Recently, Bangladesh's national budget for the fiscal year 2026-27 was presented to the Jatiya Sangsad. Following it, public discussions have focused on issues such as: where the necessary financing for the budget will come from; how much scope there is for being frugal by cutting on expenditures; and how the obstacles to implementing the proposed initiatives can be overcome.

Furthermore, more than 100 days have already passed since the current government assumed office. From a geopolitical perspective, the government faces various global economic challenges while also confronting numerous domestic economic problems. Against this backdrop, a relevant question arises: what should Bangladesh do on its journey forward?

In the post-budget period, the government must focus on three key areas. The first is the reform of revenue collection. This requires increasing the tax-to-GDP ratio as well as widening the tax net and the tax base. Bangladesh currently relies more heavily on indirect taxes than direct taxes. As a result, the tax burden falls disproportionately on ordinary citizens, and government revenues become more volatile to global economic shocks. Bangladesh should, therefore, shift toward greater reliance on direct taxation.

In addition, the efficiency in tax collection must be improved. In this regard, there was a proposal to divide the National Board of Revenue into two units, assigning tax policy to one unit and tax administration to another. This proposed reform is yet to be implemented.

The second one is the reform of the structure and the process of government expenditure. Given the significant constraints on financing public spending in the current fiscal year, the government must carefully prioritise its expenditures. Both in fulfilling the electoral manifesto of the government and in selecting development projects, decisions must be made objectively regarding which initiatives deserve priority. Projects that are necessary and that directly contribute to productive economic activity should receive precedence. Large-scale mega projects should, for the time being, be deferred. For the time being, economic realities rather than political considerations should guide future government initiatives.

Third, project implementation processes must be reformed to ensure the swift execution of budget proposals. Traditionally, government programmes and projects have faced various obstacles – some arising from legal complexities, others from excessive procedural requirements and bureaucratic layers. As a result, projects are delayed and prolonged, while also creating opportunities for corruption. Reform across every stage of implementation should therefore be a government priority.

In the post-budget period, the government must focus on three types of challenges: lingering problems, deepening problems, and emerging problems. Among Bangladesh's lingering problems are poverty and deprivation, economic slowdown, unemployment, inflation, and inadequate investment. Poverty appears to have increased recently, and around 36 million people are currently living below the extreme poverty line.

Bangladesh's economic growth rate is currently just above 3%. Both agriculture and industry are experiencing sluggish growth. According to government data, around 3 million people are currently unemployed. Inflation has remained high for an extended period and shows little sign of declining. Domestic and foreign investment have also slowed noticeably.

In the coming years, the government must focus on an inclusive, pro-poor growth strategy, centred on employment-led growth. This requires greater emphasis on the agricultural sector. Human resource development is essential for achieving higher growth, which in turn requires increased investment in education and healthcare, as well as policies oriented toward human development.

To reduce inflation, structural reforms in market systems are necessary, alongside the creation of strategic reserves of essential commodities. In terms of investment, incentive-based economic policies alone are insufficient. Reforms are also needed in the investment environment, including infrastructure, political stability, law and order, and security.

Among the deepening problems are inequality, financial sector distress, the burden of foreign debt and subsidies, violence against women, and environmental degradation. Inequality has become a profound issue in Bangladesh, where the wealthiest 10% of the population own three-fifths of the nation's wealth, and the richest 1% control one-quarter of all wealth. Loan defaults in the banking sector amount to nearly Tk6 trillion. Thousands of crores of taka have been illicitly shipped abroad. Bangladesh's external debt currently stands at approximately $110 billion. In the last fiscal year, the government provided subsidies worth Tk109,000 crore across various sectors. Violence against women has reached a toxic level, not only curtailing women's economic empowerment but also threatening their very existence. Climate and environmental degradation are not merely environmental crises; they are also development challenges.

There is no alternative to economic democratisation if inequality and disparity are to be reduced. Inequality exists not only in outcomes but also in opportunities. Therefore, merely removing structural regulations within the economy is not sufficient; access to resources and opportunities must be ensured for poorer segments of society. In the financial sector, establishing economic discipline and a visible framework of transparency and accountability is essential.

Addressing defaulted loans may require a combination of legal action, loan restructuring, and other coordinated measures. Regarding foreign debt, Bangladesh could engage with international financial institutions, explore debt restructuring arrangements, and also seek financing opportunities from international capital markets.

Subsidies across various sectors should be rationalised and carefully evaluated. A phased roadmap for reducing subsidies should then be developed. At the same time, efficiency and productivity must be increased in order to lessen reliance on subsidies. The state has a unique role in promoting gender equality and women's empowerment. Achieving this requires government commitment and prioritisation, effective policies and law enforcement, and partnerships with families and society. Under no circumstances should violence against women be tolerated. A sustainable development strategy that integrates economic growth with environmental protection deserves government commitment and priority. Existing effective plans should be implemented without delay.

Among the emerging challenges are wars and conflicts arising from geopolitical shifts, global political instability, and the spread of "economic nationalism." As Bangladesh is part of the global economic system, issues such as the Ukraine war, the Covid-19 pandemic, and the recent Middle East war have negatively affected its energy situation, import-export trends, overseas employment and remittances, exchange rates, and foreign exchange reserves.

