Dhaka:Bangladesh's external sector has shown resilience, bolstered by strong remittance inflows and improving foreign exchange reserves, according to the World Bank's latest update.
According to Bangladesh Sangbad Sangstha, the World Bank emphasized the need for urgent reforms in Bangladesh's financial, energy, and revenue sectors to restore economic growth and create jobs. The report pointed out that Bangladesh's economic growth is slowing due to persistent structural constraints, including vulnerabilities in the energy and financial sectors, weak domestic revenue mobilization, and global uncertainties impacting investment and economic activity.
The report projects a GDP growth of 3.4% for fiscal years 2026 and 2027, with expectations of improvement to 3.9% in fiscal year 2028, contingent on easing energy supply issues and accelerating government reforms. The World Bank underscores the necessity for fast and bold reforms in the banking sector, domestic revenue mobilization, and energy sector to avert an economic downturn and return to an inclusive growth path driven by private investment.
The World Bank also highlighted the importance of better-targeted social protection programs to improve their poverty impact. It suggests that consolidating multiple food subsidies and improving the targeting of cash programs could lift an additional 2.85 million people out of poverty. The implementation and scaling-up of the government's Dynamic Social Registry are seen as critical to addressing gaps in targeting and coverage.
Immediate priorities identified for Bangladesh include easing energy constraints, repairing the financial sector, and mobilizing domestic revenue. For the energy sector, the report recommends increasing domestic gas production, improving LNG infrastructure, and diversifying fuel sources, alongside investments in power transmission and distribution. It also advises scaling up renewable energy and expanding regional electricity trade.
In the financial sector, the World Bank calls for asset-quality reviews, time-bound bank restructuring, and stronger governance and transparency through legal and regulatory reforms. For revenue mobilization, the suggestions include separating tax policymaking from administration and digitalizing tax systems.
The report also addresses the broader South Asia region, forecasting a growth increase to 6.9% this year, driven by strong domestic demand, although growth is expected to slow to 6.7% by 2027 due to mounting headwinds. The World Bank highlights the potential for South Asia to invest in new growth drivers, such as AI, to sustain economic momentum and job creation.