White Paper

on
State of the Bangladesh Economy

Dissection of a Development Narrative

Prepared by
the White Paper Committee 2024

Constituted by the Hon’ble Chief Adviser of

the Government of Bangladesh

Dhaka: 30 November 2024

 White Paper
on
State of the Bangladesh Economy

Dissection of a Development Narrative

White Paper on State of the Bangladesh Economy ii

November 2024
© Government of Bangladesh

Disclaimer: The views expressed in the chapters of this document are those of the respective
authors and do not necessarily reflect the views of any organisation(s) they are
affiliated with.

Citation: White Paper Committee 2024 (2024). White Paper on State of the Bangladesh
Economy Dissection of a Development Narrative. Dhaka: Government of
Bangladesh

White Paper on State of the Bangladesh Economy iii

White Paper Committee
Chair

Dr Debapriya Bhattacharya
Distinguished Fellow, Centre for Policy Dialogue (CPD)
and
Convenor, Citizen's Platform for SDGs, Bangladesh

Members (in alphabetical order)

Professor A K Enamul Haque

Deputy Vice Chancellor, UCSI University, Bangladesh Branch
and
Director, Economic Research Group, Dhaka

Ms Ferdaus Ara Begum

CEO, Business Initiative Leading Development (BUILD)

Dr Imran Matin
Executive Director, BRAC Institute of Governance and Development (BIGD)

Dr Kazi Iqbal
Research Director, Bangladesh Institute of Development Studies (BIDS)

Dr M Tamim
Professor, Bangladesh University of Engineering and Technology (BUET)

Dr Mohammad Abu Eusuf

Professor, Department of Development Studies and Director, Centre on Budget and Policy,
University of Dhaka
and
Executive Director, Research and Policy Integration for Development (RAPID)

Professor Mustafizur Rahman

Distinguished Fellow, Centre for Policy Dialogue (CPD)

Dr Selim Raihan
Professor, Department of Economics, University of Dhaka
and
Executive Director, South Asian Network on Economic Modeling (SANEM)

Ms Sharmind Neelormi
Professor, Department of Economics, Jahangirnagar University

Dr Tasneem Arefa Siddiqui

Professor, Department of Political Science, University of Dhaka
and
Founding Chair, Refugee and Migratory Movements Research Unit (RMMRU)

Dr Zahid Hussain
Former Lead Economist, World Bank Bangladesh

White Paper on State of the Bangladesh Economy iv

Research and Technical Support Team
Lead
Mr Towfiqul Islam Khan, Senior Research Fellow, CPD

Members
Ms Najeeba Mohammed Altaf, Senior Research Associate, CPD
Ms Mamtajul Jannat, Research Associate, CPD
Ms Shourza Talukder, Research Associate, CPD
Ms Naima Jahan Trisha, Research Associate, CPD
Ms Anika Tasnim Arpita, Programme Associate, CPD
Ms Saba Sabnam, Programme Associate, CPD
Mr Saikat Islam, Intern, CPD
Ms Sarah Sabin Khan, Head of Solutions Mapping-Accelerator Lab, UNDP Bangladesh
Ms Iffat Anjum, Head of Exploration, UNDP Bangladesh

Outreach and Administrative Support Team

Lead
Ms Tarannum Jinan, Senior Administrative Associate, CPD

Members
Mr Avra Bhattacharjee, Joint Director, Dialogue and Outreach, CPD
Mr A H M Ashrafuzzaman, Joint Director, IT, CPD
Mr Md. Rifat Bin Aowlad, Dialogue Associate, CPD
Ms Nahian Raihana Prapti, Programme Associate, CPD
Ms Zarin Tasnim, Executive Associate, CPD
Ms Maisha Sadia, Programme Associate, CPD
Mr Nepoleon Dewan, Senior Assistant Chief at Poverty Analysis and Monitoring Wing, GED,
Bangladesh Planning Commission
Mr Md Maksudul Islam, Deputy Chief at Macro and Perspective Planning Wing, GED, Bangladesh
Planning Commission (Till 30 September 2024)
Ms Fatema Zohara, Deputy Chief (Attachment) at Delta Wing, GED, Bangladesh Planning
Commission (till 14 October 2024)

White Paper on State of the Bangladesh Economy v

List of Meetings and Outreach

White Paper Committee Meetings

1. 1st Meeting of White Paper Committee on Thursday, August 29, 2024, at Bangladesh Planning
Commission
2. 2nd Meeting of White Paper Committee on Tuesday, September 3, 2024, at the Coordination
Room, Nazia Salma Building, Bangladesh Planning Commission
3. 3rd Meeting of the White Paper Committee on Wednesday, September 18, 2024, the
Coordination Room, Nazia Salma Building, Bangladesh Planning Commission
4. 4th White Paper Committee Meeting to discuss first drafts of selected chapters on Thursday,
October 17, 2024, at the Coordination Room, Nazia Salma Building, Bangladesh Planning
Commission
5. 5th White Paper Committee Meeting to discuss first drafts of selected chapters on Sunday,
October 20, 2024, at the Coordination Room, Nazia Salma Building, Bangladesh Planning
Commission
6. 6th White Paper Committee Meeting to discuss first drafts of selected chapters on Sunday,
October 20, 2024, at the Coordination Room, Nazia Salma Building, Bangladesh Planning
Commission
7. 7th White Paper Committee Meeting to discuss first drafts of selected chapters on Thursday,
October 24, 2024, at the Coordination Room, Nazia Salma Building, Bangladesh Planning
Commission
8. 8th White Paper Committee Meeting to discuss first drafts of selected chapters son Sunday,
October 27, 2024, at the Coordination Room, Nazia Salma Building, Bangladesh Planning
Commission
9. 9th White Paper Committee Meeting to discuss first drafts of selected chapters on Tuesday,
October 29, 2024, at the Coordination Room, Nazia Salma Building, Bangladesh Planning
Commission
10. 10th White Paper Committee Meeting to discuss first drafts of selected chapters on Tuesday,
October 29, 2024, at the Coordination Room, Nazia Salma Building, Bangladesh Planning
Commission
11. 11th White Paper Committee Meeting to discuss revised drafts of selected chapters on
Wednesday, 6 November 2024, at the Coordination Room, Nazia Salma Building, Bangladesh
Planning Commission.
12. 12th White Paper Committee Meeting to discuss revised drafts of selected chapters on
Thursday, 7 November 2024 at the Coordination Room, Nazia Salma Building, Bangladesh
Planning Commission.
13. 13th White Paper Committee Meeting to discuss revised drafts of selected chapters on Sunday,
10 November 2024 at the Coordination Room, Nazia Salma Building, Bangladesh Planning
Commission.
14. 14th White Paper Committee Meeting to discuss revised drafts of selected chapters on Monday,
11 November 2024 at the Coordination Room, Nazia Salma Building, Bangladesh Planning
Commission.
15. 15th White Paper Committee Meeting to discuss revised drafts of selected chapters on
Tuesday, 12 November 2024 at the Coordination Room, Nazia Salma Building, Bangladesh
Planning Commission.
16. 16th White Paper Committee Meeting to discuss revised drafts of selected chapters on
Thursday, 14 November 2024 at the Coordination Room, Nazia Salma Building, Bangladesh
Planning Commission.

White Paper on State of the Bangladesh Economy vi

 17. 17th White Paper Committee Meeting to discuss revised drafts of selected chapters on Sunday,
17 November 2024 at the Coordination Room, Nazia Salma Building, Bangladesh Planning
Commission.
18. 18th White Paper Committee Meeting on Sunday, 24 November 2024 at Brac Centre Inn.

Policy Consultations
19. Consultation with the Student Coordinators on Thursday, September 5, 2024, the
Coordination Room, Nazia Salma Building, Bangladesh Planning Commission
20. Consultation with Non-Resident Scholars on Thursday, September 5, 2024 (Virtual)
21. Consultation with UNDP & GED on Thursday, September 5, 2024, at Bangladesh Planning
Commission
22. Consultation with Focal Points of the Government Ministries, Divisions and Agencies on
Tuesday, September 17, 2024, at the Coordination Room, Nazia Salma Building, Bangladesh
Planning Commission
23. Consultation with senior economists and experts on Wednesday, September 18, 2024, the
Coordination Room, Nazia Salma Building, Bangladesh Planning Commission
24. Consultation with young economists and experts on Wednesday, September 18, 2024, the
Coordination Room, Nazia Salma Building, Bangladesh Planning Commission
25. Consultation with young entrepreneurs on Sunday, September 29, 2024, the Coordination
Room, Nazia Salma Building, Bangladesh Planning Commission
26. Consultation with trade unions on Monday, September 30, 2024, the Coordination Room,
Nazia Salma Building, Bangladesh Planning Commission
27. Consultation with a selected group of economists and relevant experts at international
development partners on Tuesday, October 1, 2024, the Coordination Room, Nazia Salma
Building, Bangladesh Planning Commission
28. Consultation with Foreign Investors on Tuesday, October 1, 2024, the Coordination Room,
Nazia Salma Building, Bangladesh Planning Commission
29. Consultation with civil society organisations on Monday, October 7, 2024, at the Conference
Room, NEC, Bangladesh Planning Commission.
30. Consultation with Bengali Professionals at international development partners on Monday,
October 7, 2024, the Coordination Room, Nazia Salma Building, Bangladesh Planning
Commission
31. Consultation with the American Chamber of Commerce in Bangladesh on Tuesday, October 8,
2024, at the Coordination Room, Nazia Salma Building, Bangladesh Planning Commission
32. Consultation with the UNICEF Bangladesh on Monday, October 14, 2024, at the Coordination
Room, Nazia Salma Building, Bangladesh Planning Commission
33. Consultation with Senior Journalists on Monday, October 21, 2024, at the Coordination Room,
Nazia Salma Building, Bangladesh Planning Commission.
34. Consultation with Economic Reporters' Forum (ERF) on Thursday, October 31, 2024, at
Coordination Room, Nazia Salma Building, Bangladesh Planning Commission.
35. Consultation on ICT sector from 12.00 - 2.00 pm on Wednesday, 6 November 2024 at the
Coordination Room, Nazia Salma Building, Bangladesh Planning Commission
36. Consultation with high-level government officials on Sunday, 3 November 2024, at Conference
Room, NEC, Bangladesh Planning Commission.
37. Consultation with the heads of foreign missions in Bangladesh on Monday, 4 November
2024, at Coordination Room, Nazia Salma Building, Bangladesh Planning Commission.
38. Consultation with heads of UN agencies and international financial institution in
Bangladesh on Tuesday, 5 November 2024, at the Coordination Room, Nazia Salma Building,
Bangladesh Planning Commission

