Starting now, a GBS could be delivering gas within this government term. Whether the Bay of Bengal seabed and cyclone loading suit it is a question for engineers. Whether it belongs in the Matarbari feasibility study is not.

Pakistan built its first LNG terminal at Port Qasim for $125 million in 332 days, with debt from the IFC and the Asian Development Bank and a capacity fee from the state gas utility. Tolling is not exotic here; it is how both existing Moheshkhali terminals are already remunerated.

I have arranged investor funding for concentrated gas assets in Europe and the Middle East, where offtake is contractual, and structures are clean. The same could be done for Bangladesh. The World Bank has committed $700 million to guarantee Petrobangla’s LNG import payments through letters of credit and short-term credit lines. That is procurement support, not construction finance. The same guarantee logic, already used for Bangladeshi power projects, can be pointed at terminal steel rather than cargo invoices.

Petrobangla has already invited transaction advisers for the Matarbari land-based terminal; submissions closed on August 10. The structuring choice sits with the Energy and Mineral Resources Division, which could set terms for a project-financed, build-own-operate-transfer structure with take-or-pay tolling and multilateral credit enhancement, with a gravity-based option costed alongside the onshore design. A terminal financed that way costs the exchequer little. The past weeks have shown what the floating alternative costs.

Insurance is unlike any other financial service. Banks safeguard deposits and capital markets facilitate investment, but insurance sells trust. Every insurance contract is built on a promise that when an unforeseen loss occurs, financial protection will be available. When that promise is honoured promptly and fairly, confidence grows. Delays or denials without transparency erode public confidence.

For the Bangladesh insurance industry, restoring that confidence is now the single most important reform challenge. Despite progress in the overall economy, insurance penetration remains among the lowest in Asia. One principal reason is the perception that claims are slow and uncertain. In every mature insurance market, prompt and transparent claims settlement is the industry’s most powerful advertisement. Public trust is earned not through marketing campaigns but by consistently honouring legitimate claims. Industry data indicate that unpaid claims have accumulated to several thousand crore taka across the sector. While claim disputes are inevitable, prolonged delays impose substantial economic costs. Businesses face liquidity constraints, reconstruction is delayed, and households experience financial hardship when insurance is expected to provide relief. These outcomes undermine confidence in the insurance system.

Improving claims performance should therefore become a national reform priority. Digital claim submission, electronic documentation, transparent service standards and publicly disclosed claims-settlement indicators would improve accountability and customer confidence. Several leading markets publish claims performance metrics as measures of governance and service quality. Bangladesh should consider moving in the same direction. A second area requiring policy review is reinsurance. Reinsurance is often described as the “insurance of insurers”. It enables insurers to absorb large losses while maintaining financial stability. As Bangladesh economy expands, with growing investment in infrastructure, energy and manufacturing, access to efficient and globally connected reinsurance markets becomes more important.

The existing reinsurance framework has contributed to domestic market development. However, the insurance industry now operates in an increasingly interconnected global environment characterised by advanced catastrophe modelling and integrated reinsurance capacity. Periodic evaluation is therefore needed to meet changing needs while preserving financial stability. Equally important is the adoption of internationally recognised financial and regulatory standards. The implementation of IFRS 17 and IFRS 9 will improve transparency, comparability and financial reporting across the insurance sector. Consideration of deferred tax implications will further strengthen implementation. Together, these reforms can enhance investor confidence and improve Bangladesh’s integration with international financial markets.
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M Sharifur Rahman Bhuiyan

Regulatory philosophy should evolve alongside these reforms. Across leading insurance jurisdictions, risk-based supervision (RBS) has replaced detailed operational control as the preferred supervisory model. Regulators evaluate solvency, governance, risk management, capital adequacy and consumer protection while allowing insurers flexibility to innovate and compete.

As Bangladesh prepares for post-LDC graduation, insurance reform should be viewed as part of national economic policy. A trusted insurance sector mobilises long-term savings, protects productive investment, supports entrepreneurship and strengthens resilience against economic and climate-related risks. Bangladesh has already demonstrated that ambitious reforms can transform industries and accelerate development. The insurance sector now has an opportunity to undertake a similar journey. By embracing smart regulation, risk-based supervision, claims excellence, modern reinsurance, IFRS 17, IFRS 9 and stronger actuarial capacity, Bangladesh can build an insurance industry that safeguards policyholders, strengthens investor confidence, supports sustainable development and improves global competitiveness.

For developing countries like Bangladesh, the key to economic success is not simply how quickly they adopt new technologies or attract investment. The deeper challenge is building strong institutions that create certainty, enforce contracts and support productive economic activity, said Professor Jean-Louis Arcand, president of the Global Development Network (GDN).

“Institutions are the single most important determinant of which countries get rich and which countries stay poor,” he said.

In an interview with The Daily Star recently, he said, “Without strong economic and political institutions, even countries rich in natural resources can remain poor, while countries with fewer resources can prosper.”

Jean-Louis said developing countries need to pay particular attention to institutions, the rule of law and how their economies function.

He also discussed the potential impact of artificial intelligence (AI), digital public infrastructure, linguistic sovereignty and investment in girls’ education.
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Jean-Louis is a Canadian economist born in Cameroon. He grew up in different parts of the world and earned his PhD from MIT in the United States. The GDN was initially created within the World Bank under Nobel laureate economist Joseph Stiglitz to strengthen research capacity in developing countries.

Jean-Louis said its core principle is that researchers from the Global South should identify local problems and formulate policies, rather than relying on consultants from Western countries.

Over 25 years, the GDN has supported more than $1 million in research by Bangladeshi researchers and is exploring Bangladesh’s membership.