At the same time, the rise of economic nationalism means that many major powers and developed countries are adopting more inward-looking economic policies. This could create difficulties for Bangladesh in securing grants, loans, and trade preferences. Developed countries are increasingly favouring bilateral relations over multilateral arrangements with developing nations like Bangladesh, potentially depriving them of the benefits of multilateral cooperation.

To address these issues, the government must adopt forward-looking and proactive policies. For example, Bangladesh could establish strategic energy reserves, diversify energy import sources, develop alternative energy options, and improve energy efficiency. Likewise, in response to economic nationalism, Bangladesh may consider forming regional alliances with other developing countries to strengthen trade and economic cooperation.

Another emerging issue is Bangladesh's graduation from the category of Least Developed Countries to that of developing countries. Bangladesh has requested the United Nations to delay this graduation process by three years, and a decision is expected next month.

If the request is approved, Bangladesh must strengthen its capabilities and capacities over the next three years to ensure that no obstacles remain to graduation. This requires careful preparation. It should also be remembered that, after graduation, Bangladesh will lose certain international benefits such as grants, concessional loans, and preferential tariff treatment. Therefore, preparation is also needed for the post-graduation period. Bangladesh has already developed a strategy paper for this transition. What is now required is its effective and phased implementation. In light of a possible delayed graduation, a revised and clearly defined roadmap could be prepared.

Let me conclude by saying that Bangladesh will face many obstacles in the coming years due to both global and domestic factors. These challenges are complex, but they are not insurmountable. With commitment, goodwill, integrity, and strong leadership, the government can confront them and, through collective effort, find effective solutions.

Despite efforts by Bangladesh Bank to promote a cashless economy, cash remained the country's preferred payment method in 2025, accounting for 67.2% of total transaction value, according to the central bank's latest annual report.

Central bank data show that digital channels made up the remaining 32.8% of transaction value, highlighting the slow pace of the transition towards digital payments.

Informal economy a major hurdle

Experts say the persistence of cash reflects the size of the informal economy, where a significant portion of transactions remains outside the formal banking system.Although mobile financial services, digital banking and QR-based payment solutions have expanded rapidly, many businesses and individuals continue to prefer cash for convenience and to avoid greater financial scrutiny.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said, "The country's informal sector remains outside the banking system. A large share of economic transactions takes place there in cash, and we have not yet been able to bring these activities into formal financial channels."
Cash still accounts for 67.2% of transactions in Bangladesh despite cashless push

Zahid Hussain, former World Bank lead economist in Dhaka, said building a cashless society will remain difficult unless the informal sector is brought under the formal financial system.

"Large businesses in transport, agriculture and wholesale-retail trade continue to operate outside banking channels. Many of them are reluctant to join the formal system because doing so would expose them to taxation and regulatory oversight," he added.

Infrastructure, trust challenges

Bankers also point to infrastructure constraints as a major barrier to digital adoption.Many consumers still lack access to smartphones, reliable internet connections or the digital skills needed to use electronic payment systems.Small merchants and rural businesses often lack the infrastructure required to accept digital payments.

Mutual Trust Bank CEO Mahbubur said policy support alone will not be enough to accelerate the shift.

"Digital payment systems must become easier, more accessible and more convenient if we want people to adopt them on a larger scale," he added.

Md Touhidul Alam Khan, managing director and CEO of NRBC Bank, said banks face a dual challenge of ensuring security while making digital services simple enough for users with limited digital literacy.

He warned that fraud incidents, failed transactions and complicated interfaces may erode trust and push users back toward cash.

The banker also stressed the need for an inclusive transition, saying the objective should be to expand consumer choice rather than eliminate cash.

Digital payment adoption remains sluggish even as the country continues to bear the substantial costs of a cash-driven economy.

According to banking sector estimates, Bangladesh spends between Tk20,000 crore and Tk22,000 crore annually on printing currency notes.

The UN CDP’s recommendation to consider an extension of Bangladesh’s preparatory period for LDC graduation is a highly significant development. It is also consistent with the findings of the Graduation Readiness Assessment, earlier commissioned by UNOHRLLS at the request of the interim government. Overall, these assessments strengthen the case that Bangladesh’s LDC timeline extension request is a justified appeal to manage a complex transition under exceptional circumstances.

The CDP’s assessment confirms two things at once. First, Bangladesh continues to meet the graduation criteria by a wide margin, and its graduation eligibility is not in question. Second, Bangladesh has faced a combination of shocks, including the lingering effects of the pandemic, global economic instability, geopolitical tensions, supply-chain disruptions, and a major domestic political transition, all of which have constrained the implementation of critical preparatory measures. The recommendation therefore gives Bangladesh’s request stronger legitimacy within the UN process.

