Economy under severe strain from inflation, revenue shortfall

Bangla Press Desk : Bangladesh’s economy faces mounting pressure as high inflation, a major revenue shortfall, slow implementation of development projects and uncertainty in investment weigh on overall economic stability.

Economists say the new government now faces critical challenges, including controlling inflation, boosting investment, creating employment and accelerating the implementation of development projects.A February economic update by the General Economics Division (GED) of the Planning Commission shows that food inflation has started rising again despite a slight easing in rice prices. The report says higher prices of fish, vegetables and fruits have pushed food inflation upward, keeping overall inflation under pressure.

According to the report, overall inflation rose to 8.58% in January 2026, up from 8.49% in December. Food inflation also increased to 8.29% during the same period. Although rice prices declined slightly, rising prices of other food items prevented any meaningful reduction in food inflation.A sectoral analysis shows that rice contributed significantly less to food inflation in January compared with December. Rice inflation dropped from 11.92% to 7.61%. However, higher prices of fish, fruits and vegetables continued to push overall food inflation upward.

Vegetables contributed negatively to inflation in December, but their prices increased in January and created additional pressure on the inflation rate.

The report attributes the rise in vegetable prices to higher transport costs, weaknesses in the supply chain and the tendency of intermediaries in wholesale markets to seek higher profit margins.

At the same time, wage growth has failed to keep pace with inflation, reducing the real income of ordinary people. Inflation stood at 8.58% in January, while the wage growth rate remained at 8.08%. As a result, people’s real income continues to decline. Inflation has exceeded wage growth for several consecutive months since September last year.

The situation has significantly reduced the purchasing power of low- and middle-income groups.

Revenue collection has also raised serious concern. The National Board of Revenue (NBR) set a revised target of Tk52,545 crore for January but collected only Tk37,033 crore. The shortfall reached about Tk15,512 crore, meaning the NBR achieved only 70.48% of its target.

Although revenue collection increased slightly in January compared with December, the overall performance remains far below expectations.

The implementation of development projects has also slowed significantly. The government implemented only Tk50,556 crore of the Annual Development Programme (ADP) by January of the current fiscal year, which accounts for about 21.18% of the total allocation. This represents the lowest ADP implementation rate at the mid-point of the fiscal year in the past five years.

However, some positive signs have emerged in the external sector. Foreign exchange reserves stabilised in January after rising slightly in December. The country’s total foreign exchange reserves stood at about $33.18 billion in January.

Remittance inflows have also remained relatively strong. Analysts expect remittance to increase further ahead of Eid, which could help strengthen the foreign exchange reserve position.

While garment exports have recorded positive growth in recent months, exports from non-garment sectors remain relatively slow.

Another key concern involves imports of capital machinery. Recent declines in such imports have raised concerns about the investment climate, as capital machinery imports often indicate private investment and future production capacity.

Economists say the government must quickly adopt coordinated measures to restore investor confidence, control inflation, strengthen revenue collection and speed up development project implementation.

CPD Executive Director Fahmida Khatun said the economy currently faces severe pressure. She said timely reforms could help the economy recover, but delays in reforms could further threaten growth, employment and social stability.

PRI Vice Chairman Sadiq Ahmed said Bangladesh faces a very difficult economic reality. He noted that economic growth has fallen to about 3.5%, poverty has increased, unemployment among educated youth has exceeded 10%, and inflation remains around 8.5%, while energy security also faces serious risks.

He said the government must prioritise major reforms, including raising the tax-to-GDP ratio to 10% and establishing a modern income-based tax system.Source: daily Sun

BP/SP