He said the GDN is also studying whether digital public infrastructure, including digital IDs and mobile money, reaches marginalised groups. It is researching open transaction networks, inspired by India’s Open Network for Digital Commerce, and their potential in Bangladesh.

AI WILL ONLY REDIRECT LABOUR

On AI, Jean-Louis said that there is currently “a lot of hype” surrounding the technology. He said the GDN is studying how AI will affect labour markets.

Rather than simply asking whether AI will replace workers, researchers should examine which tasks AI can perform better than humans, he said.

He explained this using what economists call an “O-ring” production function. If a product depends on several tasks and one task fails, the entire product can lose its value. AI is therefore more likely to be adopted for tasks where the probability of human failure is high.

According to Jean-Louis, AI can substitute for workers in some high-risk tasks while increasing demand for workers performing other tasks.

“What AI does is it doesn’t so much eliminate labour; it redirects it to other tasks,” he said.

He said this could happen in sectors ranging from manufacturing to medicine.

In medical diagnosis, for example, AI can assist radiologists in identifying problems in X-rays. In other tasks where humans perform well, there may be less reason for companies to adopt expensive AI systems.

Jean-Louis said research suggests AI adoption could increase output by around 0.5 percent of GDP every year as firms adopt the technology. His simulations also suggest that poor countries could gain slightly more than rich countries from AI adoption.

“It won’t be a huge narrowing of the gap between poor countries and rich countries,” he said, but AI could still narrow the gap slightly.

The major constraint, however, is the cost of AI.

Jean-Louis said AI adoption remains very low in poor countries because the technology is still expensive. He said Chinese open-source models could change this by reducing the cost of adoption.

BUILD LOCAL AI CAPACITY

For Bangladesh, he said the economics of adoption will be particularly important. If an AI system costs much more than the labour it replaces, companies have little incentive to adopt it.

“I suspect that the cost of AI relative to the benefit is still very high in Bangladesh,” he said.

Jean-Louis also raised concerns about linguistic sovereignty.

He pointed out that there are very few large language models available in Bengali, with similarly limited resources for many other languages in the Global South.

“The linguistic sovereignty issue is actually very important for the Global South,” he said.

Developing countries, he argued, should not become so dependent on foreign AI models that access could eventually be restricted. He said there are economic reasons for countries in the Global South to develop their own large language models.

For Bangladesh, Jean-Louis said the country has enough talent and scale to develop its own models.

EDUCATING GIRLS A SMART INVESTMENT

The economist also highlighted another policy priority: educating girls.

The single most important determinant of development may be institutions, but when it comes to government investment, he said educating young girls can be one of the smartest investments a country can make.

Meanwhile, he said technology alone cannot solve development problems.

Jean-Louis said he has spent increasing amounts of time with technologists and found that many of them underestimate the importance of society, incentives and human behaviour.

“You could have the best technological solution for a problem. It will never get implemented if society and incentives are not taken into account,” he said.

Technology, he argued, is only the supply side. Understanding how people respond to it is equally important.

“The technology is supply, but then the demand has to do with human reactions,” he said.

Not long ago, the finance team in a company would have spent the week buried in paper, chasing invoices and posting entries by hand. Today the accountant opens one screen, and the numbers are already there, reconciled overnight. Instead of finishing the month-end close, the accountant is with the managing director, explaining what the figures mean.

This is one of the biggest changes in the history of the profession, and it is not only about technology. It is also about new business models, higher expectations, stronger ethics, and new skills, driven by digital systems, automation, artificial intelligence, data, sustainability and ESG reporting, evolving standards, globalisation and tax reform, tools such as blockchain, and, above all, people with the right knowledge. Start with the digital shift. Paper ledgers and manual journals are quietly disappearing. Transactions flow into cloud-based systems where the general ledger updates in real time, and a month-end close that once took two weeks can be done in hours. The role of the accountant shifts from recording to explaining. This makes the profession more valuable to business.

Close behind sits automation. Rule-based software now handles repetitive work that once filled the day: matching invoices to purchase orders, posting journal entries, running bank reconciliations, and processing payables. This frees skilled people from data entry for judgment, analysis, and advice. Artificial intelligence pushes this further, working through huge volumes of data in seconds. It can draft financial statements, forecast cash flow, and support audits by testing the full population of transactions rather than a sample, strengthening assurance. But AI is still a tool, not a replacement. It does not understand the culture of a company and cannot exercise professional judgment. The real story is humans working with machines.

That partnership matters most with data. Every business now produces more information than it can use, and the hard part is no longer gathering it but making sense of it, where management and cost accounting come into their own. Variance analysis and reliable forecasting turn a scorekeeper into a strategist. Investors, regulators, and the public now want to know not just how much a company earns, but how responsibly. Reporting on emissions, energy use, waste, staff wellbeing, diversity, and governance is becoming as important as the income statement. For Bangladesh, where exporters answer to global buyers, this is already a commercial reality.

Globalisation adds another layer. As local firms trade and raise capital across borders, they meet transfer pricing rules, multiple tax regimes, and the global minimum tax on multinationals. Tax administration is going digital too, with e-invoicing and real-time VAT reporting reshaping compliance. Accountants who understand both local rules and international practice will be in high demand. Running through all of it are trust and good governance. As money and records move online, so do the dangers, from cyber-attacks to digital fraud. Strong internal controls and protection of confidential information are now core duties, not afterthoughts. Ethics will stay at the heart of everything: financial information shapes the choices of lenders, employees, and the public. AI can calculate, but it cannot supply honesty or a sense of the public interest. As tools become more powerful, ethical leadership matters more, not less.

The accountant of tomorrow will not simply ask what happened last year. He or she will answer what is happening now and what the business should do next, as adviser, risk manager, and partner. For young people entering the profession, this is a real opportunity: not to race against AI, but to use it wisely while building the human qualities no machine can copy.