White Paper on State of the Bangladesh Economy vii

 39. Consultation with the US-Bangladesh Business Council on Monday, November 18, 2024
(online)

Technical Consultations
40. Consultations with National Accounting Wing, Bangladesh Bureau of Statistics (BBS) on
Tuesday, September 17, 2024, at the Coordination Room, Nazia Salma Building, Bangladesh
Planning Commission
41. Consultation with the Implementation, Monitoring and Evaluation Division (IMED) on
Thursday, September 19, 2024 at IMED Office, Bangladesh Planning Commission
42. Meeting with BBS on Monday, September 23, 2024, at the BBS.
43. Consultation on External Sector in Bangladesh on Wednesday, September 25, 2024, at the
Coordination Room, Nazia Salma Building, Bangladesh Planning Commission
44. Consultation with Women Representatives on Thursday, September 26, 2024, a at the
Coordination Room, Nazia Salma Building, Bangladesh Planning Commission
45. Consultation on Institutions on Thursday, September 26, 2024, at the Coordination Room,
Nazia Salma Building, Bangladesh Planning Commission
46. Consultation with practitioners working in the disability field on Thursday, September 26,
2024, at Meeting Room 11, Building 4, Planning Commission.
47. Consultation on Power and Energy Sector on Sunday, September 29, 2024, at the Coordination
Room, Nazia Salma Building, Bangladesh Planning Commission
48. Consultation with SME Entrepreneurs on Monday, September 30, 2024, at SME Foundation.
49. Consultation with Gas Transmission Company Limited (GTCL) on Monday, September 30,
2024
50. Consultation on Domestic Revenue Mobilisation on Tuesday, October 1, 2024, at the
Coordination Room, Nazia Salma Building, Bangladesh Planning Commission
51. Consultation on Public Expenditures on Sunday, 6 October 2024, at the Coordination Room,
Nazia Salma Building, Bangladesh Planning Commission
52. Consultation with the Bangladesh Power Development Board on Monday, October 7, 2024
53. Consultation on Agriculture and Food Security on Tuesday, October 8, 2024, at the
Coordination Room, Nazia Salma Building, Bangladesh Planning Commission
54. Consultation on Climate Change Issue on Thursday, October 17, 2024, at the Coordination
Room, Nazia Salma Building, Bangladesh Planning Commission

Public Hearings
55. Public Hearing at Sylhet on Wednesday, October 2, 2024, at Nirvana Inn, Sylhet
56. Public Hearing at Chattogram on Saturday, October 5, 2024, The Peninsula, Chittagong
57. Public Hearing at Rajshahi on Wednesday, October 9, 2024, at Grand River View Hotel,
Rajshahi

White Paper on State of the Bangladesh Economy viii

Contents

White Paper Committee .............................................................................................................................. iv

List of Meetings and Outreach .................................................................................................................. vi
Foreword ........................................................................................................................................................... 1
A. MACROECONOMY ....................................................................................................................................... 7
Chapter I. A Development Promise in Flux............................................................................................ 8
1.1 State of Our Development Discourse ........................................................................................................... 8
1.2 Foggy Visibility ................................................................................................................................................... 10
1.3 Middle-income Trap ......................................................................................................................................... 11
1.4 Plethora of Divides ............................................................................................................................................ 12
1.5 A Toxic Combination of Stress...................................................................................................................... 13
1.6 Policy Mediated Fragility ................................................................................................................................ 14
1.7 Institutional Decay ............................................................................................................................................ 15
1.8 A Lethal Interplay of Politics, Business and Governance .................................................................. 16
1.9 Walking the Talk ................................................................................................................................................ 18
Chapter II. GDP Growth: Sleepwalking into Middle-income Trap............................................... 22
2.1 The Bullish Narrative ....................................................................................................................................... 22
2.2 A Deeper Dive into Official Data .................................................................................................................. 23
2.3 The Acceleration Demystified ...................................................................................................................... 25
2.4 Structural Stagnation ....................................................................................................................................... 27
2.5 Escaping the Trap .............................................................................................................................................. 30
Chapter III. Inflation: A Lingering Pain Afflicting Public Lives..................................................... 35
3.1 Reality .................................................................................................................................................................... 35
3.2 The Inflation Triggers and Amplifiers ...................................................................................................... 38
3.3 Impact on the Vulnerable Population ....................................................................................................... 43
3.4 Taming Inflation ................................................................................................................................................. 44
Chapter IV. The Pitfalls of External Imbalance .................................................................................. 54
4.1 External Balance Hurting on Both Sides .................................................................................................. 54
4.2 Disorderly Policies ............................................................................................................................................ 57
4.3 Current State of Play on Foreign Exchange Reserves ......................................................................... 60
4.4 Learning from Policy Mistakes..................................................................................................................... 61
Chapter V. The Growing Burden of Public Debt................................................................................. 66
5.1 The Level and Composition of Debt ........................................................................................................... 66
5.2 The Comfort Narrative .................................................................................................................................... 67
5.3 The Devil’s Advocates ...................................................................................................................................... 68

White Paper on State of the Bangladesh Economy ix

 5.4 Prudent Borrowing ........................................................................................................................................... 73
B. STRUCTURAL ............................................................................................................................................. 75
Chapter VI. The Illusive Goal of Domestic Revenue Mobilisation ............................................... 76
6.1 Introduction......................................................................................................................................................... 76
6.2 Six Stylised Facts of Domestic Resource Mobilisation ....................................................................... 76
6.3 What Factors Constrain Domestic Resource Mobilisation ............................................................... 82
6.4 Key Messages ...................................................................................................................................................... 87
Chapter VII. Public Investment: The Roots of Corruption .......................................................... 100
7.1 Introduction: The Critical Role of Public Goods in Bangladesh's Economic Growth ........... 100
7.2 Share of Public Expenditure in Selected Countries ........................................................................... 100
7.3 Surge in Public Investment, Fiscal Burden and Impact on Private Investment ..................... 101
7.4 Navigating the Public Expenditure Decision-Making Process ...................................................... 103
7.5 Scrutinising Public Spending: Processes and Oversight Mechanisms ....................................... 105
7.6 Understanding the Roots of Corruption: Systemic Issues and Systemic Failures ................. 107
7.7 Measuring the Magnitude of Corruption in Public Spending ........................................................ 108
7.8 Toward a Solution: Strategies for Addressing Corruption in Public Spending ...................... 109
Chapter VIII. Food Security in Peril..................................................................................................... 113
8.1 Introduction....................................................................................................................................................... 113
8.2 Navigating Food Security in Bangladesh ............................................................................................... 114
8.3 ADP Expenditure in Agriculture................................................................................................................ 115
8.4 Agricultural Value Chain and Prices ........................................................................................................ 116
8.5 Enhancing Agricultural Resilience ........................................................................................................... 118
8.6 Profitability Declines and Shifting Labour Dynamics....................................................................... 119
8.7 Mechanisation in Agriculture: Promises, Subsidies, and Corruption ........................................ 120
8.8 Corruption, Extortion, and Impact on Productivity .......................................................................... 120
8.9 Impact on Soil Quality ................................................................................................................................... 121
8.10 Concluding Observations and Recommendations .......................................................................... 123
Chapter IX. Whither Private Investment ........................................................................................... 128
9.1 Introduction....................................................................................................................................................... 128
9.2. The Business Environment Remained Unfavourable ...................................................................... 129
9.3 Domination of Crony Capitalism Deprived the Genuine Investors ............................................. 130
9.4 Tax System Remained Friendly to Cronies but Unfriendly to Most of the Businesses ........ 130
9.5. Weak Capital Market Didn’t Promote Private Investment ............................................................. 131
9.6. Investment Promotion Agencies were Made Dysfunctional ......................................................... 132
9.7 FDI is Still Mostly based on Retained Investment .............................................................................. 133
9.8 SMEs Faced Disproportionately More Challenges than Larger Firms in Business Operation
and Expansion .......................................................................................................................................................... 134
9.9 Trade Facilitation Measures are not Adequate to Encourage Investment ............................... 134

White Paper on State of the Bangladesh Economy x

 9.10 Lack of Preparation to Face New Challenges..................................................................................... 134
9.11 Governance in the Private Sector ........................................................................................................... 135
9.12 Conclusion ....................................................................................................................................................... 135
Chapter X. The Banking System - Deep into a Blackhole ............................................................. 138
10.1 Macro Criticality of Banking ..................................................................................................................... 138
10.2 Solvency and Liquidity ............................................................................................................................... 139
10.3 The Depth of Distress .................................................................................................................................. 140
10.4 The Deep Determinant of Stress............................................................................................................. 142
10.5 A Dhaka Consensus ...................................................................................................................................... 144
Chapter XI. Power and Energy Sector – A System Designed for Corruption......................... 152
11.1 Analysing Policy Missteps and Corruption......................................................................................... 152
11.2 Current and Projected Power Generation Capacity ........................................................................ 153
11.3 Gas Shortages and Mismanagement ..................................................................................................... 157
11.4 Cost and Pricing............................................................................................................................................. 159
11.5 Contracts and Policy .................................................................................................................................... 161
11.6 Way Forward .................................................................................................................................................. 165
Chapter XII. The Trapped External Trade ........................................................................................ 168
12.1 Introduction .................................................................................................................................................... 168
12.2 Seven Structural Concerns ........................................................................................................................ 168
12.3 Key Messages.................................................................................................................................................. 179
C. SOCIAL ....................................................................................................................................................... 181
Chapter XIII. Poverty, Inequality, and Vulnerability: A Story of Fragile Glory .................... 182
13.1 Introduction .................................................................................................................................................... 182
13.2 Trends in Poverty and Economic Growth ........................................................................................... 183
13.3 Rising Inequality: All in the Top.............................................................................................................. 187
13.4 Human Capital Disparities and the Threat of Rising Inequality ................................................ 191
13.5 Social Protection: Too Little to Make a Dent ...................................................................................... 193
13.6 Digital Exclusion: A New Dimension of an Unequal Society ....................................................... 196
13.7 Observations on Data and Independence ........................................................................................... 197
13.8 Conclusion: A Record and Narrative of Fragile Glory .................................................................... 198
Chapter XIV. Reality of Human Development: Mind the Gaps ................................................... 201
14.A Health and Nutrition: Not Thriving....................................................................................................... 201
14.A.1 Introduction ................................................................................................................................................ 201
14.A.2 Primary Health Care: Low Facility Readiness and Poor Supervision .................................. 201
14.A.3 Sexual, Reproductive, Maternal, Newborn, Child and Adolescent Health ......................... 202
14.A.4 Family Planning Programmes Require Momentum ................................................................... 203
14.A.5 Delivery of Nutrition Programmes Encounters Structural Limitations and Rampant
Corruptions ............................................................................................................................................................... 204

White Paper on State of the Bangladesh Economy xi

 14.A.6 Non-Communicable Disease and Mental Health (NCDs) ......................................................... 205
14.A.7 Secondary, Tertiary and Specialised Care Facilities.................................................................... 205
14.A.8 Corruption: The Picture from the Demand Side .......................................................................... 206
14.A.9 Rampant Systematic Corruption in Health Sector ...................................................................... 207
14.A.10 Health Financing: Inadequate with Poor Implementation ................................................... 210
14.B Education Sector ........................................................................................................................................... 212
14.B.1 Introduction ................................................................................................................................................ 212
14.B.2 Education Deprived of Quality ............................................................................................................ 213
14.B.3 The Quantity and Quality Crisis: Evidence on Post-COVID Learning Situation in Primary
and Secondary Education .................................................................................................................................... 218
14.B.4 Tertiary Education.................................................................................................................................... 220
14.B.5 Education Budget- A Fallacy of Prioritisation Characterised by Low Utilisation ........... 226
14.B.6 Forms of Corruption in Education Sector in Bangladesh ......................................................... 228
14.B.7 Career Mobility for Teachers................................................................................................................ 230
14.B.8 Conclusion ................................................................................................................................................... 231
14.C Disability-Inclusive Development: A Good Start that Fizzled Out ............................................ 232
14.C.1 Introduction ................................................................................................................................................ 232
14.C.2 Identification of Persons with Disabilities: Slow Progress and Gaps in Implementation
232
14.C.3 Jatio Pratobandhi Unnyan Foundation (JPUF): An Opportunity Wasted ........................... 233
14.C.4 Many Faces of Access Constraints: Big Room for Improvement ............................................ 234
14.C.5 Social Protection........................................................................................................................................ 236
14.C.6 The Problem of Picking and Promoting Favourites: A Weakening Impact on the Larger
Movement .................................................................................................................................................................. 236
14.C.7 Conclusion: Bungling A Solid Start and Movement ..................................................................... 237
Chapter XV. Between Rhetorics and Realities: Gender Issues .................................................. 251
15.1 Introduction .................................................................................................................................................... 251
15.2 Overstated Women’s Advancement: Selection Bias in Data Representation ....................... 251
15.3 Poor Outcomes in Labour Market .......................................................................................................... 252
15.4 Disparity in Education: Can’t See the Elephant ................................................................................ 255
15.5 Disparity in Health Outcomes: Both Physical and Mental ........................................................... 256
15.6 Women’s Financial Inclusion: Still a Far Cry ..................................................................................... 256
15.7 Child Marriage: Inadequate Efforts to Address Girls’ Early Marriage..................................... 258
15.8 Gender-based Violence in Bangladesh ................................................................................................. 258
15.9 Institutions and Laws: Are They Enough for Protection? ............................................................ 260
15.10 Gender Budget............................................................................................................................................. 261
15.11 Diversity of Gender Identity and Expression.................................................................................. 262
15.12 Conclusion..................................................................................................................................................... 262