The next step will be to secure support in the UN General Assembly. Bangladesh should not assume that the CDP recommendation alone will automatically translate into approval. A focused diplomatic drive is now essential. The government will need to engage with UN member states, explain the evidence behind the request, demonstrate that the extension will be used for concrete reform actions, and reassure partners that Bangladesh remains fully committed to graduation.At the same time, Bangladesh must navigate the process with care. In the current global environment, geopolitical issues have become a serious development risk. While support should be sought from all relevant partners, the LDC graduation extension should not become a bargaining chip in ways that compel Bangladesh to make costly concessions to major powers. Diplomatic engagement should therefore be broad-based, principled, and carefully coordinated, with the extension framed as a development-transition issue rather than a matter of geopolitical alignment.

The CDP recommendation makes the case for an extension considerably stronger. It gives Bangladesh a credible basis for arguing that additional time is warranted on developmental, institutional, and transition-management grounds. However, we must treat this extension as a time-bound window for accelerating long-overdue reforms and strengthening graduation preparedness, not as a pause or a justification for delaying difficult policy decisions. Three years will pass very quickly.

Immediate priorities must include urgently securing post-graduation trading arrangements with the European Union, which absorbs nearly half of Bangladesh’s exports and where the country’s garment sector will face intensifying competitive pressure in the aftermath of the EU’s free trade agreements with Viet Nam and India. Failure to secure favourable market access could significantly erode Bangladesh’s export competitiveness. At the same time, Bangladesh must strengthen export resilience by accelerating diversification beyond traditional products and markets, reducing the longstanding anti-export bias embedded in domestic policies, enhancing productivity and compliance standards, and fast-tracking the implementation of the key measures identified in the Smooth Transition Strategy for LDC graduation.

This is where foreign direct investment becomes central. Bangladesh’s limited progress in non-RMG exports shows that export diversification cannot be achieved through domestic production capacity alone. The missing link has been FDI. While Bangladesh has developed a large and competitive garment sector, its non-RMG sectors have remained weakly connected to global value chains, international buyers, quality-control systems, design networks, and distribution channels. FDI can help close this gap by bringing technology, managerial capability, compliance systems, global sourcing relationships, and access to established markets.

Successful diversifiers have used foreign investors and joint ventures to anchor domestic firms within global production networks. Bangladesh must now treat FDI not as a general investment objective, but as a core instrument of export transformation. This requires a more focused investment strategy. Rather than spreading policy attention thinly across too many economic zones and sectors, a few selected special economic zones should be prioritised and made fully functional for export-oriented investors. These zones should offer reliable power and gas, customs facilitation, serviced land, duty-free input access, compliance infrastructure, labour-skills support, and fast-track regulatory services.

If needed, generous but disciplined incentives should be offered to attract a small number of large foreign multinational export manufacturers. Securing a few credible anchor investors can have a demonstration effect: once global firms begin producing successfully in Bangladesh, suppliers, logistics providers, buyers, and other investors are more likely to follow. As multinational firms seek to reduce excessive dependence on major geopolitical power manufacturing locations, Bangladesh can position itself as a competitive, non-power-aligned production base for global exports. Bangladesh has already demonstrated its ability to produce at scale, supported by abundant labour, an established export culture, and proximity to Asian supply chains. These advantages will count only if Bangladesh presents itself as a reliable, reform-oriented, and export-ready location.

Several long overdue actions require urgent attention. Foremost among them is fixing the Central Effluent Treatment Plant in Savar and ensuring environmental compliance in the leather sector. This would restore credibility and signal seriousness to investors. Other priorities include creating affordable export-support financing for man-made fibre-based apparel, improving product quality and compliance standards in agro-processing and other promising export sectors, reducing logistics and trade-related costs, and preparing for emerging regulatory requirements such as the EU’s Corporate Sustainability Due Diligence Directive and the Carbon Border Adjustment Mechanism.

The issue of export incentives also deserves special consideration. While many broader policy reforms have stalled, the reduction of export incentives appears to have been placed on a much faster track. This sequencing is questionable. The resurgence of industrial policy globally, and recent experience from export success by various economies, suggest that carefully designed support for exports remains important for building supply-side capacity and strengthening competitiveness. With the possibility of an extension of Bangladesh’s graduation timeline, the country must use any available policy space strategically. Export support should not be indiscriminate, but it should be targeted and linked to export expansion, diversification, technology upgrading, compliance, and new market entry. Removing support before alternative competitiveness-enhancing reforms are in place could weaken the very sectors Bangladesh needs to build for the post-LDC period.

More fundamentally, the success of any extended preparatory period will depend on domestic economic management. Tackling inflation, restoring macroeconomic stability, addressing banking-sector weaknesses, and strengthening implementation capacity remain critical. Without progress in these areas, an extension may provide temporary relief but not a stronger transition. The real test, therefore, will be whether Bangladesh can use the additional time to accelerate reforms, deepen productive capacity, attract export-oriented investment, and enter the post-LDC phase with greater confidence and resilience.

The government’s ongoing effort to formulate a new five-year strategic framework presents a timely opportunity to embed LDC graduation preparedness within a broader national development action plan. Rather than treating graduation-related measures as a parallel exercise, the plan should explicitly align its priorities, targets, and implementation mechanisms with the requirements of a successful post-LDC transition.