The writer is an economic analyst

Bangladesh must advance implementation of the Sustainable Development Goals (SDGs) and its graduation from the least developed country (LDC) category simultaneously, said Irene Khan, Bangladesh's newly appointed permanent representative to the United Nations in New York.

Speaking at a session titled "Role of Development Partners in Implementing the Five-Year Strategic Framework for SDGs and Reforms" at a national conference in Dhaka, she said the two processes offered a rare opportunity to accelerate long-pending economic and institutional reforms.

"SDG implementation and the LDC graduation process are closely interconnected. Bangladesh now has an opportunity that has rarely come in the country's history. By using this opportunity to implement necessary reforms quickly, it is possible to bring about major changes in the economy," she said.Bangladesh is scheduled to graduate from the LDC category in 2026, but the government has sought an extension to ensure a successful, sustainable and lasting transition. The UN envoy said the extension request and the final phase of SDG implementation would put additional pressure on the government to implement reforms and accelerate development, creating a "dual incentive".

The LDC roadmap calls for strengthening the financial sector, improving the investment climate, increasing domestic revenue mobilisation, facilitating trade negotiations and pursuing new trade agreements. Bangladesh must make significant progress in these areas over the next three years while accelerating SDG implementation, she said.

Bangladesh must work faster in the final phase of SDG implementation as it has already lost considerable time, she said. While the country made significant progress under the Millennium Development Goals, the SDGs are harder because their targets are broader and deeply interconnected.

Despite global challenges, Bangladesh has no shortage of strength, creativity and innovation among its people, she said, urging more effective use of these capabilities.

She also called for stronger international development-partner support and stressed domestic partnerships, particularly the role of civil society and local communities in grassroots development programmes.

SM Abdul-Awal, principal coordinator for SDGs at the Prime Minister's Office, called for greater development-partner support to accelerate SDG progress by 2030, including concessional financing, faster loan disbursement and increased technical assistance. He also stressed stronger partnerships and adequate resources for marginalised and vulnerable groups.

The two simultaneous transitions present both a major challenge and an opportunity for economic and institutional reform, making timely reforms and development-partner support crucial, stakeholders said.

Bangladesh has been experiencing a long episode of near-double-digit inflation since FY2023. This inflation rate considerably exceeds the global inflation rate. Efforts to control inflation have yielded some limited results, but the inflation rate remains persistently high, hovering around 9 percent annually. Along with rising inflation, GDP growth has slumped. This has raised the question, is Bangladesh passing through a phase of stagflation?

Sustained high inflation, along with a sharp deceleration in GDP growth, has hurt employment and increased poverty. The World Bank estimates that the incidence of both poverty and extreme poverty has increased since 2022. This reversal of poverty progress is a serious social problem. The employment challenge is reflected in the reduction in employment in all three broad sectors of agriculture, industry and services.
This stagflationary phase cannot prevail for long without creating social discontent and must be addressed swiftly. The policy focus should concentrate on lowering the inflation rate sustainably, while supporting the recovery of GDP growth.

The first question is why the inflation rate is persistently high in Bangladesh even as global inflation has fallen. In a market economy, prices are determined by demand and supply. The aggregate price level for the economy as a whole, which is the weighted average of individual prices, is similarly influenced by forces of aggregate demand and supply. So, the inflation rate, defined as the rate of change of the aggregate price level, is determined by factors that affect the growth of aggregate demand and supply.

The oldest theory of inflation, known as the quantity theory of inflation, owes its origins to Polish mathematician Nicolaus Copernicus and states that the rate of growth of prices (inflation) is the difference between the rate of growth of money supply and the rate of growth of real GDP. While this simple theory has faced fierce criticism from Keynesian economists, it has grown in sophistication, led by monetarist economists like Milton Friedman. The Keynesian economists have argued that the demand for money can change and affect the velocity of circulation and thereby destroy the one-to-one correspondence between the growth of money supply and inflation. Yet, the substantial role of monetary impulse in affecting inflation has remained intact.

However, instead of targeting the growth of money supply as recommended by monetarists, modern central banks target the inflation rate directly by influencing the interest rate. When inflation is high, a typical central bank raises the interest rate to reduce demand through cutbacks in spending, which then lowers inflationary pressure.

In my book “Bangladesh Stabilizing the Macroeconomy” published in December 2023, I provided evidence that the main factors that initially fueled the acceleration in inflation in Bangladesh since August 2022 were the excess growth of domestic credit, mostly public sector credit, owing to the large stimulus packages of the Covid-19 period (FY20-FY21) funded mostly through budgetary deficits and money creation, the continued financing of fiscal and quasi-fiscal deficits (FY22-FY23) through money creation, and control over interest rates (July 2020-November 2023) that pushed up private sector credit growth and lowered the growth of bank deposits.

Monetary policy correction started in November 2023 when the interest rate was deregulated, and the financing of the budget deficit through money creation was stopped. These policies were strengthened in May 2024 and further tightened during August-October 2024. They have largely remained in place since then. The interest rate is now deregulated, and the official stance of monetary policy is to control inflation through interest-rate management.

Many observers are disappointed that despite considerable monetary tightening, inflation remains stubbornly high at near double digits. There is also some scepticism about whether monetary tightening has gone too far without favourable outcomes for inflation. This scepticism, however, is based on a partial view. A fuller analysis will show that the main reason the full benefit of demand tightening for lowering inflation has not emerged is because of a large supply downturn that has happened over the past several years.