White Paper on State of the Bangladesh Economy xii

Chapter XVI. Employability and Labour Market Dynamics: The Ticking Time Bomb ...... 266
16.1 Introduction .................................................................................................................................................... 266
16.2 Major Labour Market Trends: Some Arithmetic .............................................................................. 266
16.3 Critical Issues and Challenges of the Labour Market ..................................................................... 268
16.4 Female Labour Force Participation: Breaking the Glass Ceiling?.............................................. 273
16.5 Youth Unemployment: Mismatched Aspirations ............................................................................. 274
16.6 Labour Market Governance ...................................................................................................................... 277
16.7 Data Issues....................................................................................................................................................... 278
16.8 Conclusion and Way Forward .................................................................................................................. 279
Chapter XVII. The Unloved Remittance Warriors .......................................................................... 282
17.1 Overview .......................................................................................................................................................... 282
17.2 Seven Key Challenges .................................................................................................................................. 283
17.3 Way Forward .................................................................................................................................................. 288
Chapter XVIII. Environment and Climate Change: A Disaster in Making............................... 293
18.1 A Mixed Bag of Successes and Failures ................................................................................................ 293
18.2 Managing Urban Air Quality: The Reversal of Misfortune ........................................................... 294
18.3 Towards Cleaner Transportation: The Role of Hybrid and Electric Vehicles ....................... 294
18.4 Balancing Economic Growth with Environmental Responsibility ........................................... 295
18.5 Challenges and Controversies in the Environmental Impact Assessment Process ........... 295
18.6 Declining Peoples’ Awareness regarding Environmental Conservation ................................ 297
18.7 The Forest without the Trees ................................................................................................................... 297
18.8 Groundwater Depletion: Whither Compromising with Food Security of Future Generations
298
18.9 Overall Understanding regarding Environmental Management ............................................... 298
18.10 Climate Change and Bangladesh .......................................................................................................... 299
18.11 NAP – an Ambitious Initiative amid Concerns of Transparency and Effectiveness ........ 299
18.12 Climate Variability on Rainfall Patterns and Flooding in Bangladesh .................................. 300
18.13 Threats of Sea Level Rise and Coastal Vulnerability in Bangladesh ...................................... 300
18.14 Trends Observed concerning Climate Change Policymaking................................................... 301
18.15 Failed Integration of Climate Concerns at Planning Levels ...................................................... 303
18.16 Climate Financing: The Achilles Heel that Could not be Guarded.......................................... 304
D. INSTITUTIONAL..................................................................................................................................... 310
Chapter XIX. Mega Concerns of Megaprojects ................................................................................. 311
19.1: Context, Concerns and Questions ......................................................................................................... 311
19.2: Megaprojects with Mega Concerns ...................................................................................................... 313
19.3: Going Forward .............................................................................................................................................. 320
Chapter XX. The Malignancy of Illicit Financial Outflows ........................................................... 326
20.1 Rationale of the Exercise and Magnitude of Concern .................................................................... 326

White Paper on State of the Bangladesh Economy xiii

 20.2 Origin and Magnitude of the Illicit Outflows ..................................................................................... 326
20.3 Channels and Process of Illicit Outflows ............................................................................................. 328
20.4 Measures to Address the Problem ......................................................................................................... 332
20.5 Concluding Remarks.................................................................................................................................... 337
Chapter XXI. Institutional Decline Stalling National Development ......................................... 340
21.1 Introduction .................................................................................................................................................... 340
21.2 Manifestations of Systematic Institutional Failures in Bangladesh ......................................... 340
21.3 Why Systematic Institutional Failures? ............................................................................................... 352
21.4 Key Messages.................................................................................................................................................. 354
Chapter XXII. Data Ecosystem – Villain of the Development Narrative ................................. 357
22.1 The Data Problematique: From Illusion to Delusion...................................................................... 357
22.2 A Deep Dive into Selected Areas to Unveil the Structure of the Problematique ................. 358
22.3 An Assessment based on the 4-A Framework: Much to be Done, Much can be Done ...... 367
22.4 Challenges of Data-Generating Institutions ....................................................................................... 368
22.5 Critical Lessons and Outlook ................................................................................................................... 370
E. REFORMS AND POLICIES..................................................................................................................... 374
Chapter XXIII. Articulation of a Strategic Outlook ......................................................................... 375
23.1 Rolling Out an Economic Stabilisation Programme........................................................................ 375
23.2 Delineating A Framework for the National Budget for FY2026 ................................................ 377
23.3 Proposing a Mid-Term Planning Format ............................................................................................. 379
23.4 Identifying Priority Reform Domains ................................................................................................... 379
23.5 Operationalising a Robust Transition Strategy for LDC Graduation........................................ 379
23.6 Accelerating Substantive Delivery of the SDGs................................................................................. 380
23.7 Hosting a Forum for Inclusive and Sustainable Development ................................................... 382

White Paper on State of the Bangladesh Economy xiv

Foreword

Time present and time past

Are both perhaps present in time future,
And time future contained in time past.
— T.S. Eliot, Four Quartets: Burnt Norton (1936)

The Context
The present government, brought to power through a student-citizens uprising, has been saddled
with an economy which is afflicted by severe structural strains and macroeconomic stresses.
Rising inequalities and lack of distributive justice have been one of the most disconcerting
features of the economy. These challenges are perceptibly visible in areas running from public
finance management to the sustainability of external balances to the human development status
of disadvantaged communities. The Interim Government of Bangladesh has to deal with these
challenges as it seeks to restore macroeconomic stability and undertake reform measures for
promoting inclusive development.

Recognising the seriousness of the situation, the Interim Government, through a gazette
notification on 29 August 2024, decided to establish a committee to prepare a White Paper on the
state of the economy. The twelve-member committee was given three months to deliver an
objective assessment of the economic landscape inherited by the government. The present
document is an outcome of the said directive.

Design of the White Paper

Preparation of the White Paper is, essentially, a transparency exercise that offers a candid view
of the economy’s “ground zero”. The White Paper takes on an integrated approach of drawing on
real-time empirical evidence and informed stakeholder perspectives to form not just an account
of “what happened”, but to take a deep dive into “why it happened”. Arguably, such an exercise
cannot be complete without a reflection on the future, which this document does, albeit in a
limited way.

Although commissioned by the government, the authors of the White Paper remain exclusively
responsible for its contents. At the same time, the government remains free to pick and choose
the policy suggestions offered in the report.

The authors of the White Paper are fully aware that the present report remains limited in terms
of the scope and depth of the analyses offered. This is largely due to the paucity of time and
resources available. Yet, the White Paper would serve as a good resource for the Commissions,
committees and task forces set up by the government to look into specific economic reform
related issues.

This report is the culmination of an intense and inclusive consultative process. The process was
structured under three broad pillars, viz (a) mobilisation of the team and related logistics, (b)
data generation, information collection and consultations, and (c) consolidation, drafting and
validation of the report.
A total number of 60 consultations were held - the White Paper Committee members met 618
times to plan and discuss their respective tasks; there were 22 specific policy-related
consultations; 17 technical consultations and key informant interviews; and three public hearings
outside Dhaka (Sylhet, Chattogram and Rajshahi). The full list of the meetings is provided
separately in the report.

In response to the committee’s open call, more than 340 ideas, views, and inputs have been
received through emails, posts and White Paper social media platforms.

The Overarching Findings

The White Paper explores and establishes the situation in specific areas of the economy. A total
of 23 chapters in the document are grouped under five broad heads. These include (i)
Macroeconomic issues, (ii) Structural challenges, (iii) Social dimensions, (iv) Institutional aspects,
and (v) Policy outlook.

The review presented in the White Paper validates the contemporary understanding of the
difficulties currently confronting the economy and the hardship experienced by the citizens.
Indeed, the investigation undertaken by the authors of the White Paper reveals that protracted
periods of deceptive data, lax financial management, reckless macroeconomic management,
public finance pilferage, and external sector imbalances have created deep wounds in the
economy. The depth of these wounds turned out to be much deeper than is generally suspected.

The sustenance of the economic management by the erstwhile government was provided by a
development narrative underwritten by cooked-up GDP growth figures. Even this invented
hyped-up development story could not hide the stagnating tax-GDP and private investment GDP
ratio and resource paucity for human development sectors, including social protection. The
record of poverty alleviation turned out to be a vain glory. Indeed, as our analysis shows, the data
eco-system of the country became essentially political preference driven.

The deceptive economic outcome indicators were coupled with serious institutional flaws in two
sectors in particular - the financial sector (e.g. banking and non-banking financial institutions,
capital market) and the energy sector (primary and secondary). Such a situation remains closely
related to the launch of overpriced mega projects and the huge outflow of illicit finance.

Thus, one of the world’s most vaunted development stories of the recent period was built on
shaky ground and deep-rooted systemic flaws. Curiously, a number of our international partners
were enthusiastic subscriber of this false narrative.

The critical question that begs an answer “Why have things turned out the way they have?”

The Kleptocratic Legacy

The short answer lies in unchecked corruption, abuse of public resources and misuse of
discretionary power for a decade and a half. The fundamental reason for such misgovernance was
predicated by a pervasive lack of democratic accountability originating from the fraudulent
national elections of 2014, 2018 and 2024. Such elections, along with disempowering local
government elections, gave shape to a very centralised authoritarian government. For its
sustainability, the regime promoted collusion between the ruling politicians, a section of the
bureaucrats and certain business elites.

White Paper on State of the Bangladesh Economy 2

The mentioned anti-development alliance not only eroded institutional integrity and democratic
accountability but also held back all institutional and policy reforms so as to maximise its gains.
A major fallout of these collusive behaviours had been a gradual erosion of the mandated role of
the three critical organs of the state, viz. legislature, executive and the judiciary. This process
further led to the paralysis of the non-state actors, i.e., media, civil society and private sectors,
through intimidation, self-censorship and co-option.

What started out as crony capitalism evolved into the rise of the oligarchs manifested in their
stranglehold on political governance and economic management. Consequently, the government
lost its policy sovereignty. These oligarchs influenced and manipulated key facets of the economy
to serve their vested interests, concealed by an illusory development narrative sustained by
inflated and misleading data.