In this regard, Bangladesh already possesses a valuable foundation in the STS, which contains a comprehensive set of actions covering macroeconomy, export competitiveness and diversification, productive capacity, institutional strengthening, and international partnerships. Many of these measures can be incorporated directly into the forthcoming development framework. The new strategic plan should therefore establish clear priorities, assign institutional responsibilities, define implementation timelines, and allocate the necessary resources to ensure that the most critical graduation-related reforms are carried out within the available window of opportunity.

Bangladesh’s next national budget should focus on strengthening economic resilience rather than increasing spending, said Zahid Hussain, former lead economist at the World Bank’s Dhaka office.

He warned that weak fiscal buffers, high inflation, and serious vulnerabilities in the financial sector have left little room for a large or expansionary budget.

In an interview with The Daily Star, Hussain said the economy is facing prolonged external pressures stemming from elevated global fuel, fertiliser, and commodity prices, limiting Bangladesh’s ability to absorb further shocks.

“The economy is now facing a global trade shock,” he said, noting that import costs have risen sharply while access to essential goods has become increasingly difficult. Even if geopolitical tensions ease, prices are unlikely to return to pre-war levels anytime soon, he added.

Hussain explained that Bangladesh is paying more for imports but receiving less in return, resulting in a net income loss. “The key question is how we will absorb these losses,” he said.

He added that policy choices are increasingly constrained by limited fiscal space.

“Except for foreign exchange reserves, most buffers are nearly exhausted,” he said, noting that inflation remains above 9 percent and the banking sector is under severe stress.

He said the economy is now facing stagflation -- high inflation, low growth and weak shock absorption capacity -- while election promises and the new government’s budget plans are increasing pressure to raise spending.

“How do we balance these conflicting pressures?” he asked.

LIMITED SPACE FOR EXPANSIONARY BUDGET

Hussain said printing money is not a viable option because inflation is already high and could rise further.

“If inflation were very low, money financing might have been considered, but that is not the case,” he added.

He also said domestic borrowing is constrained as interest rates are already high, with businesses facing double-digit lending rates. Higher government borrowing would push rates up further and restrict private credit.

A large portion of the budget is already locked into mandatory spending.

IMF projections suggest interest payments could reach Tk 1.7 lakh crore in FY27. In FY26, salary expenditure is close to Tk 85,000 crore, while pension payments exceed Tk 35,000 crore.

“These are mandatory costs that are difficult to reduce,” he said, adding that many development projects are already in advanced stages and cutting them would waste past investment.

World Bank studies show that 70 to 80 percent of Bangladesh’s public spending is pre-committed, compared to 50 to 60 percent in other lower-middle-income countries and 40 to 50 percent in better-governed Asean economies.

With inflation eroding purchasing power and weak real wage growth, Hussain said tax revenue cannot rise sharply. Bangladesh typically struggles to collect even Tk 4.5 lakh crore.

Given the constraints, he said, “If we respect these constraints -- no money printing, limited domestic borrowing, large fixed expenditures, and rising interest costs -- then a realistic revenue target would be around Tk 5 lakh crore, with a deficit of about Tk 3 lakh crore.”

“That would put the maximum feasible budget size at roughly Tk 8 lakh crore.”

He warned that financing even this deficit would be challenging. Domestic borrowing needs could exceed safe limits unless external financing rises significantly.

Net external financing may need to reach Tk 1.1 lakh crore, while domestic borrowing of around Tk 1.9 lakh crore would still pressure financial stability.

“For this reason, the overall budget size would need to remain tighter,” he said.

He added that concessional financing from the World Bank, ADB, IMF, JICA and other development partners could allow a slightly larger budget without stressing domestic banks.

“Even so, under realistic assumptions, I do not see the government implementing a budget much beyond Tk 7.5 to Tk 8 lakh crore,” he said.

STRUCTURAL REFORMS OVER SPENDING PUSH

On the IMF programme, Hussain said challenges go beyond subsidy cuts or electricity price adjustments.

Key reforms in tax policy, exchange-rate management, banking sector restructuring, Bangladesh Bank governance, and separating the National Board of Revenue remain incomplete.

“I don’t think simply increasing electricity prices will bring the IMF programme back on track,” he said.

Hussain said Bangladesh no longer has the option to prioritise either inflation control or growth.

The problem, he said, is supply-side constraints rather than weak demand.

“If you don’t have diesel, LNG, or fertiliser, higher government spending will not increase growth,” he said. “Instead, it will mostly lead to higher prices or exchange rate pressure.”

He said the budget should prioritise resilience by protecting food security, energy security, healthcare, and social protection.

“You cannot cut spending on vaccinations, medicines, schools, or support for the poor and vulnerable,” he said.

However, he warned against broad subsidies that often benefit higher-income groups more than those in need.

Hussain said low tax collection is mainly due to a complex tax system and weak administration.

Multiple VAT and customs duty rates, he said, create corruption risks and revenue leakage.

“If the rate structure is simplified and the tax system is automated, revenue can increase without adding pressure on taxpayers,” he said.

He called for urgent reforms in energy, banking, ports, regulation and skills development.

Bangladesh has around 30,000 megawatts of installed power capacity, while peak summer demand is about 18,000 megawatts.