GDP growth rate declined by 51 percent between FY22 and FY26. All sectoral components of GDP have experienced a reduction in growth; the sharpest cutback was registered by the manufacturing sector with a 71 percent decline in the growth rate between FY22 and FY26. At the same time, the volume of imports has been falling, with the deepest cuts in imports of consumer and capital goods. This magnitude of supply shock over a 5-year period is unprecedented in the recent history of Bangladesh and is a major factor for the persistence of high inflation.

A sustainable strategy for fighting inflation is to continue to restrain demand while seeking to restore the growth momentum for both GDP and imports. Indeed, the growth of GDP and imports is correlated, and GDP growth cannot be restored without allowing imports to grow. Similarly, to lower inflation, in addition to boosting domestic supply, it is important to lower trade barriers that restrict the import of consumer goods into Bangladesh at a time when there are supply constraints.

The policies for demand and supply management must be internally consistent. This consistency of policy-making has become a major challenge. Despite the stated monetary policy stance of monetary tightening to fight inflation, in recent months money and credit growth have exceeded prudent limits consistent with lowering inflation. After falling between FY23 and FY25, the growth of money supply accelerated in FY26 from 7 percent to 10.8 percent. Similarly, total credit grew from 8.3 percent in FY25 to 10.2 percent in FY26. Additionally, the velocity of circulation increased from 2.4 in FY23 to 3.0 in FY26, possibly reflecting higher inflationary expectations. This expansion in monetary and credit growth, along with rising velocity of circulation in the face of a falling growth of aggregate supply, has inevitably stoked inflation as predicted by the quantity theory of inflation.

The acceleration in money supply growth is partly the outcome of the creation of high-powered money through the Bangladesh Bank’s purchase of foreign assets. Financing of a large budget deficit through bank borrowing by the Treasury has also contributed to the growth of money supply and domestic credit. Indeed, the Treasury deficit financing has tended to offset the reduction in total credit growth resulting from a reduction in private credit growth and thereby lowered the effectiveness of interest rate increases in reducing inflation. While private credit growth has fallen to a mere 5.3 percent, public sector credit growth surged to 26 percent. The conduct of fiscal policy is clearly not consistent with the targets of monetary policy. Moving forward, this must be corrected.

What is the role of money and credit policies for restoring the growth momentum? Looking at the supply side, it is hard to argue that GDP growth is constrained by a lack of liquidity. While the turmoil in the banking sector has created liquidity problems for the weak banks, the strong banks are flush with liquidity because they cannot find adequate traditionally defined creditworthy borrowers who are willing to borrow.

This slowdown in the demand for credit in the organised private sector is mostly a reflection of weak profitability of investment owing to several binding constraints, including high cost of doing business, a severe energy supply crunch, weak trade logistics, and shortage of skills. These constraints must be addressed swiftly to increase investment and GDP growth, but they cannot be removed by lowering the interest rate and increasing domestic liquidity.

Channelling greater credit growth to areas where there is indeed a credit constraint, such as the micro and small enterprises sector, would support a supply response by relaxing the credit constraint. But this credit expansion must be made consistent with the growth of total credit and money supply required for reducing inflation by lowering the bank financing of the budget deficit.

The writer is vice chairperson of the Policy Research Institute of Bangladesh (PRI). He can be reached at sadiqahmed1952@gmail.com

The US has rolled out a fresh 10 percent duty on all imports from Bangladesh under Section 301 of the Trade Act of 1974, replacing a temporary global tariff. The new 10 percent tariff will make the total duty on the country's garment shipments to the USA at 25.62 percent that includes the existing 15.62 percent Most-Favoured-Nation (MFN) tariff rate.

The rate is just replacement of previous universal rate at 10 percent to another name failure to impose prohibition on import of goods produced using the forced labour.
The tariff was announced by the Office of the United States Trade Representative (USTR) on July 23 and took effect on July 24.
Why forced labour?

Following the nullification of reciprocal tariffs by the US Supreme Court from the Agreement on Reciprocal Tariffs (ART), the Trump administration was looking for the opportunity to impose higher tariffs on the imported goods.

US again imposes 10% tariff on Bangladesh
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US again imposes 10% tariff on Bangladesh

So in March, the USTR has launched an investigation on 60 economies including Bangladesh globally under Section 301 to determine whether they failed to block imports made with forced labour. Bangladesh was found to have a “partial enforcement framework”, placing it in the lower of two tariff bands ranging from 10 percent to 12.5 percent.
A shifting tariff landscape

This is the third tariff regime Bangladeshi exporters have faced only in two years. Exporters faced a 15.62 percent base rate before reciprocal tariffs were imposed under a national emergencies law in April 2025. After the US Supreme Court struck down that regime in February this year, a temporary 10 percent global tariff under Section 122 filled the gap until its 150-day legal limit expired on July 24, replaced immediately by the Section 301 tariff.
Official and exporter reactions

Government officials and trade leaders view the measure as a continuation. Commerce Minister Khandaker Abdul Muktadir said the measures would not create any new impact as the tariff rate remains unchanged.

Faisal Samad, director of Bangladesh Garment Manufacturers and Exporters Association, echoed the view, adding it will not impact exports.

US tariffs to have no fresh impact on Bangladesh: Commerce minister
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US tariffs to have no fresh impact on Bangladesh: Commerce minister

Meanwhile, the Ministry of Foreign Affairs (MoFA) said Bangladesh retains its competitive standing as key apparel-exporting rivals face a higher 12.5 percent duty.

"This distinct differential reinforces Bangladesh's ongoing comparative advantage in the US market relative to its high-tariff competitors," MoFA said.