This alliance fostered a corruption-enabling culture that pre-empted reforms. It served to

effectively suppress pluralistic voices and exclude stakeholders who could have meaningfully
contributed to the nation’s progress. Indeed, in the face of the student people's upheaval, the then-
head of the government could not locate a space for social-political negotiation for a peaceful
transition.

Manifestations of Corruption
As mentioned earlier, the hallmark of the economic legacy left to the current government had
been wide-ranging and deep-rooted manifestations of corruption, particularly concerning the
management of public resources. The White Paper Committee identified a number of dominant
channels of corruption, which are listed below.

• Banking Loan Scams. Fraudulent practices in illusory bank loans, misappropriation of

loans, etc.
• Bank Takeover. Forced takeover of ownership of banks with the help of state machinery.
• Illicit financial outflows. Ill-gotten money is laundered out of the country in large volume.
• Politically Motivated Unviable Projects. Resources are wasted on unviable projects,
prolonging timelines and inflation costs.
• Inflated Project Costs. Systematic cost overestimation to siphon funds.
• Project Cost Escalation Post-Approval. Costs are artificially escalated after project
approval to divert funds.
• Non-Competitive Tender Processes. Cronyism and favouritism dominate procurement,
excluding qualified bidders.
• Unnecessary or Poorly Designed Projects. Resources are wasted due to weak feasibility
studies, prolonging timelines and inflating costs.
• Nepotism in Appointments. Project management, particularly Project Directors, is often
appointed based on political connections rather than merit.
• Illegal Land and Asset Acquisitions. Land and assets are seized or acquired through
illegitimate means.
• Misappropriation of Land Acquisition Funds. Politically weak landowners are coerced into
unfair deals, and funds allocated for land acquisition are misused.
• Awarding Overpriced Contracts. Contracts are often granted to politically connected
contractors at inflated prices and given without competitive bidding.
• Abuse of Project Resources. Misuse of vehicles, travel budgets, and other project resources
for personal or political gain.

White Paper on State of the Bangladesh Economy 3

 • Bribery as a Standard Management Practice. Bribes are routinely exchanged to expedite
processes or secure favours.
• Misallocation of Public Funds. Funds intended for development are diverted to serve
political and/or personal objectives by the leaders.
• Tax Exemptions for Elites. Tax policies disproportionately benefit influential groups.
• Distorted Supply Chains. Manipulated supply chains lead to unfair pricing and market
inefficiencies.
• Sharing Insider Information. Policy decisions are leaked to select groups for financial gain.
• Collusive Corruption. Collaboration between public officials and private actors for mutual
benefits.
• Extortion-Based Corruption. Coercion is used to extract bribes or enforce unfair deals.
• Monopolistic Corruption. Market conditions are manipulated to favour specific individuals
or entities.
• Pre-emptive Information Sharing Corruption. Early access to critical information is
exploited for undue advantage.
• Information Concealment Corruption. Withholding important information to mislead
stakeholders.
• Corruption by Inaction. Deliberate delays are used to create opportunities for rent-
seeking.
• Corruption for Career Advancement. Bribes and connections are leveraged to secure
promotions or influential positions.
• Commission-Sharing Corruption. High-level officials demand a share of commissions for
approvals.
• Corruption for Political Favour. Resources and decisions are manipulated to secure
political allegiance or favour.
• Legislative Manipulation Corruption. Laws and policies are tailored to serve vested
interests.

The review of the White Paper puts the banking sector on top of the most corruption-ravaged
sector, followed by physical infrastructure, and energy and power. Information and
Communication Technology (ICT) was also identified as one of the most corruption-affected
sectors by its operational and technological novelty.

This non-exhaustive list of pervasive corrupt practices highlights the urgent need for systemic
reforms and robust accountability mechanisms to restore governance integrity and economic
resilience.

Magnitude of Corruption
One wonders to what extent corruption occurred because of these fraudulent practices. Below,
we present several such estimates provided by the White Paper committee.

• Revenue Leakages and Fiscal Drainage. Systemic tax evasion, misuse of exemptions, and
poorly managed public finances have deprived the state of critical resources, stalling
development. Between 2009 and 2023, illicit financial outflows averaged USD 16 billion
annually—more than double the combined value of net foreign aid and FDI inflows. Moreover,
halving tax exemptions could double education funding and triple health allocations,
underscoring the significant fiscal opportunities lost to corruption.

• Public Investments. Corruption in large-scale public projects has caused an average cost
escalation of 70 per cent and delays of over five years. Of the $60 billion invested in ADP and
development projects over the past 15 years, $14–24 billion (1.61–2.80 lakh crore BDT) has

White Paper on State of the Bangladesh Economy 4

 been lost to political extortion, bribery, and inflated budgets. Misappropriation of funds
during land acquisitions and the appointment of patronised project directors have further
strained resources, undermining potential benefits from infrastructure and social
investments.

• Distorted Supply Chains. Manipulated domestic production figures and understated demand
for key commodities, such as rice, edible oil, and wheat, have destabilised markets. Erratic
and politically influenced procurement policies have benefited powerful business groups
while exacerbating consumer hardships. The absence of robust regular stock monitoring has
only compounded these distortions.

• Banking and Financial Systems. Politically influenced lending practices have deepened the
banking sector crisis, with distressed assets (as of June 2024) equivalent to the cost of
constructing 14 Dhaka Metro systems or 24 Padma Bridges. Persistent loan defaults and high-
profile scams have eroded financial stability and diverted capital away from productive
sectors.

• Labour Migration. Over the last decade, BDT 13.4 lakh crore (BDT 1.34 trillion) has been
funnelled through hundi transactions by recruiting agencies for visa purchases—an amount
four times the cost of constructing Dhaka MRT 06 (Uttara-Motijheel). Syndicates and
exploitative recruitment practices have deprived migrant workers of equitable access to
employment and diminished remittance contributions to the economy.

• Social Safety Nets. Misallocations within social protection programs have left millions of
people vulnerable. As of 2022, 73 per cent of social safety net beneficiaries were classified as
non-poor, a significant increase from 66 per cent in 2016. Over 20 million individuals remain
just two days of lost work away from falling into poverty, highlighting the systemic inequities
exacerbated by corruption.

• Environmental Mismanagement. Corruption within climate adaptation funding has

exacerbated environmental degradation. Politically patronised mismanagement of climate
resources has derailed sustainability initiatives, threatening long-term resilience against
climate-induced risks.

Closure
This White Paper is the collective work of the Committee. I am extremely grateful to the esteemed
members of the White Paper Committee as well as to all other colleagues who have provided
invaluable inputs and exceptional support. All of them have volunteered their time and talent
imbued by an aspiration for a new Bangladesh.

I am also grateful for the overwhelming support that the various interviewees and stakeholder
groups from Bangladesh and beyond have extended during the preparation of this report. All of
them have been mentioned in the following note of acknowledgement.

Finally, I would like to express my deepest gratitude to the Chief Advisor, Professor Muhammad
Yunus, for giving us the opportunity to remain professionally and substantially engaged in this
historic moment of Bangladesh’s transition.

White Paper on State of the Bangladesh Economy 5

Acknowledgement

The White Paper Committee most sincerely appreciates the excellent support provided by the
various organisations, institutions and individuals in various capacities and ways.

• General Economic Division, Bangladesh Planning Commission for hosting the office of the
White Paper Committee and extending secretarial support.
• United Nations Development Programme (UNDP), Bangladesh, for generously providing
operational and logistics support.
• Centre for Policy Dialogue (CPD) for continued support throughout the process.
• Citizen’s Platform for SDGs, Bangladesh, its Secretariat and the Partner Organisations of
the network who have been engaged in mobilising diverse groups of participants for the
public hearings organised outside Dhaka.
• Government ministries, divisions and agencies who designated Focal Points from their
respective organisations and provided data, documents and information support
requested by the White Paper Committee.
• Participants of the public hearings held in Sylhet, Chattogram and Rajshahi whose
valuable insights and perspectives have significantly shaped the development of the
White Paper.
• Experts and participants who have contributed by taking part in various policy
consultations, technical meetings, focus group discussions and key informant interviews.
• Those stakeholders who have shared their ideas, views and inputs through emails, posts
and White Paper social media platforms.
• Members of the print and electronic media who covered the process and progress of the
work of the White Paper Committee.

Debapriya Bhattacharya, PhD

Head of the Committee for White Paper on the State of Bangladesh’s Economy
Distinguished Fellow, Centre for Policy Dialogue (CPD), Dhaka
and
Convenor, Citizen’s Platform for SDGs, Bangladesh

White Paper on State of the Bangladesh Economy 6

 A. MACROECONOMY

White Paper on State of the Bangladesh Economy 7

Chapter I. A Development Promise in Flux*

The interim government inherited an economy in a deep flux as it took oath on August 8, 2024.
How we got there is a story of stasis in structural reforms, reform reversals, institutional
decadence, global adversities, and a growing gulf between the reality on the ground and the
perceptions of policy makers leading to macro-financial recklessness. These sleepwalked the
economy into a low middle income growth trap. Traps are manifest in slowing GDP growth and
structural stagnation in international trade, private investments, public finance, service delivery,
and financial markets.

This chapter summarises the evidence on the state of the Bangladesh economy. It begins with
taking a cryptic stock of the state of our development discourse. The discourse travelled from the
“test case” in the 1970s to the “development paradox” embedded in the Millenium Development
Goals going into the first decade of the new millennium and mutating in the last decade and a half
into the paradox of the fastest growth economy. The development paradox was persuasively
unbundled to establish its veracity. This chapter summarises evidence on the veracity of the
fastest growth paradox, suggesting that the “fastest” part of the narrative is a figment of biased
measurement. It did a major disservice by drugging the heads of policy makers and their local and
international cheerleaders into the sands of hubris.

There was growth for sure, but not nearly as much as made out in the “Unnoyon“ narrative of the
previous regime. Contrary to belief popular in this camp, growth has been slowing well before the
pandemic. The middle income growth trap is not lurking any more, it is here in Bangladesh. The
chapter provides an account of how a plethora of divides, a toxic combination of policy mediated
economic stress and fragility, and decaying institutions under a despotic leviathan was held
together by a dynamic coalition of transactional convenience between politics, business,
bureaucracy, law enforcement organisations, media, development partners and the outsider
insiders from civil society. As democratic accountability moved from the electorate to power
brokers in business and the state institutions, growth slipped, and development regressed in
economic, social and political domains. The chapter concludes by noting the window of
opportunity, unlocked by the historic change on August 5, 2024, to reform institutions and
organisations to break out of the low middle income growth trap and all the baggage that come
with it.

1.1 State of Our Development Discourse

The history of Bangladesh’s economic development is lit with two paradoxes, one real and the
other statistical. The real one pertains to observed excess human development relative to
expectations based on the level of per capita income. The excess human development observation
was robust to a variety of statistical scrutiny. This is where the other paradox, which celebrated
Bangladesh as one of the fastest growing countries in the world but struggled to explain it, fails.
The excess growth paradox is a figment of statistical manipulation.

Bangladesh’s early development achievements are well documented by proponents and

critics alike.1 Since the early 1990s, Bangladesh transformed from “a laggard to a clear leader in
many of the indicators of health, education and demographic outcomes.”2 The exploratory work
more appropriately labelled it as “Bangladesh surprise” from the “development surplus”
produced by non-state actors and informal institutions. They delivered low cost solutions in
agriculture, public health, educations, and infrastructure complemented by massive social

*The chapter has been prepared by Dr Zahid Hussain, Former Lead Economist, World Bank Bangladesh.
1 See Rounaq Jahan and Rehman Sobhan (ed), Fifty Year of Bangladesh, Routledge, 2024.
2 Wahiduddin Mahmud, Markets, Morals and Development, Routledge Focus, South Asia edition, 2022.