“The problem is not power generation capacity,” he said. “The real issues are fuel supply and limitations in the transmission grid.”

He also highlighted inefficiencies in ports, complex regulations, and weak vocational training.

“Bangladesh exports labour but imports skills,” he said.

Hussain said structural reforms, rather than higher spending, now offer the most practical path to improving investment, lowering costs, and stabilising the economy.

He said Bangladesh is still facing a global trade shock, with both import prices and volumes under pressure.

“Prices have increased, and even if you are willing to pay more, it is still difficult to get the required quantities, especially as global supply chains remain strained,” he said.

He concluded that Bangladesh needs a more productive economy driven by reforms, not a larger budget based on fragile borrowing.

“Without such reforms, the economy could remain stuck in repeated crisis management, while private investment confidence continues to weaken,” he said.

April 2026 inflation data sends a clear warning signal. According to the latest data from the Bangladesh Bureau of Statistics, general point-to-point inflation rose to 9.04% in April, up from 8.71% in March. This means that the expectation of a steady decline in inflation has not yet materialised. Rather, the April figures show that price pressures have increased again.

Food inflation also rose from 8.24% in March to 8.39% in April. At the same time, non-food inflation increased from 9.09% to 9.57%. This suggests that the pressure is not confined to rice, lentils, edible oil, fish, meat, or vegetables. Costs have risen across almost all areas of daily life, including house rent, healthcare, education, transport, clothing, and energy-related expenses.

Both rural and urban areas are experiencing an upward trend in overall inflation. In rural areas, general point-to-point inflation increased from 8.72% in March to 9.05% in April. In urban areas, general inflation also rose from 8.68% in March to 9.02% in April. Numerically, the difference between rural and urban inflation is not very large, but rural inflation is slightly higher. This difference has important social implications. Rural low-income households, small farmers, agricultural labourers, day labourers, and informal workers often have uncertain incomes and very limited savings. As a result, they find it harder to absorb the shock of rising prices.

The internal composition of rural inflation is even more concerning. Rural food inflation rose from 8.02% in March to 8.23% in April. Rural non-food inflation increased from 9.38% to 9.81%. This means that rural households are facing pressure not only from food prices but also from non-food expenses. When the costs of healthcare, education, transport, agricultural inputs, electricity, house repairs, and everyday services rise, the real purchasing power of rural households declines quickly. We often assume that because rural people are connected to food production, they are less affected by food inflation. The reality is different. A large share of rural people are net food buyers. They buy rice, lentils, edible oil, fish, eggs, and vegetables from the market. Therefore, food inflation directly affects them.

Urban inflation is also a serious concern. In urban areas, general inflation increased from 8.68% in March to 9.02% in April. The expenditure pattern of urban households is different from that of rural households. In cities, house rent, transport, education, healthcare, gas and electricity, water, childcare and market-dependent food purchases occupy a large share of household budgets. Urban low-middle-income and working-class people have to buy almost everything from the market. They have little scope for own production or family-based support. Therefore, even a modest rise in food prices, combined with higher rent and service costs, can quickly disrupt the monthly budget. Fixed-salary workers, garment workers, small service-sector workers, rickshaw pullers, shop employees and informal workers are particularly exposed to this pressure. Urban inflation is therefore not only a matter of market prices; it also reflects the growing insecurity of urban life.

In this situation, inflation cannot be treated only as a monetary policy issue. Interest rates, credit growth and money supply management are important, but a large part of Bangladesh's current inflation is linked to supply chains, import costs, the exchange rate, energy prices, market management and inflation expectations. Therefore, a coordinated policy response is needed. The food supply chain must be strengthened. Competition in markets has to be improved. Effective monitoring is required against hoarding and abnormal price hikes. Import decisions must also be timely, so that signals of shortage do not emerge in the market. At the same time, inefficiencies in agricultural production, storage, transport, and wholesale market systems must be reduced.

The highest priority should be protecting low-income people. Rural and urban poor households, lower-middle-income groups, fixed-income earners, and informal workers are the main victims of inflation. Social protection programmes need to be made more targeted. Food support, subsidised essential goods, cash transfers and employment-based assistance should be expanded in line with actual needs. In urban areas, subsidised food distribution, support for the urban poor facing rental pressure, and special protection programmes for low-income workers are also needed. Wage growth must also be monitored so that it does not remain below inflation. In the end, inflation is not merely a statistic. It means eating less, postponing healthcare, cutting children's education expenses and accepting a lower quality of life.

Dr Selim Raihan is a professor of Economics at Dhaka University and executive director of the South Asian Network on Economic Modelling (Sanem).

US President Donald Trump’s military forays in Venezuela and Iran have weakened Opec more than anyone thought possible just months ago. The White House may view this as a major win, but it may ultimately leave both the US and energy markets worse off.

For decades, the Organization of the Petroleum Exporting Countries, under its de facto leader Saudi Arabia, has exercised outsized influence over oil markets, dialling output up or ​down by tapping spare capacity to manage prices and defend market share.

That influence has long been eroding as the US and other non-Opec members have gained prominence in the past decades. The percentage of ‌global oil production Opec oversees fell from a peak of about 50 percent in the 1970s to roughly 35 percent last year - and down to around 26 percent in March in the wake of the closure of the Strait of Hormuz at the start of the Iran war.