It added that the USTR is considering a three-year Tariff-Rate Quota (TRQ) for Bangladesh, Cambodia, Indonesia and Malaysia to waive Section 301 tariffs on goods made from US cotton and textile inputs.
The bilateral deal complication

The interim government signed a US-Bangladesh Agreement on Reciprocal Trade (ART) on February 9 this year, setting a 19 percent rate in exchange for market opening. Because ART rested on the struck-down emergency-powers structure, the government is seeking formal clarification on whether the 19 percent rate applies or is superseded by Section 301.
Where Bangladesh stands against rivals

Dhaka retains its competitive standing in apparel exports, being among 17 of 86 countries placed in the lower 10 percent tier. Competitors China, Vietnam, and Thailand face the maximum 12.5 percent rate, reinforcing Bangladesh's ongoing comparative advantage, the foreign ministry noted.

While young Bangladeshi entrepreneurs are eager to innovate, start businesses, and scale up, their momentum is severely hindered by process-related bottlenecks, Hossain Zillur Rahman, chairman of Power and Participation Research Centre (PPRC), said yesterday.

Beyond bureaucratic hurdles and policy inconsistencies, he identified three major state-level ailments that continuously suppress entrepreneurial energy – corruption, harassment and underperformance.
Extortion, bribery, and rent-seeking behaviour create unfair financial burdens on emerging businesses, Hossain also said at a panel discussion at the InterContinental Dhaka, organised by the Dacca Institute of Research and Analytics.The economist noted that these issues drain resources from young entrepreneurs at both the inception phase and the scaling phase, discouraging investment and innovation.

Harassment, he said, operates even where favourable policies exist on paper, because implementation depends on individual officials – customs officers, for instance – who interpret regulations arbitrarily.

The result is administrative friction across the system, which is as damaging as corruption itself, said the PPRC chairman.

On chronic underperformance, he pointed to state infrastructure projects plagued by persistent delays and poor execution.

He cited Dhaka’s drainage and sewage pump project, which was launched in 2013 and originally scheduled for completion by 2020, but remains unfinished years later while continuing to draw budget allocations.

“All of these are state-level diseases that are holding back business,” said the PPRC chairman.

Also speaking at the event, Zonayed Saki, state minister for planning, outlined the government’s roadmap for economic recovery, including a five-year strategic framework meant to translate plans into implementation.

Ending capital flight, he said, is essential to redirecting capital toward productive domestic investment.

He said social safety net programmes – Family Card, Farmers Card, etc. – serve both as direct support for citizens and a stimulus for consumption.

Concurrently, he added that public investment in health, education, and skills training is prioritised to boost human capital and industrial productivity to match global competitors.

On energy, the state minister said the government is moving away from an import-dependent policy through domestic gas exploration, including the purchase of five rigs and drilling of five wells, alongside expanded storage capacity. It has also set a target of generating 20 percent of energy from renewables within a decade, driven mainly by private-sector incentives.

He also cited efforts to streamline bad loan management while offering targeted support to distressed but viable industries, and described plans to merge licensing processes under Bida, Beza, Bepza, and the PPPA into a single-window system aimed at issuing licenses within two days and utility connections within seven.

To cut delays and waste in public investment, Saki said the ministry is introducing programmatic project planning, revising Project Director appointment policy to allow private-sector professionals and retired experts, simplifying inflated rate schedules, and moving toward full digital automation.

Asif Ibrahim, former president of the Dhaka Chamber of Commerce and Industry, focused on regulatory hurdles facing entrepreneurs.

Existing one-stop-service systems, such as those run by Bida and Beza, operate in isolation, he said. “There must be a single, overarching OSS to handle all licensing centrally under one framework.”

He said trade licence fees based on factory square footage disproportionately burden large manufacturers, whose annual renewal costs can reach Tk 20-25 lakh, and that fee structures should instead be scaled to company size to avoid overburdening industry.

The former DCCI president also pointed to licensing overload from multiple sector-specific clearances.
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He cited a prior reform that had allowed environmental licence renewals through banks rather than requiring annual visits to the relevant department — a change that was later reversed.

Such “reverse reforms,” he said, need to end.

The global leather industry is changing rapidly. Environmental sustainability, resource efficiency, traceability and responsible production have become essential for competing in international markets. For Bangladesh, which has one of the world’s largest supplies of naturally available hides and skins, this shift presents both challenges and opportunities. At the centre of this changing landscape is the Leather Working Group (LWG), the world’s leading sustainability assessment system for leather manufacturers.

A common misconception is that LWG imposes foreign environmental standards on leather-producing countries. In reality, it does not set environmental laws. Instead, it assesses whether a tannery complies with the environmental regulations of its own country while adopting internationally recognised best practices. LWG certification should therefore be seen as internationally accepted verification of environmental compliance and responsible manufacturing.

For Bangladesh, this distinction matters. The Environment Conservation Act and the Environment Conservation Rules 2023 provide the legal framework for pollution control, environmental clearance, wastewater discharge, waste management and environmental monitoring. Many requirements assessed under the LWG protocol closely match these regulations. As a result, investment in complying with Bangladeshi environmental laws also strengthens readiness for LWG certification.

The LWG Leather Manufacturer Audit covers environmental and operational indicators including environmental management systems, chemical management, traceability, water use, energy efficiency, air emissions, waste management, occupational health and safety, emergency preparedness and governance.

Modern leather production depends on a wide range of chemicals throughout tanning and finishing. International buyers expect manufacturers to maintain strict control over chemical storage, handling, use and disposal. Effective chemical management reduces environmental risks, improves workplace safety, enhances product quality and supports sustainable production.

Water management is another key part of the certification process. Leather manufacturing requires large amounts of water. Tanneries that monitor consumption, adopt cleaner production techniques, recycle water where practical and reduce waste demonstrate environmental responsibility and operational efficiency. Buyers are also placing greater emphasis on energy efficiency as they seek suppliers with lower carbon footprints.