Chapter 5.

White Paper on State of the Bangladesh Economy 8

mobilisation. It coincided with reinstatement of democratic rule and extensive economic
reforms. Structural reforms enabled scaling these processes to visibility at the aggregate level.
Long-term benefits from structural improvements materialised over time. Micro finance and
investment in female education empowered women. This cocktail of development sources, which
describe Bangladesh’s economic evolution in the first four decades, did not quite fit the “income-
mediated” or “support led” pathways.3 Bangladesh’s development performance compared with
India, Pakistan, Cambodia, Laos, Ethiopia and so on distinguished the Bangladesh model in
development discourse. This well explained development variant is now passe.

The “fastest” growing variant is a statistical artifact. The development variant mutated into
the growth variant ironically as the establishment embraced the “developmental state”
philosophy of governance. Reported GDP growth joined the fastest growing countries in the
world in last decade and a half. Economic growth kept increasing even though structural changes
slowed after the mid-2000s. Lifting growth to cross the Upper Middle Income threshold by 2031
and Higher Income Country threshold by 2041 ascended to the front and centre on national
aspirations articulated by the establishment and their local and international cheer leaders. A
policy of the development of capital-intensive Fast Moving Consumer Goods (FMCG) and heavy
industries (steel, cement) and prioritising the erection of “temples of development” such as the
mega projects in power and transport sidelined investing in small and medium entrepreneurs
and farmers or the development of existing cities to make them liveable and, more generally, the
Sustainable Development Goals. The determination of the Awami League government to cling to
political power through rigged elections overlooked the full costs of these developmental
strategies where the government, connected businesses and elite bureaucracy put democratic
accountability on the back burner.

The economic legitimacy behind the idea of the “developmental state” rested on their growth
narrative with the “Kuznets Curve” playing the role of the pied piper.4 The latter sounded like a
law of nature or a religious cult preaching forbearance of short term pains for long run gains. An
inward looking, state driven development strategy delivered in partnership with crony capitalists
of domestic and foreign origin claimed to have produced development, often recited like mantra,
with increased inequality that will inevitably revert if the robber barons in politics and markets
are allowed free play.

The overdose of “Unnoyon” to glorify the few “rights” (Padma bridge, Dhaka Metro) and justify
the many blatant “wrongs” (corruption) at best struggles and, in most cases, fails to pass some
very basic fact checks. The pace of growth was far slower, and the slope of the growth path in the
past decade was the opposite of that portrayed in official data. This is not to say the economy did
not grow. It did. The quality of 4-5 per cent annual GDP growth the economy did achieve was
severely diluted by rising inequalities in income, wealth and opportunities.

3 Wahiduddin Mahmud, Social development: Pathways, surprises and challenges, Indian Journal of Human
Development, vol 2, no. 1, 2008.
4 An inverse U shaped relationship observed by Kuznets in a seminal paper in 1955 showing income

inequality firs increased as countries developed and then decreased. The 2024 Nobel laureates in
economics Daron Acemoglu and James A. Robinson have argued, in their paper titled The Political Economy
of the Kuznets Curve (Review of Development Economics, 2002) that “development may be associated with
two types nondemocratic paths: “an autocratic disaster”, with high inequality and low output, and an “East
Asian Miracle” with low inequality and high output. Piketty points to myriad country-specific institutions
(from educational and labour market institutions to corporate governance and social norms) that play a
key role in shaping the interplay between development and inequality.

White Paper on State of the Bangladesh Economy 9

1.2 Foggy Visibility

Was growth real? Not just growth, how well do we know what we think we know about inflation,
poverty, inequality, education, health, food security, energy, financial, fiscal and monetary
development reported by different data producing institutions under the auspices of the
autocratic regime? What is the extent and sources of noise in the data? A consensus answer
gleaned from the White Paper consultations is that the data ecosystem is highly foggy and toxic
for the gullible. Just as global warming is the result of human actions, so are the fogs and toxicity
in Bangladesh’s data results of errors of omission arising from data collection and computation
methods and errors of commission by the ruling elites to fit political purposes.

There is a shared lack of trust on key indicators. These include GDP growth, inflation, exports,
public investment, agricultural production, bank balance sheets, revenue collection and public
expenditures, among many others (see Annex-I). A highlight consensus discovered from
consultations with a variety of stakeholders and observers held in August to November 2024 is
that data on all of these must be taken with more than a grain of salt. There is strong evidence
that GDP growth has tended to be overstated irrespective of political regimes, but the
overstatement itself grew noticeably in the past decade. Public perception and corroborative
evidence from various consultations suggest inflation rates are understated. Macroeconomic
balances that are relatively easy to record, report, and reconcile have large inaccuracies generally
favouring the establishment bullishness.

The balance of payment data, considered relatively free from systematic bias, entered the flux
zone with a story changing revision of export data. Foreign exchange reserve reporting became
controversial with the publication of discrepancies in an IMF report in 2020.5 Data on financial
sector balance sheets became increasingly problematic with departures from standard
accounting practices, as revealed in the recent Financial Stability reports of the Bangladesh Bank.
Source inconsistencies aside, data on public debt is less controversial, though not entirely free
from it, especially the nonnegligible contingent liability parts. Data on tax revenues typically
comes with over-estimation by the National Board of Revenue (NBR), allegedly at times
deliberately by the top, and inevitably long and variable lags from the office of the Comptroller
and the Auditor General.

Mismatches between BBS survey data and administrative data measuring the same social
outcome indicate nontrivial noise in social indicators. Survey data on various social indicators
relating to public health, education, vulnerability, and the environment struggle to match their
official counterparts, suggesting that the latter may be padded. Revision of poverty estimation
and data collection methodologies increased the magnitude of poverty reduction from 2010 to
2022 relative to previous estimates for the same period.6 Revisions of previous estimates to make
them comparable with current estimates did not cover estimates before the 2010s.

Political influence on data generation and reporting reached an unprecedented high under
the past regime. Pre-existing weaknesses in data reflecting skills and infrastructure deficiencies
were made worse by the subordination of the Bangladesh Bureau of Statistics (BBS) for political
appeasement. The difference in the density of data fogs between the last decade and earlier
periods of Bangladesh’s development is not a difference in degree. It is a difference in kind.

5 IMF, Safeguards Assessment Aide Memoire, 2020. A popular English daily obtained a copy of this
internal document from undisclosed sources.
6 The revisions per se may be technically sound, but its noncomparability with the poverty estimates

preceding the 2010s did not get the attention it deserved, not even from the partners such as the World
Bank, IMF and ADB who provided technical and financial support.

White Paper on State of the Bangladesh Economy 10

When data is unreliable, standard statistical tools can’t fire. Yet, we have to work with what we
have. Data is almost always incomplete. Like all scientists, economists too guesstimate. The force
majeure is to pay closer attention to the accounting and economic consistency of the data.
Macroeconomic data has the unique mirror advantage that microeconomic data rarely enjoy. GDP
data have their mirror images in nightlight intensity, trade and credit. Data on national savings
and domestic investment can be checked against data on trade and payments in the balance of
payments. Fiscal data have their mirror images in monetary survey.

The data corrections and economic consistency checks reveal a different story about the
development outcomes produced by the so called developmental state in the last decade and a
half. The differences extend beyond simply just nuancing the story here and there. Growth was
much slower than touted, the poor much more vulnerable than acknowledged, inequalities much
deeper and harmful than the Kuznets narrative apologised for, learnings much poorer and more
uneven than glorified in the metric and intermediate examination results, health lot less
accessible than publicised a la community clinics, and macroeconomic management lot messier
than dissected in the flagship reports of the international partners.

1.3 Middle-income Trap

Most reports written on Bangladesh’s development in the past decade and a half begin almost
with religious like regularity with assertions of accomplishments in the recent past. A typical
opener in 2022 is illustrated below:
“Economic growth during the last couple of decades has been pulled by the expansion of
manufacturing and services, both in terms of composition of output and of labour share,
while on the demand side consumption and gross capital formation have been the main
drivers of growth. The process of capital deepening has been accompanied by rapid sectoral
labour reallocation, away from agriculture and into manufacturing and services, as well as
a significant rise in agricultural productivity, resulting in so-called “growth enhancing
structural change”.”7

They missed the growth slowdown that was statistically repressed from around the mid-2010s,
the decline in share of industry in total employment and the absence of data on labour share in
total national income. Corrections made on the basis of clinical scrutiny in the international
context over time turn the growth story upside down from a rising to a falling trajectory. The
official statistics started showing slower growth in the post-pandemic era.

Structural transformation from low productivity agriculture to high productivity industry

and services grinded to halt. Low productivity sectors (agriculture and informal services) are
dominant. The decline in the share of agriculture in employment was reversed between 2016 and
2022. Domestic demand for labour struggled to keep pace with growth in supply, particularly low
skilled youths. Labour productivity growth and real wages declined in the most recent decade.
The share of industry increased, and the share of agriculture declined secularly in production.
The advantages of low-cost labour and imitation of foreign technology have lacked scale except
in garments, textiles, and pharmaceuticals. Digitalisation and the gig economy added temporarily
to growth until the politically powerful extended their claws into these sectors.8

7 UNCTAD, Vulnerability Profile, Bangladesh, Geneva 2022. The quote is from the first para of the
Executive Summary.
8 A Bonik Barta lead story on September 20, 2024, narrates how ministers and powerful individuals

amassed wealth from government projects without delivering any output under the banner of “digital” and
“smart” Bangladesh.

White Paper on State of the Bangladesh Economy 11

These are telltale signs of a country sleepwalking into a middle-income trap.9 Relatively
robust indicators of economic activity such as international trade (merchandise and services
exports and imports), investment, credit, energy supplies, and informality suggest a creeping
economic slowdown before the pandemic.10 The factor accumulation that propelled growth since
the 1990s lost steam as alternative sources of growth failed to crop up. Bangladesh has remained
stuck in garments, remittances and conventional services unable to compete with either low-
wage African countries that dominate mature industries or upper middle and high-income
countries that dominate innovative, high technology industries. It almost looks like a textbook
case of a low middle income growth trap.

1.4 Plethora of Divides

A large majority of the population were getting a smaller share of prosperity even before
growth ran out of steam. The increased inequality in Bangladesh is a story of prosperity on
steroids at the top 10% and the dehydration of income of the bottom 50 per cent.11 Seven out of
ten do not, on average, make anything close to the national income per capita.12 A very large lower
middle class got squeezed while the top 10 per cent gained enormously in the past decade.

The concentration of high paid jobs in the upper class, depressed real wage growth, and a
perverse shift in employment from high productivity industry to low productivity agriculture
account for the squeeze. Income inequality in all likelihood would have been wider if not for
access of unskilled labour from lower middle-income families to overseas markets where earning
levels are 2.5 to 3 times higher than what they would have earned at home doing the same work.13

The concentration of wealth at the top 10 is 1.5 times the concentration of income.14 The
rate of return on capital is very high; hardly surprising in an economy with a wealth ratio 40-50%
below the global 5-6 years of national income. Return on capital tends to converge in open
economies as return seeking capital from capital abundant countries flows to capital scarce
countries. That has not happened in Bangladesh because of protection provided to domestic
capital and regulatory bottlenecks. On the contrary, illicit capital flows have been salient.