The United Arab Emirates, the cartel’s fourth‑largest producer, quit the group last week after 60 years to pursue its energy strategy free of Opec production quotas, directly challenging Saudi Arabia and its Gulf neighbours.

Trump – a long-time critic of Opec – hailed the UAE’s departure as “great,” arguing it would help push oil prices lower.

That may prove true – ​and the US president’s muscular foreign policy may ultimately prove to be the producer group’s undoing. But a weaker Opec is not necessarily good news for consumers or producers – including the US.

Opec has long been a ​lightning rod for US lawmakers who accuse it of acting as a cartel. Trump has levelled blistering criticism at the group for years. In 2018, he accused Opec of being a monopoly that kept oil prices “artificially high.” After returning to office last year, he renewed pressure on the group to keep prices low.

This year, he went far beyond tough talk.

The lightning-fast US raid on Venezuela in January saw long-serving President Nicolas Maduro ​captured and replaced by a Washington‑friendly government. The Trump administration swiftly took control of Venezuela’s oil sector, redirecting most of its exports to the US and opening the country’s vast oil reserves to Western companies.

Venezuela, a founding Opec member in 1960, ​saw its production wither over recent decades to under 1 million barrels per day as a result of mismanagement, chronic underinvestment and US sanctions. That is less than 1 percent of global supplies.

But output is now expected to rebound as fresh capital flows in. While Trump has not objected to Venezuela remaining in Opec, it is hard to imagine Caracas agreeing to curb output under Opec quotas given Washington’s tight oversight of its energy sector.

The US-Israeli strikes on Iran on February 28 triggered a far more dramatic cascade, leaving Opec fractured and largely powerless.

Tehran sealed off the Strait ​of Hormuz within hours of the first strikes, trapping roughly a fifth of the world’s oil and gas supplies inside the Gulf.

During the 40-day active conflict, dozens of energy facilities were targeted across the Gulf, including tankers, oil and gas ​fields, refineries, pipelines and storage terminals.

The closure and the fighting forced producers to shut in around 10 million bpd, while Saudi Arabia and the UAE diverted some output to ports outside the Gulf.

Washington implemented its own blockade in mid-April while US efforts to break the Iranian blockade have ‌so far done little to revive traffic through the narrow waterway.

Opec’s traditional pillars - Saudi Arabia, the UAE, Kuwait and Iraq - found themselves bereft of their main export route, usable spare capacity and operational flexibility.

In short, they were essentially powerless in the face of the biggest oil shock in history.

This, in turn, created an opening for the vast US oil and gas industry - now the world’s largest in terms of production - to rapidly ramp up exports to Asia and Europe, further eroding Opec’s market share and influence.

America’s position is strengthened, but the US oil industry is driven by market forces. It has no equivalent of Opec’s spare capacity to balance the market.

In the absence of a strong Opec, Trump may find this new environment far less manageable than he bargained ​for.

CUSHIONING THE BLOW

Opec has long played a central role in stabilising oil ​markets, using large volumes of low-cost spare capacity, mostly concentrated ⁠in the Gulf, to cushion the impact of wars and weather events.

It also proved effective in times of oversupply, most notably during the onset of the COVID‑19 pandemic. Trump personally urged Saudi Crown Prince Mohammed bin Salman in April 2020 to slash output and ease pressure on US producers. Within days, Opec+ announced its largest-ever production cut.

Without effective market management by Opec, oil markets ​face higher volatility and fewer shock absorbers to deal with disruptions that are likely to become more frequent as geopolitical tensions rise.

For producing nations, including the US, this would likely ​translate into more frequent boom-and-bust cycles, ⁠higher operating costs for oil companies and, ultimately, higher and more volatile prices at the pump.

SHADOW OF ITS FORMER SELF

It is premature to declare Opec dead. Riyadh will almost certainly seek to steady the group in the coming months and lean more heavily on its alliance with Russia to reassert authority.

Politically, though, the Iran war has left Opec in tatters. Iran’s bombardment of critical energy infrastructure belonging to fellow Opec members, particularly Saudi Arabia, combined with its decision to close Hormuz - once unthinkable - has created deep rifts ⁠within the group ​that may take years to heal, if they ever do.

The most notable thing about Sunday’s Opec+ meeting - which includes Russia - was not the announcement of ​a theoretical quota increase. It was the absence of the UAE.

Opec, as the world has long known it, is gone. Trump and others may eventually regret that.

After more than 35 years in commercial banking, I have seen a troubling pattern: persistently high non-performing loans, limited product innovation, weak risk management, a shortage of capable and transformational leadership, and undue interference by owner directors. Over time, these have become almost normal. They are compounded by uneven central bank supervision, outdated technology and limited institutional capacity to respond to shocks.

Meanwhile, global banking is changing rapidly. Technological advances, shifting customer expectations and new economic realities are reshaping how banks operate. Some institutions are struggling to keep up; others are moving ahead with stronger governance, modern systems and forward-looking strategies. This widening gap poses a pressing question: what will banking look like in the coming decade, and can our local banks remain competitive?