Traceability is one of the fastest-evolving parts of the LWG framework. Global brands increasingly want visibility across their supply chains to ensure responsible sourcing and meet sustainability commitments. Bangladesh has a natural advantage because most raw materials come from domestic livestock. Stronger traceability systems can improve transparency and increase buyers’ confidence.

Waste management and effluent treatment remain the biggest environmental challenges for Bangladesh’s leather industry. The tanning process generates large volumes of wastewater, sludge and other by-products that require proper treatment, disposal or recovery.

The relocation of tanneries from Hazaribagh to the Savar Tannery Industrial Estate was a major environmental reform. The estate was designed to support cleaner leather production through shared infrastructure, including a CETP. Although progress has been made, further improvements are needed in CETP performance, sludge management, hazardous waste handling, chromium recovery and environmental monitoring. These issues increasingly shape how international buyers judge a country’s commitment to sustainable leather production. Better environmental infrastructure strengthens not only regulatory compliance but also industry reputation, market confidence and long-term competitiveness.

The future of Bangladesh’s leather sector will depend on its ability to demonstrate environmental responsibility. Sustainable production is no longer optional. By strengthening compliance with national environmental regulations and expanding LWG certification, Bangladesh can establish itself as a trusted source of responsibly produced leather.

The writer is former director of the Institute of Leather Engineering and Technology

Think of it like driving with one foot on the accelerator and the other pulling the handbrake. All you get is burnt tyres, a damaged engine, and no movement at all.

That's the direction Bangladesh's economic policy is heading. The government has announced an expansionary budget designed to jumpstart a sluggish economy, while the central bank holds the line on a bruising 10% policy rate to fight stubbornly high inflation. It's a classic macroeconomic standoff and in this collision, it is the private sector, the engine of growth, that takes the hit.
Economists say that when fiscal policy is expansionary and monetary policy is contractionary at the same time, the typical outcome is predictable: interest rates stay high, suppressing private investment; government spending crowds out private spending through the credit channel; inflation moderates, but at the cost of weaker growth than the fiscal expansion intended.

The newly elected government's first budget took an expansionary stance - cutting taxes, protecting local industries, boosting investment incentives, raising the development outlay, deregulating business processes, and expanding social protection. The message to businesses and investors: the cost of operating is lower, the environment more supportive, now is the time to invest and hire.The central bank's contractionary stance sends the opposite signal: borrowing is expensive, credit is constrained, conditions are tight.The million-dollar question is whether businesses will invest when lending rates sit at 12-14%. Businesses say they need 15-18% operating profit just to service debt but profits remain thin or nonexistent. Without that margin, investment stalls.The numbers bear this out. Private sector credit growth has stayed below 5% for months, down from the usual double digits. Many mills are shutting down for want of working capital and energy supply. Private investment as a share of GDP sits at around 21% and, per the government's own medium-term macroeconomic outlook, will stay there for the next two fiscal years. Against this backdrop, absorbing the roughly 25 lakh people entering the job market each year looks increasingly difficult.

Two legitimate priorities, one policy clash

This mismatch isn't accidental or irrational, according to Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD). It reflects two genuinely competing priorities that are both legitimate given Bangladesh's current conditions: the government needs to stimulate growth through investment, while also reining in inflation.

"It's a double whammy for the government," she said. It creates a problem of policy coherence, yet an expansionary monetary policy now could have been more devastating.

Even with an expansionary fiscal stance, she said, the government must be disciplined about how public money is spent - earning real returns on that spending, and plugging leakages and corruption so investment actually pays off. She hopes fiscal and monetary policy will eventually align, and that the central bank may review its tightened stance within six to twelve months.

Dr Mustafa K Mujeri, former chief economist of Bangladesh Bank, agreed the two policies appear mismatched on the surface. But he argued that contractionary monetary policy has limited real impact on inflation in Bangladesh, since price pressures stem largely from market management and supply chain issues rather than credit conditions alone.

Still, he said the expansionary budget could work if the government channels spending into productive activity while controlling leakage and corruption. "If the government can do this, then there will be no mismatch visible but that is a tough task," he said.

How the mismatch plays out in practice

Tax cuts lower businesses' operating costs, but the interest rate environment determines the cost of the capital they need to expand. A factory owner who saves Tk50 lakh in annual taxes gains little if his working capital loan costs 14-15% and term loan repayments are eating into cash flow. For most businesses in Bangladesh right now, financing cost, not the tax rate, is the binding constraint.

The credit channel itself is broken. Private credit growth at 4.7% isn't primarily a function of high interest rates; it reflects a banking system stressed by over 32% classified loans, wary of borrower quality, and hoarding liquidity overnight rather than lending term. Bangladesh Bank's stance doesn't fix this structural problem - keeping interbank liquidity costly potentially makes it worse by discouraging lending further.

An investor weighing a new project looks at the whole environment: tax rates, energy supply reliability, regulatory ease, political stability, financing cost, and expected demand. The budget improves some of these variables; monetary policy worsens ao critical one. Whether the net effect is positive depends on which factor binds for that particular investor.

For many factories - from spinning, weaving, ceramics - energy supply is the constraint, and neither fiscal nor monetary policy touches it. For domestic-market businesses, weak consumer demand, itself partly a legacy of four years of inflation eroding real incomes - is the constraint. For new investment projects, financing cost and banking sector health are critical. The budget helps with some of these; monetary policy helps with none.

Rising government borrowing compounds the problem. The budget's NBR revenue target of Tk6.04 lakh crore is, by any honest assessment, unlikely to be met given the NBR's recent track record. When revenue falls short, as it has for years, the government borrows more from the domestic banking system to cover the gap and that borrowing competes directly with private credit for the same pool of funds. Every Tk1,000 crore the government borrows is Tk1,000 crore unavailable for private sector loans. With Bangladesh Bank keeping rates high and liquidity tight, that crowding-out effect is even larger than it would be in a looser monetary environment.