Growing education and health divides have exacerbated income and wealth inequalities.
Overcrowding and under-qualified instructors have led to high dropout rates at the primary and

9 The concept of a middle-income trap was first coined by Indermit Gill and Homi Kharas of the World Bank.

Comparing a general phenomenon observed in Latin America and the Middle East to the possibility of
slowdowns in East Asia’s emerging economies, their account described how cheap labour, basic technology
catch-up, and the reallocation of labour and capital from low-productivity traditional agriculture to export-
driven, high productivity manufacturing is often followed by lower growth. See Greg Larson, Norman
Loayza, Michael Woolcock, The Middle-Income Trap: Myth or Reality? Research & Policy Briefs From the
World Bank Malaysia Hub,
10 Trade expanded after the pandemic followed by a contraction. The data on electricity shows a similar

trajectory after the pandemic. Supply of gas has tightened and growth in electricity of late has turned
negative.
11 See White Paper Chapter 12.
12 The income Gini coefficient, a synthetic and omnibus measure of inequality, increased 3.5% to 0.499 in

2022 from 0.482 in 2016. An overwhelming 90% of the population lost share in total income pie. The
income shares of the bottom 50% declined 0.56 percentage points and the middle 40% lost 2.21 percentage
points between 2016 and 2022. The former subsumes 0.33 percentage points gained by the bottom 20%,
which coincided with a decline in poverty from 26.4% in 2016 to 18.7% in 2022. Such a coincidence has
not always been the case. For instance, the income shares of the bottom 20% decreased from 5.22% in
2010 to 3.85% in 2016 while poverty declined by about 7 percentage points.
13 World Bank, Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth, 2012.
14 World Inequality Database 2023.

White Paper on State of the Bangladesh Economy 12

secondary levels.15 A growing number of youths enter the labour market unprepared in literacy
and numeracy. Bangladesh has long struggled with widespread health inequities, especially those
between rural and urban areas, in availability and standard of health care.16 High out-of-pocket
costs of health services has aggravated vulnerability of the low and middle class to destructive
health shocks.

The hard to measure inequality of opportunities are glaring. Bangladesh Sample Vital
Statistics (2023) data revealed only 37.1 per cent of the rural population uses the internet,
compared with 53.7 per cent for the urban population. Similarly, 47.6 per cent of men use the
internet, compared with 34.6 per cent of women. The inequalities are order of magnitude worse
for people who send their children to government schools, seek care in public hospitals and clinics
or find themselves stuck in justice system. They live in an unforgiving system very different from
the one lived by the country’s elites in urban and rural locations. Limited, mismanaged and
politicised budgetary allocations to social protection render ineffective public interventions to
preserve human development.

Policy hypocrisy on environmental fronts compounded intergenerational inequalities.

Climate change cannibalised other environmental policy issues as policy rhetoric followed the
money. Issues like rapidly diminishing natural processes of soil nutrients regeneration;
biodiversity loss; coastal and riverbank erosion; ground and surface water depletion; air
pollution; land grabbing and environmentally induced outmigration fell by the wayside. The
August 2024 floods in eastern Bangladesh once again brought to the fore waterlogging due to
illegal canal fillings and disorderly urbanisation. We risk leaving the future generations high and
dry literally. Major rivers have experienced a severe decline in water quality due to industrial
discharge and unmanaged waste, including plastics and untreated sewage.17

1.5 A Toxic Combination of Stress

Cracks in macroeconomic stability added yet another headache as Bangladesh started

living dangerously. Macroeconomic stability attracted strong focus following deep imbalances
in the 1980s. This was maintained in a global environment with near zero interest rates, low
commodity prices and a stable US dollar following the global financial crisis in 2008-09. Fiscal
deficits were contained, and the debt level was kept low and concessional. Foreign exchange
reserves and exchange rate were generally stable under a managed float regime.

Elevated and persistent inflation. Official data on inflation shows an unabashedly rising
trend. Increased import prices of key commodities and unravelling of pent up demand in
the aftermath of the pandemic and the Ukraine war triggered the inflationary spike.
However, inflation remained elevated even as international prices of many of these
commodities eased. Exchange rate depreciation, foreign exchange shortage and import
controls amplified the passthrough of international price increases. Increases in domestic
administered prices of gas, electricity, and petroleum products pushed costs of supply.
Extortions at various nodes in the supply chain and price gouging by a few significant
players in the market for essential food items amplified inflation further. Expansionary

15 Teach The World Foundation 2024, Google Scholar.

16 Angeles G, Ahsan KZ, Streatfield PK, El Arifeen S, Jamil K. Reducing inequity in urban health: have the
intra-urban differentials in reproductive health service utilization and child nutritional outcome narrowed
in Bangladesh? J Urban Health. 2019;96(2): 193-207. https://doi.org/10.1007/S11524-0180307-X.
17 Environmental pollution is taking a heavy toll on children. Lead poisoning causes irreversible damage to

children’s brain development, resulting in an estimated annual loss of nearly 20 million Intelligence
Quotient points in Bangladesh. Emissions from cooking with solid fuels severely affects women and
children. World Bank, Bangladesh Country Environmental Analysis, 2023.

White Paper on State of the Bangladesh Economy 13

 monetary and fiscal policies fanned the fire adding to public miseries, especially amongst
the poor and low-income families.

Distressed financial sector. The extent of financial distress, already growing large before
the pandemic, has multiplied. Recognised NPLs alone have increased nearly ten times
since 2010, reaching Tk 2,11,391 crores at end-June 2024, equivalent to seven Padma
bridges. It is order of magnitude higher when NPL recognition criteria following
international standards are applied and the rescheduled, restructured, unrecovered
written off, and loans under litigation are included. The disclosed capital relative to risk-
weighted assets in the banking system is close to the bare minimumm10 per cent with
drying liquidity.18

Depleted foreign exchange reserves. The foreign exchange reserves declined to levels
too low for comfort no matter how the adequacy of reserves is judged. Both BB and the
domestic commercial banking system lost reserves. BB’s mood swings on exchange rate
policy turned lethal when a multiple fixed exchange system was put in place in September
2022. It discouraged the repatriation of export proceeds and remittance through formal
channels and incentivised capital flight. Diminishing policy transparency eroded the
confidence of international lenders, inducing downgrading of economic outlook and
sovereign credit ratings.

Growing public debt. The public debt-to-GDP ratio increased to nearly 40 per cent in
FY24. While WB-IMF jointly continued to assess the risk of debt distress as low,
alternative metrics better capturing the dollar liquidity constraint suggest that the
comfort signalled by the standard GDP based metrics could in fact be injurious.19 Stories
on massive corruption in public investment expenditures, sharp reduction in fiscal space
due to stagnant revenue mobilisation, the rising share of interest in the total budget, and
mounting pressures on domestic and foreign currency liquidity have brought rollover and
liquidity risks to the fore.

The narrative propagated by the then establishment put the blame squarely on global
adversities. Indeed, Bangladesh confronted large spillovers from cascading global crisis. High
inflation, tight financial conditions, stronger US dollar, and anemic activity in large economies
amid heightened geopolitical tensions have characterised the post pandemic new normal.20 The
Russian invasion of Ukraine in February 2022 reignited geopolitical instabilities and deepened
geoeconomic fragmentation. Commodity prices have been elevated since 2022. Financing costs
have been high for a long time. These have hurt Bangladesh’s economic management, but no more
than the policy responses with the heads of policy makers in the sands and economic institutions
subservient to the needs and whims of the political and business oligarchy.

1.6 Policy Mediated Fragility

The frittering of resilience into brittle owes largely to policy. These included stasis in
structural reforms, protectionism, cronyism in service delivery, financial market repression,
multiple exchange rates, deficit monetisation and often nepotistic regulatory forbearance, not to
speak of flagrant corruption. Together, they explain the behaviour of the economy that external

18 See the White Paper Chapter 10.

19 See the White Paper Chapter 5.
20 Both advanced economies and emerging market and developing economies (EMDEs) are set to grow at

a slower pace over 2024-26 than in the decade preceding the pandemic.

White Paper on State of the Bangladesh Economy 14

forces cannot.21 The combination of monetary, exchange rate, fiscal, industrial, energy and trade
policies benefited many cronies at the expense of chaos and uncertainty in credit, foreign
exchange and goods markets.

It is very hard to assign a simple expansionary or contractionary tag to a set of mutually

incompatible and non-transparent policies. BB signalled monetary tightening with increased
policy rates. It sold dollars, withdrawing taka liquidity from the system. On the other hand, BB
financed the government deficit, provided disguised support to liquidity short banks and opened
forex swap lines where banks could deposit surplus foreign exchange to borrow Taka at a very
low interest rate against the forex deposited. Regulatory forbearance and liquidity support in
dollars as well as taka were targeted at banks controlled by boards with dubious integrity.

The government increased the primary deficit, notwithstanding the rhetoric on austerity. Some
contractionary measures were taken. The Finance Division put curbs on travel, vehicle purchases,
entertainment, stationary expenses, new public buildings, and ceiling on fund release for the
Annual Development Programme projects that tended to remain high on buildings, vehicles and
travel but low on output and effectiveness. The walk was miles behind the talk.

The dire consequences of policy errors were dismissed as either fake or caused by external
factors. These figured prominently in defence of the indefensible policies by the establishment
and its apologists inside and outside. They missed the lack of correspondence between the policy
instruments and the stress they are best designed to address: monetary tightening to ease the
inflationary pressure, exchange rate flexibility to stem foreign exchange reserve drawdown,
macro and micro prudential regulation to mitigate financial distress, and fiscal policy to protect
the poor and invest in human development.

1.7 Institutional Decay

A captured democracy came to roost. Bangladesh drifted away from minimal democratic
practice of free and fair elections, not to speak of rule of law, freedom of speech, and horizontal
and vertical accountability.22 An era of political democracy after a politician led people’s
movement toppling 15 years of military rule in December 1990 ended unceremoniously in 2014,
notwithstanding episodic political resistance that all got crushed. The progress in fulfilling the
criteria of a “minimalist democracy” since 1990 of holding free and contested elections in roughly
five years intervals, peaceful transfer of powers, fundamental freedoms, and civilian control over
policy and institutions unfolded. 23 Bangladesh’s democratic decay began before 2014’s national
elections as the constitutional provision on the Caretaker Government was deleted, going
downhill hand in hand with kleptocratic, clientelist and crony capitalist system ever since.24

Corruption in public institutions flourished. Bureaucracy operated on a centralised authority

vested in the Prime Minister’s Office (PMO). Application of rules became irrational and elitist with
low level of trust. The reward system became fully contingent on the political affiliation of the
officials. A politicised bureaucracy took advantage of weak political and national institutions.
Senior bureaucrats shifted alliances towards powerful stakeholders in business and politics.
Ironically, the redirection in the locus of accountability was immune to barrages of

21 The impulse that came from the global factors started to fade from mid-2022. International prices
declined and the dollar became stable. The interest rate remained sticky at an elevated level and world
trade volume stabilized.
22 Freedom House ranks Bangladesh as ‘partly free’ and the Economist’s Democracy Index describes the

country as a ‘hybrid regime’, between a ‘flawed democracy’ and an authoritarian state.