There are signs of progress. Several commercial banks in Bangladesh have begun centralising operations to improve efficiency and oversight. Effective centralisation brings large corporate and retail branches under unified control, strengthening governance while improving risk management and customer service. At the same time, the expansion of digital banking services is making transactions quicker, simpler and more accessible.

Banks are also placing greater emphasis on customer relationship management (CRM). Many have invested heavily in technology and staff training, and that effort is set to continue. Customers initially faced disruption, but many are now seeing the benefits. Banks are working to understand each client’s overall financial needs and to offer tailored solutions. Relationship managers (RMs) are being deployed to integrate corporate banking, foreign exchange and personal financial services, enabling clients to access a full range of services through a single point of contact.

Lending strategies are shifting as well. Banks increasingly recognise that heavy reliance on traditional instruments such as cash credit is unsustainable. The focus is moving towards mobilising low-cost deposits and boosting profitability through a more balanced mix of corporate and retail banking.

To support this transition, banks are investing in digital platforms, data analytics, artificial intelligence and blockchain. AI, including generative AI, is beginning to transform financial services by enabling personalised advice and sharper market insights. Robo-advisers, for example, can analyse market trends and customer behaviour to provide recommendations aligned with individual risk profiles.

AI is also improving efficiency. Chatbots now handle routine enquiries such as account balances or transaction histories, cutting waiting times and operating costs. More advanced tools can assess financial statements, support credit decisions, detect fraud in real time and streamline processes, including customer onboarding, loan approvals and regulatory reporting. These innovations enhance service quality while reducing administrative pressure.

The revenue model must evolve, too. A balanced bank should aim for an equal split between interest income and fee-based income. Leading institutions are placing greater weight on fee-based services such as corporate advisory, foreign exchange, structured finance and syndication, where risks are shared. This reduces dependence on traditional lending and strengthens balance sheet resilience.

Risk management will determine future success. To manage interest rate volatility, banks are prioritising short-term, low-cost deposits over long-term liabilities. At the same time, they must develop robust credit policies aligned with emerging investment trends and economic needs.

Ultimately, the future of banking will be shaped by technology, market forces and rising customer expectations. Banks can no longer confine themselves to deposit-taking and lending. They must expand into wealth management, integrate with fintech platforms and ensure secure, technology-driven transactions.

In an era defined by globalisation and rapid technological change, continuous transformation is essential for survival. Banks that fail to adapt will become irrelevant. The message is unmistakable: banking cannot continue the way it is.

Bangladesh’s economy is facing renewed pressure from global geopolitical tensions and commodity market disruptions, with risks of elevated inflation, slower growth and mounting fiscal strain, according to Eric Robertsen, global head of research and chief strategist at Standard Chartered.

In an interview with The Daily Star, Robertsen said financial markets appear “overly optimistic” about a swift resolution of the ongoing Gulf tensions and the reopening of the Strait of Hormuz, a critical artery for global energy supplies.

If shipping resumes soon, it could take weeks or months for oil, gas and petrochemical supply chains to normalise, prolonging price pressures worldwide, Eric Robertsen said
He added that even if shipping resumes soon, it could take weeks or months for oil, gas and petrochemical supply chains to normalise, prolonging price pressures worldwide.

“Even when the Strait reopens, it will take time for exports to normalise and for supply chains to stabilise,” he said, adding that such shocks typically leave behind persistent economic damage across vulnerable economies.

He explained that governments tend to follow a predictable policy response during commodity crises, starting with subsidies to cushion consumers and businesses, followed by price caps, rationing and, in some cases, more aggressive interventions.

“What we have seen in this crisis is that many economies, particularly in Asia, have moved through all these steps very quickly,” he said, adding that such measures come at a high fiscal cost.

“There will be a negative impact on fiscal balances as governments step in to support their economies,” he added.

Robertsen also flagged rising risks of stagflation -- a combination of high inflation and weak growth, particularly for emerging economies like Bangladesh.

“The inflation impact is immediate in a commodity shock, but the hit to growth comes with a lag,” he said.

Bangladesh has been witnessing persistently high inflation for the last three years.

“Higher energy prices reduce disposable income and investment capacity, which ultimately weakens demand,” Robertsen said.

He cautioned that central banks face a difficult balancing act in such an environment.

“If policy tightening happens too early or too aggressively, it could worsen the growth outlook,” he said.

However, he noted a key relief factor in the current crisis: the absence of a sharp appreciation of the US dollar.

“This has not turned into a currency crisis, which is extraordinarily good news for central banks,” he said.

About the global outlook, Robertsen highlighted four key risks for emerging economies: higher inflation, weaker growth, potential policy missteps and deteriorating fiscal balances.

“For the next two quarters, there is a need to build a higher risk premium into both market expectations and economic forecasts,” he said.

He also pointed to a longer-term structural shift in the global economy.

“We are moving into a world where control over commodities becomes both an economic and geopolitical tool,” he said, citing recent examples of export restrictions on energy products and critical inputs.

“One of the key lessons is the importance of maintaining strategic reserves of oil and gas,” he said. “Many countries have learned the hard way that they were underprepared.”