The United States in the early 1980s offers the textbook parallel: Reagan's expansionary fiscal policy - tax cuts, defence spending - collided with Paul Volcker's Federal Reserve holding extremely tight monetary policy. The result was high real interest rates, a strong dollar, a recession, and eventually lower inflation but the growth benefits of the fiscal expansion were significantly delayed and diluted.

Bangladesh's financial system is far less developed, its monetary transmission mechanism weaker, and its fiscal capacity more constrained than the US in the 1980s. But the directional logic holds. Perhaps Bangladesh's development partners have already priced this in as the ADB projected on Thursday that GDP will grow just 4.5% in FY27, well below the government's 6.5% target.

The National Board of Revenue’s (NBR) collection of more than Tk360,000 crore during the first eleven months of the fiscal year deserves recognition. At a time when Bangladesh is grappling with mounting fiscal pressures, this performance signals improvement in revenue administration despite a challenging economic environment.

Higher revenue collection strengthens the government’s ability to finance infrastructure, education, healthcare, and social protection while reducing excessive dependence on domestic and external borrowing.
Yet, beyond the headline figure lies a more important policy question: Is Bangladesh pursuing revenue growth in a sustainable manner?

The answer depends not only on how much revenue is collected today, but on whether the country’s revenue strategy is built on realism, efficiency, and trust.

Every year, Bangladesh announces ambitious revenue targets as part of the national budget. While optimism has its place in public finance, persistent gaps between targets and actual collections have become a recurring feature of our fiscal landscape.

When revenue targets consistently prove unattainable, they gradually lose their value as planning instruments. Revenue forecasting must therefore be grounded in economic realities rather than aspirations. Tax collection ultimately reflects economic activity. Ignoring these realities while setting ambitious targets only widens the gap between expectations and outcomes.

A balanced revenue strategy begins with acknowledging the economy’s actual capacity.

Bangladesh continues to have one of the lowest tax-to-GDP ratios among comparable developing economies. However, the real issue is not necessarily tax rates but a narrow tax base and uneven compliance. A small segment of formal businesses and salaried individuals continues to shoulder a disproportionate share of the tax burden, while large parts of the economy remain outside the formal tax net.

Expanding the taxpayer base should therefore become the central objective of tax reform.

Rather than repeatedly imposing additional obligations on compliant taxpayers, policymakers should focus on identifying new taxpayers, formalising informal businesses, strengthening digital record-keeping, and improving data sharing among government agencies. Technology offers opportunities to detect tax evasion while reducing compliance costs for honest taxpayers. Equally important is simplifying the tax system. Businesses are more likely to comply when tax rules are clear, predictable, and consistently applied. A modern tax administration should view taxpayers as partners in national development rather than merely subjects of enforcement.

This is particularly important as Bangladesh seeks greater domestic and foreign investment. Frequent regulatory changes and inconsistent interpretation of tax laws increase business uncertainty and discourage long-term investment. A stable and transparent tax environment ultimately generates more sustainable revenue than short-term collection drives.

Another often overlooked aspect of revenue mobilisation is public trust. Citizens are more willing to pay taxes when they see visible improvements in public services and infrastructure. Revenue collection should therefore be viewed not merely as a fiscal exercise but as part of a broader governance framework where accountability and service delivery strengthen voluntary compliance.

Bangladesh’s development ambitions will require steadily rising public revenues in the coming years. These objectives cannot be financed indefinitely through borrowing alone. The solution lies in building a tax system that is broader, fairer, more efficient, and more trusted.

The recent progress made by the NBR demonstrates that improvements are possible. The next phase of reform should focus less on announcing ambitious collection numbers and more on strengthening institutional capacity, expanding the formal economy, reducing tax evasion, and making compliance easier.

Balanced revenue growth is not about collecting the maximum amount in a single fiscal year. It is about creating a tax system capable of supporting Bangladesh’s long-term economic transformation. Realistic target-setting, efficient administration, and greater taxpayer confidence will ultimately produce more credible fiscal outcomes and a stronger foundation for sustainable economic growth.

In 2021, banks earned most of their income the traditional way -- by lending. Four years later, lending, the core business of banking, became a relatively minor source of earnings, according to their financial reports.

As private sector credit growth slowed and non-performing loans (NPLs) mounted, net interest income of banks came under increasing pressure. At the same time, sluggish imports also weighed on commission income from trade-related services such as opening letters of credit (LCs).
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To survive and, for many, to thrive, commercial banks, whose DNA is to create credit and take calculated risks by backing businesses, instead took shelter in the safety of Treasury bills, lured by their higher returns.

On paper, banks now appear highly profitable because of those elevated Treasury yields. They are earning strong returns without taking credit risk.

But economists and bankers say the windfall comes with two risks.

If banks continue to favour government securities over lending, private investment could weaken further, slowing the country’s economic recovery. And if Treasury yields begin to fall, banks will simply fail to maintain their current level of earnings.

INCOME PATTERN SHIFTS SWIFTLY

In 2021, the country’s 52 major banks generated a combined Tk 40,793 crore in income.

Interest income accounted for 47 percent of the total, while investment income contributed 34 percent. The remaining 19 percent came from commission income, according to financial reports of the commercial lenders.

In 2022, investment income increased but remained below interest income. The overall pattern changed little in 2023.

The balance shifted swiftly in 2024, when investment income overtook interest income to become the largest source of banks’ earnings.

By 2025, net interest income accounted for just 6.8 percent of total income, while investment income surged to 73 percent. Commission income contributed around 20 percent.

Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank, said this is a matter of serious concern.

He said foreign investors have already warned that banks could face significant difficulties if Treasury bond yields start to decline.

Explaining the shift in banks’ income sources, he said the cost of deposits has risen alongside overall operating expenses, narrowing lending margins.

“The biggest issue is that NPLs [non-performing loans] in the banking sector have risen sharply. As a result, banks are not receiving interest income from a large portion of their loans, yet they still have to pay interest to depositors.”

“Consequently, net interest income has declined. Ideally, a bank’s primary source of income should be its net interest income, as lending is its core business,” he added.

The CEO said the growing volume of bad loans has handicapped banks. At the same time, credit growth has slowed, prompting commercial lenders to increase their investments in Treasury bonds.

“Commission income has also declined because the country’s trade volume has weakened. In addition, the margins that banks previously earned from foreign exchange transactions have largely disappeared.”

“For the long-term sustainability of banks, their core income remains critically important. However, given the current state of private sector investment, sluggish credit growth, and the fact that NPLs have yet to improve,” he said, adding, “I do not expect the situation to improve in the near future.”
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CONCERNS OVER INVESTMENT, GROWTH

Another notable trend is the steady decline in banks’ net interest income over the past three years. Commission income also fell by around 8 percent year-on-year in 2025.

Investment income, however, has risen gradually over the past five years.

Kazi Monirul Islam, chief executive officer of Shanta Asset Management, said banks had a clear incentive to invest in Treasury securities because they offered attractive yields while lending became significantly riskier.

“That is why investment income has increased,” he said.

Monirul said banks naturally gravitate towards areas where they can earn higher returns with lower risk.

However, when banks choose government securities over extending loans, the wider economy suffers. If the trend continues, it will constrain private investment and slow the country’s economic recovery, he added.

As long as Treasury yields remain high, banks are likely to continue posting strong earnings. Once yields begin to fall, banks may initially benefit from capital gains on their Treasury portfolios, said the CEO of the asset management firm.

“Over time, however, their overall income is also likely to decline,” he added.

He believes that unless economic growth strengthens, banks will struggle to redirect the large volume of funds currently invested in government securities into productive private sector lending.

On the decline in commission income, Monirul said subdued imports and weaker export earnings had reduced trade-related fees and commissions.

Banks that operate brokerage houses also earned less commission because of weak trading activity in the stock market. However, he expects commission income to improve this year.

According to data from the Dhaka Stock Exchange (DSE), average daily turnover stood at Tk 1,474 crore in 2021. It fell to Tk 960 crore in 2022 and Tk 578 crore in 2023.

Turnover declined further to Tk 566 crore in 2024 before plunging to Tk 51 crore in 2025.

There has been a serious concern about economic growth because of the liquidity crisis, huge volumes of bad and doubtful loans, inadequate revenue collection, pressure on foreign debt repayments, declining remittances from non-resident Bangladeshis and uncertainty over export growth. Some of these challenges are beyond our control, while others, including revenue collection, debt recovery and liquidity management, can certainly be addressed through appropriate policy measures.

Bad and doubtful loans reported so far need to be categorised in a dispassionate and objective manner. A large portion of these outstanding loans resulted from fraudulent lending, with funds siphoned out of the financial sector. These are criminal offences and should be dealt with through legal action. Some loans have become bad because of adverse economic conditions, including slower imports caused by the foreign currency crisis, the wars in the Middle East and Ukraine, inadequate power supply to industrial units, rising fuel prices and production costs, weaker exports and other related factors. There is also another category comprising wilful and habitual defaulters. Even in these difficult circumstances, many borrowers continue to repay their loans regularly, demonstrating their commitment and honest intention.

Loans that have become bad because of economic factors beyond borrowers’ control warrant rehabilitation schemes in both the short and long term. Such support should follow careful review on a case-by-case basis, taking industry-specific issues into account. Working capital financing is another critical requirement for boosting production and, where applicable, increasing exports.

Unfortunately, since independence, Bangladesh has seen the persistent presence of habitual and wilful defaulters, with or without political patronage. This has seriously undermined the repayment culture, encouraged corruption and ultimately weakened economic growth. This issue should be addressed firmly, with no further incentives or concessions for wilful defaulters. Strict measures could include restrictions on business expansion, overseas travel by family members, children’s overseas education, infrastructure development and donations to institutions used to fulfil political ambitions. It is unfortunate that many wilful defaulters have never been brought to account, while a large number have escaped responsibility one way or another. This should not be allowed to continue.

Where appropriate, legal action should be initiated without further delay. Inter-company loans are another important area requiring close review. It is necessary to determine whether such funds have been extended to subsidiaries and associated entities and whether those entities have the capacity to repay them on time. It is well established that borrowers often overstate the value of their personal assets when securing loans. Subsequently, those assets may be diverted or disposed of, with or without the knowledge of banks or financial institutions. As a result, loans become effectively unsecured, exposing banks to greater risks in recovering overdue advances.

Increasing revenue collection is equally important. For many years, Bangladesh has failed to raise revenue to the expected level, leaving its tax-to-GDP ratio below that of neighbouring countries and comparable economies. Weak measures by the National Board of Revenue (NBR), inadequate digitalisation and corruption remain major obstacles. Required tax payments cannot be expected solely on a voluntary basis. Greater emphasis should be placed on credible financial statements, effective tax audits as practised in many countries, third-party verification of key financial information, adoption of a faceless assessment system and stronger action against corruption. Good governance is equally important, as poor governance encourages corruption, which ultimately undermines economic growth.

Bangladesh must overcome these challenges. Otherwise, economic growth will be seriously affected at a time when the world is already facing severe pressures from wars and continuing economic uncertainty.