23 Rounaq Jahan, The Challenges of Institutionalising Democracy in Bangladesh, ISAS Working Paper No.

39, 6 March 2008

24 Inge Amundsen, Democracy decaying in Bangladesh, East Asia Forum, 6 March 2018.

White Paper on State of the Bangladesh Economy 15

recommendations for reforms in bureaucratic mechanisms for accountability from the private
sector and the multilateral and bilateral partners.

The cancerous spread of petty and mega corruption eroded trust in almost all public institutions.
Politicisation and criminalisation crushed the accountabilities of public officials, the judiciary,
legislators, media and public universities. We experienced the 21st century version of Hobbesian
anarchy. A culture of impunity is now deeply embedded in the individual and collective psyche of
our political, administrative, legal, economic and social systems.25 Legislative committees,
parliamentary debates, public hearings, ministerial control, access to information, and media
were stripped of their countervailing power.

The performance of key public institutions descended to new lows. According to the
Worldwide Governance Indicators, Bangladesh has been hovering at the lower end of the
spectrum in almost all governance indicators over the past decade. In the Global Competitiveness
Index, Bangladesh consistently ranked below peers on institutions and some of its key
components. The World Bank’s Business Ready 2024 report placed Bangladesh in the lowest
quintile on public services and competition. These weaknesses suggest Bangladesh’s growth has
not created enough incentives for the ruling elites to address inefficiency and inequity in the
economic system.26

Checks and balances collapsed. The Election Commission, Anti-Corruption Commission and
Public Service Commission mandated to operate independently were captured by the ruling part
through appointments reward loyal retired personnel of the judiciary, bureaucracy, and army.
Civil society organisations involved in social and economic interventions for poverty alleviation,
literacy, human rights, health care, micro-finance, environmental protection, and awareness of
social and political rights in urban and rural areas succumbed to divisibility, thus losing autonomy
and visibility. The electronic and print media proliferated while, at the same time, the government
agencies following instructions from the top of the political hierarchy became more adversarial
and coercive in reporting on maladministration, irregularities, and lapses.

The media grew amidst decline in media freedom.27 The government used the Digital Security
Act, later renamed as the Cyber Security Act, with assistance from mass surveillance equipment,
to silence critics and create a culture of self-censorship. Media ownership changed multiple times,
making the electronic media, in particular, fully aligned with the broader coalition of the ruling
elite. Competition between the conglomerates at times produced the collateral benefit of exposing
corruption in multiple domains of public-private interface.

1.8 A Lethal Interplay of Politics, Business and Governance

The slide in institutions is associated with politicisation of accountability systems, oligarchic

capture of regulatory leadership, loss of credibility of macroeconomic policies, and a near
breakdown of integrity in economic management.28 Industry faces regulations that impede
investment and protect unprofitable firms from extinction. The trade regime is complex, with
tariff rates among the highest in the world. The health and efficiency of the banking system are
cramped by growing nonperforming loans. Public enterprises lack commercial incentives and
accountability. Government servants are reluctant to serve, police do not uphold the law, and tax

25 See the White Paper Chapter 21.

26 Selim Raihan, François Bourguignon and Umar Salam (ed.), An Institutional Diagnostic of Bangladesh,
Cambridge University Press: 10 January 2024.
27 Ali Riaz and Mohammad Sajjadur Rahman, Media ownership in Bangladesh: Why more media outlets

does not mean more media freedom, Center for International Media Assistance, April 15, 2021.
28 Pierre-Richard Agénor, Caught in the Middle? The Economics of Middle-Income Traps, Fondation pour

les études et recherches sur le développement international (FERDI), May 2016.

White Paper on State of the Bangladesh Economy 16

collectors connive with those cheating the state. Employment growth and the quality of jobs that
are created are not in sync with GDP growth. Political power was, and still is likely to remain,
monopolised by a small elite. Consequently, most policies were elite self-serving, with little
sharing with the masses.

The lines between politics, business and administration were increasingly blurred by
transactional interest seekers. Unfettered growth of a patronage system impeded investment,
imitation, infusion and innovation. Incumbents shifted from bringing scale and diversity to
cornering, if not cannibalizing, rivals to entrench themselves. A large number of firms enter the
market, but only a small proportion survive to become established businesses.29 Local oligarchs
drove foreign investors and local competitors away in an increasingly uneven playing field. Over
time, the industries became dominated by a few conglomerates as the number of new entrants
declined. Bangladesh is among the bottom six out of 50 countries, as assessed, among others, on
market competition by the World Bank recently.30

Many business models in the formal sectors appear designed to profit from opportunities
for malfeasance. Innovations are foregone if they risk undermining connections with political
and economic power. Businesses end up congregating in traditional sectors such as garments,
construction, transport, energy, power, and agribusiness where the benefits of investing in
relationships with the government are high.31 Incumbents were very successful in generating
profits and far less so in creating jobs, as they preferred laundering money overseas.

Collusion and corruption in the energy sector is a glaring case in point. It deleteriously impacted
energy prices and governance, with immunity provided by the Quick Enhancement of Electricity
and Energy Supply (Special Provision) Act 2010.32 It vested in the Energy Minister (always the
Prime Minister) the sole authority to approve energy purchase agreements. This legislation
facilitated high-cost energy procurement and created fertile ground for corruption through
collusion between politically connected firms and government officials. A strategy of offering
higher prices to attract investors in a high-risk environment allowed more corruption and raised
risks for future investors even further. It escalated energy prices and limited the participation of
unconnected but potentially more efficient energy suppliers.33

Authoritarianism became more overt over time. The regime drivers often stated what they
are going to do both to intimidate those who resist (Rampal Power plant for instance) and to
condition the broader public for what is coming—plan to stay until Upper Middle Income by 2031
and Higher Income by 2041). The stories of “midnight election” (2018) or “dummy elections”
(2024) rubbed very little on the politics of the establishment. Absolute power corrupted
absolutely sought legitimacy playing the “threat from the BNP-Jamaat terror” narrative or some
conspiracy (Saint Martin Island theory) hatched by a foreign aided (enemy outside you know
who) part of the civil society (enemy within). A cadre of politicised civil servants dismantled the
administrative state. Steady suppression of voting rights over time, enduring threat of political
violence, and imprisonment or disappearance of critics nailed the coffin of Bangladesh’s
democratic institutions of governance.

29 World Bank Enterprise Survey 2022.

30 World Bank, Business Ready, October 2024.
31 Bangladesh ranked 106th out of 133 countries in the Global Innovation Index 2024. Among the 38 LMICs,

Bangladesh ranked 22nd and 8th among the 10 economies in central and southern Asia. See World
Intellectual Property Organization, Global Innovation Index 2024.
32 See the White Paper Chapter 11.
33 Mushtaq Khan, M. Zakir Hossain Khan, Arafat Hossain Rafi, Shadman Sakib Khalili, Tonmay Saha,

Collusive Pricing in Solar Power in Bangladesh: Mapping Informal Processes and Corruption Risks,
Anti=Corruption Evidence, Working Paper 049, March 2024.

White Paper on State of the Bangladesh Economy 17

An unstable elite bargain prevailed until it didn’t. With one leg in each political basket initially
and all legs in one basket increasingly as the locus of voting rights shifted to state and party
agencies with control over violence, businesses ran out of legs to invest, employ and grow other
than through entry into the patronage system. Investing in this system yielded higher and quicker
dividends than investing in people, factories, transports, shops and public goods. Once ordinary
citizens began to assume that success depends on connections and bribes, it becomes a self-
fulfilling prophecy. Markets became rigged. Justice became transactional. Politicians auctioned
themselves to the highest bidder. A culture of corruption permeated through the polity. The
Faustian bargain between the ruling political, business and bureaucratic elites ensured the
equation of support with pliancy in areas where political prerogatives are paramount. Until, of
course, it did not as the conditions holding the inherently unstable equilibrium cracked.

The ruling elites missed the accumulation of anger from the increasingly wider perception
of social injustice. The state inflicted violence on its own people. The trigger to stand up to such
violence came from a court ruling that culminated into the antidiscrimination movement in July-
August 2024. The ignominious fall of the previous government is not only a testament to its
inexplicably poor handling of the protest but also its overall legacy of “increasingly autocratic
response to political dissent”.34 The history of the “historic Change” on August 5, 2024, is now in
a drafting process. Only time will tell whether it will revert to the mean (old political order) or
pivot to unleash the forces of accumulation, infusion, innovation and inclusion.

1.9 Walking the Talk

Bangladesh did well in escaping low-income levels and reducing extreme poverty, leading to the
general perception that the last five decades have been great for development. This owes as much
to abysmally low expectations as to the glory of the development outcomes. Judged against the
ambition to reach high- income status within the next two decades, the record is nothing
extraordinary based on hyperbolic official data. The total population that transitioned to high-
income status within Bangladesh since 1990 is probably less than the size of a typical village.

A window of opportunity has opened to bend the arc of history. The shift in political power
to a whole new set of players has raised reform expectations. Some stroke of the pen reforms
were done in quick succession, and the appointment of fit and proper personnel in key positions
provided initial validity to such expectations. Macroeconomic stabilisation; transformative
initiatives in banking, energy, and regulation; and investments in human development can create
the momentum needed to catapult the economy out of a premature trap.

Development practitioners in Bangladesh, as elsewhere, have been using a host of not so

informative indicators to assess the structural strength of the economy. These include the size
distribution of firms in an industry to measure their productive efficiency, household income
distributions to gauge social durability, and the distribution of energy sources to figure ecological
sustainability. Policies predicated on such superficial lenses are especially prone to premature
slowdowns in development. Measures such as value added, socioeconomic mobility, and
emissions intensity are more realistic metrics for policy making. They require policy makers to
be more willing to make data public to inform policy debates and seize opportunity to destroy
outmoded arrangements. Without it, we risk sailing blind into stormy seas. 35

Securing Bangladesh from autocracy and corruption requires more than just policy
plumbing. Bangladesh 2.0 will struggle to take off and stay on an inclusive development path
without reinventing state and civil society institutions governing law, justice, property rights, the

34 Geoffrey Macdonald, United States Institute of Peace, Bangladesh’s Accidental Revolutionaries Topple
Sheikh Hasina—What’s Next? August 6, 2024.
35 World Bank, The Middle Income Trap, World Development Report 2024.

White Paper on State of the Bangladesh Economy 18

core economic services and its developmental offsprings. These collective choices will be the
outcome of a political process. The current opportunity to expand the truncated electoral
franchise and redistribute political power to the masses is destined to fritter, if not ceased, to
create institutions enabling greater investments in capital, schooling, health, and liberty.

Our own experience in the past illustrates top-down action often degenerates into a witch hunt
against the dominant elite’s political opponents rather than a crackdown on malfeasance
generally. Double standards can hardly be an effective way of building trust. A robust engagement
of civil society characterizing the glory days of growth and development in Bangladesh needs
reinvention to fit changing times by improving transparency, ensuring the independence of the
judiciary, and empowering ordinary citizens to fire corrupt politicians. The resurrected students’
power outside national politics could be galvanised for direct engagement in building the
country’s post-August-5 institutions and organisations from the ground up. The economic
imperative is deceptively simple. Bangladesh will have to become much more efficient in the use
of capital, labour, and energy.

Cohesive collective action needed to unlock the promises. Escaping the trap requires
restructuring institutions, organisations, work, and livelihood systems with greater economic
freedom, social mobility, and political contestability. How can society be mobilised to do policies
and measures disciplining incumbency, reward merit, and capitalise on the current political
transition? Incumbents such as large conglomerates, state-owned enterprises, civil and military
bureaucracy, powerful elites, and civil society can create or destroy value immensely. Exigencies
such as domestic political instability, climate change, and increasing geoeconomic fragmentation
globally provide opportunities to make room for new ones by dismantling obsolete
arrangements.