As a result, he expects global energy prices to remain structurally higher even after the current crisis subsides.

Naser Ezaz Bijoy, the chief executive officer of Standard Chartered Bangladesh, said in the same interview that Bangladesh’s ongoing economic challenges have been building over several years.

“Bangladesh’s current challenges did not begin with the war. They started during Covid-19, followed by the Russia-Ukraine conflict, which created foreign currency pressures,” he said.

“There was a strong expectation that after the political transition, investment would pick up and economic activity would accelerate,” Bijoy said. “However, fresh external disruptions have continued to weigh on the outlook.”

He stressed that limited fiscal capacity remains a core constraint.

“Our tax-to-GDP ratio is weak, and revenue collection has been consistently low,” he said, warning that this leaves the country with less room to respond to shocks.

Government decisions to adjust administered prices, particularly in energy, are also adding to cost pressures.

“The government initially deferred price adjustments due to political sensitivities, but ultimately had little choice but to implement them,” he said, adding that such measures would inevitably affect both inflation and the cost of doing business.

At the same time, he emphasised that ensuring an uninterrupted energy supply is more critical than keeping prices low.

Bijoy also pointed to setbacks in external financing discussions. “The IMF negotiations did not progress as expected, which is another hurdle,” he said, adding that the issue would require high-level policy attention.

On the external sector, Bijoy said export performance has weakened in recent months, particularly in Europe.

“The decline in exports began around August,” he said, attributing it to softer demand, higher costs and intensifying competition from countries such as China and India.

Buyers are also changing sourcing strategies.

“They are increasingly diversifying and consolidating orders with larger suppliers who are better equipped to meet sustainability standards and manage risks,” he said.

Despite the slowdown, Bijoy does not foresee a sharp downturn. “We are seeing a modest dip in exports, around 4.5 percent, which may reach 5 to 5.5 percent. It is not a catastrophic situation,” he said.

Picture a garment factory in Ashulia on a Tuesday morning. Machines hum, deadlines loom, and a buyer waits on a shipment. Then the power cuts out. The generator kicks in. Diesel is expensive and polluting. The factory absorbs the cost and carries on. This is not a crisis. This is Tuesday. Bangladesh’s energy crisis is the “common cold” of the RMG sector: chronic, underestimated and quietly debilitating. Painful, yet rarely dramatic enough to force action. The prescription is known, and the reforms are within reach, but the cost of inaction is no longer theoretical. What was once a logistical headache has become an existential threat.

On the factory floor, reality is harsher. Chronic gas shortages idle machines, delay shipments and raise costs. Global buyers are asking tougher questions about carbon footprints. With only 5.24 percent of installed capacity coming from renewables, we are not merely missing targets; we are risking competitiveness in a market that rewards reliability and sustainability. The country aims to generate 40 percent of its electricity from clean sources by 2041. Yet, of 32,345 MW total capacity, renewables account for just 1,695 MW. In more than a decade, the renewable share has risen by barely 3 percent, while investment has continued to favour fossil fuels. The energy mix is also unbalanced. About 82.7 percent of renewable capacity comes from solar, with minimal contributions from wind and hydro. Limited diversification leaves the grid exposed to supply and price shocks.

Industry is already paying the price. Gas shortages, often exceeding 1,300 MMCFD, mean factories receive well below the required fuel. To keep production lines running, many rely on diesel generators. That raises costs and erodes margins already squeezed by currency depreciation and global price competition. Energy insecurity is making Bangladeshi goods more expensive, precisely when buyers demand lower prices. The greater risk lies in compliance. The EU, our largest export market, is tightening environmental standards. Buyers increasingly link orders to carbon intensity.

Waiting until 2030 is not an option. Four shifts are urgent. First, enable private power. A Merchant Power Plant framework should allow producers to sell directly to large industries at market rates. The policy must be bankable and free of excessive open access tariffs. RMG hubs should be able to sign long-term power purchase agreements with solar and wind developers. Second, modernise the grid. The transmission and distribution network was not designed for variable renewable generation. Scaling up clean energy requires smart grid investment, faster net metering rollout and a clear modernisation roadmap with financing and timelines.

Third, remove fiscal barriers. The FY2025-26 budget cut import duties on solar panels and inverters to 1 percent, but mounting structures still face duties of 58.6 percent and battery storage remains heavily taxed. Duty relief must extend to all essential components so that fiscal policy aligns with national energy goals. Fourth, mobilise green finance. Bangladesh needs up to $980 million annually until 2030 to meet renewable targets, several times the current annual investment of $238 million. The Tk 200 crore single borrower cap under the Green Transformation Fund is too small for utility-scale projects. Developing a liquid green bond market and securing risk guarantees from development partners would help attract investment at scale.

The textile and RMG sectors must be central to energy policy. Policies detached from factory realities will fail. The priority must shift from announcements to implementation. Renewable energy is no longer a distant aspiration or a branding exercise. It is an industrial necessity. If we do not accelerate the transition now, we risk leaving our most vital sector behind as global trade shifts towards low-carbon production.

The writer is a former director of BGMEA and additional managing director at Denim Expert Ltd