White Paper on State of the Bangladesh Economy 19

Annex:

A note on data

Noise in data is not unique to Bangladesh. Data on macroeconomic variables is so notorious that
econometricians such as Milton Friedman popularised the econometrics of “errors in variables”
problem nearly three quarter of a century ago. What may be a distinguishing feature of
macroeconomic data in Bangladesh is its politicisation and weaponisation in making belief a
narrative of seamless economic growth with external and financial stability, job creation, and
prudent macroeconomic management.

Bangladesh revised the national accounts series twice in the last decade and a half. Because of
expansion in the coverage of both production and expenditures, nominal GDP in taka and dollars
each time spiked by on average 13-15% relative to the series it replaced. Such large increases in
successive revisions naturally raises eyebrows. More problematic than the level are the estimates
on growth which were robust to base year and coverage revisions but irreconcilable with many
correlates of growth such as trade, credit, investment and nightlight intensity.

Empirical verification of the critiques of inflation data are limited to reconstructing the consumer
price index using expenditure shares of marginalised household groups where the share of food
tends to be much higher than their counterparts on the other side of the income distribution.36
So, when food inflation is higher than non-food inflation, it follows that the overall inflation rate
faced by the bottom 50% is higher than the upper 50%. The opposite is true when non-food
inflation exceeds food inflation.

This does not necessarily discredit the underlying price data. There has never been an
independent verification of the price data on items in the BBS CPI rural and urban baskets. The
basket has changed over time. The public perceive inflation as systematically understated.
Perceptions are often fogged by conflating the level (nominal price) and delta (change in nominal
price) effects. Personal experiences in markets, media reports, and a lack of trust are made worse
by alleged manipulation of data for political profit. We use inflation data on the faith that while
the value of the index has changed with changes in the base year, the overall rates of change in
the value of the indices do not have any systematic estimation bias. More importantly, while the
magnitude of inflation is always in question, the direction is less controversial.

The balance of payment data is in a state of flux because of the recent tsunami in export data. The
story on the turnaround of large current deficit into surplus more than offset by financial account
deficit morphed into current account deficit, never turning into surplus with a surplus in the
financial account. All of these due to the correction of massive over-reporting of the shipment
value of exports (credits) in the current account and the treatment of accrued receipts (debits) in
trade credit in the financial account. Not surprisingly, the overall balance of payment (before
reserve changes) is not affected. EPB officials claim the overreporting of export data extends back
to no more than two to three years.

While this is good news, the bad news is the behaviour of Errors & Omissions calculated by
matching the balance of accounted external inflows and outflows with the exchange rate
valuation adjusted changes in the stock of foreign exchange over the concerned period of Balance
of Payments accounting. The E&O exhibited one-sided (understated) outflow bias in recent years.
We use BB data on reserves, less noisy items in the current account (imports, remittances) and,
financial account (short- and long-term credit flows) and foreign exchange market data to make
inferences on external balance.

Selim Raihan, Do the official inflation figures in Bangladesh reflect the actual inflation faced by the
36

marginalized households in Bangladesh? SANEM, March 3, 2022.

White Paper on State of the Bangladesh Economy 20

The financial sector data is similarly problematic. But the difference in this case is we know what
we know. The elephant in the room is bank balance sheets. We know nonperforming loans only
include those greater than 180 days due and not written off. We know the reported regulatory
capital is understated by undercompliance in provisioning. The signals against all the noise
provide a sense of depth and diversity of financial distress. We selectively use financial sector
data to gauge the vulnerabilities posed by the sector.

Data on public debt is less but not entirely free from controversy. Accuracy of fiscal data has
drawn attention as different sources publish different figures for the same indicator and same
source published different figures for the same indicator over time. These include revenue
collection, ADP expenditures and deficit financing.37

The Bangladesh Bureau of Statistics has limited capacity to produce many of the statistics it is
mandated to produce in accordance with relevant international standards and good practices. It
is constrained by statistical mandates and financial and human resources, including access to
training, data sources, business registers, statistical information systems, quality assurance
frameworks, and data editing techniques.

The current legal mandate of the BBS does not comprehensively and clearly specify the role of
the BBS in the coordination of statistical activities. Their limited financial and staff resources
constrain their capacity to collect survey data, compile economic statistics with high frequency in
accordance with the latest international standards and good practices.

37Towfiqul Islam Khan, Fiscal data in Bangladesh: Issues and Challenges, Centre for Policy Dialogue
(CPD), February 24, 2022.

White Paper on State of the Bangladesh Economy 21

Chapter II. GDP Growth: Sleepwalking into Middle-income Trap*

The most notable feature of Bangladesh’s recent official growth estimates is its acceleration in the
decade of 2010. This raised Bangladesh to the status of the “fastest growing” countries in the
world’s development business community. Though not entirely undeserved, the hype around it
fed by padding measured growth hid the slippage into a self-made trap far below the upper
middle income threshold. Employment has remained concentrated in low productivity
agriculture and informal activities, resource misallocations are ubiquitous, and the
competitiveness of the economy has slipped.

This chapter begins with an examination of the data informing the complacent conventional
wisdom. It presents evidence on the disconnects between the measured GDP growth data and
changes in the state of the economy indicated by several growth correlates. The observed
systematic upward bias in data is diagnosed next to find where the biases come from. How much
is inherent in the type of data sources and computational procedures and what was the role of
political influences on data outcomes? Inflated growth data crowded out attention to low
frequency data on structural stagnation. We sleepwalked into a downward sloping growth path
emblematic of the family of “middle income traps”. The paper concludes alluding to what needs
to happen to escape the trap.

2.1 The Bullish Narrative

Bangladesh surpassed the lower-middle-income threshold in 2015. Reported Gross National

Income per capita (Atlas method) 38 increased from US$519 in FY2000 to US$2,675 in FY24. GDP
growth, inflation, exchange rates, remittances from overseas workers and population growth all
influenced the calculation of the level of Atlas GNI per capita which crossed the $1,026 threshold
to graduate into the World Bank’s Low Middle Income Country (LMIC) category in 2015.
Revisions to improve methods and data had sizable direct impacts, but Bangladesh’s current
distance from LMIC thresholds is robust to upward biases in income per capita.39

Not as big a deal as hyped even when we take official statistics at their face value. The hype
is best illustrated by the following Boston Consultancy Group pitch branding Bangladesh: 40
“With an average annual GDP growth of 6.4% between 2016 and 2021, Bangladesh has
outpaced Asian peers, such as India, Indonesia, and Philippines, and has performed
significantly better than the global average of 2.9%. The country’s GDP per capita was
~$2,800 in 2022—already higher than India’s. And at its current growth rate, Bangladesh is
on track to become an upper-middle-income country (at least ~$4,000 GDP per capita) by
2031…. Bangladesh has proven resilient to global economic shocks…. Buttressing
Bangladesh’s prospects is its extremely active domestic consumer market, which accounts
for nearly 70 per cent of GDP and is rapidly expanding due to a growing middle and affluent
class.”

*The chapter has been prepared by Dr Zahid Hussain, Former Lead Economist, World Bank Bangladesh.
38 The basis for the World Bank’s country classifications.
39 Even if we take away $1000 per capita to correct the overestimation of GNI per capita due to the revisions

of the nominal series and apparent upward bias in annual GDP growth numbers, Bangladesh would still be
well ahead of the current $1,088 GNI per capita LMIC threshold. The Bangladesh Bureau of Statistics revised
the National Accounts twice last 15 years. The revisions have implications on the year in which Bangladesh
surpassed the World Bank’s GNI per capita threshold for middle-income country status. Based on 2005–06
prices, Bangladesh reached lower-middle-income status in FY15. Based on 2015–16 prices, it likely already
exceeded LMIC threshold in FY11 under some plausible assumptions. World Bank, Change of Fabric, 2022.
40 Zarif Munir, Saibal Chakraborty, and Tausif Ishtiaque, Bangladesh’s Economy Is Growing, and So Are Its

Emerging Champions, International Business, April 28, 2023.

White Paper on State of the Bangladesh Economy 22

They are not the only ones using official growth data to back up hyperbolic narratives. Apart from
naive acceptance of numbers on income and growth, cherry picking comparators and ignoring
the shrinking share of the middle class in total income, they paint a booming economy like only a
few, if not no, others in the development landscape.

Even assuming the officially reported levels and trends in income and growth are correct,
Bangladesh had a lot of company doing lot better. The proportion of countries reported in the
World Bank’s low-income category fell from 30 per cent in 1987 to 12 per cent in 2023.41 Despite
similar conditions in the 1970s, GDP per capita today is four times as large as in 1972 in
Bangladesh, compared with more than five times as large in India, six times as large in Indonesia,
and over 30 times as large in China. Vietnam increased GDP per capita more than five times from
1984 till present. Bangladesh increased only 3.4 times over the same period.42

2.2 A Deeper Dive into Official Data

The official estimates deserve deeper examination given its place in shaping local and global
thinking on which way Bangladesh is heading. The Bangladesh Bureau of Statistics (BBS)
published Fifty Years of National Accounts on Bangladesh in 2022. Subsequent BBS compilation
of the national accounts uses the same sources and methods described in this document.
Bangladesh’s growth story stands or falls with BBS data. We begin with what the data says before
going into its pitfalls.

Stylised Facts
Growth accelerated. Average growth rose to 4.2 per cent in the 1980s from 3.8 per cent in the
previous half decade in which growth was most volatile. Average growth rose to 5.2 per cent in
the 1990s with lower volatility. Subsequently growth travelled a stable path until 2009 (Figure
2.1). A point of inflexion occurred around 2010 taking average growth to 6.7 per cent in FY09-14
and further to 7.3 per cent during FY15-19 with declining volatility.43 Growth slowed since the
pandemic.

Industry dominated. Industrial growth was wild in the 70s before recovering in the 80s (Figure
2.2). The peak in the past four decades occurred in FY18 at 11. 6 per cent. Industry’s contribution
tapered in FY21-24. Construction maintained steady growth in the 8-10 per cent range since the
1990s to present. Together with the rise of manufacturing, industry never ceded leadership it
assumed in growth in early 1990s.

Services stabilised. Growth in services gravitated around 5.2 per cent with a low standard
deviation of around 1 per cent. Wholesale & retail trade, transport, storage, communication
consistently lead growth in services. Covid boosted the expansion of online trade and commerce.
The gig economy gained visibility.44

41 Eric Metreau, Kathryn Elizabeth Young, Shwetha Grace Eapen, World Bank country classifications by
income level for 2024-2025, July 01, 2024
42 World Bank, 2022, ibid.
43Measured by the standard deviation of growth.
44 Quarterly data on sectoral growth have the strongest correlation of GDP growth with industrial growth

(0.92) and the weakest with agricultural growth (0.51).

White Paper on State of the Bangladesh Economy 23

Figure 2.1: Period average GDP growth and deviations (per cent)

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0
1975-80 1981-90 1991-95 1996-01 2001-06 2007-08 2009-14 2015-19 2021-24

Average Std. Dev Linear (Average)

Source: BBS, Fifty Years of National Accounts and national accounts releases in 2023 and 2024.

Agriculture took time to find a stable path. The contribution of agriculture to GDP declined steadily
across crops, fishing, horticulture, animal farming, and forestry as industry and services outpaced
agricultural growth. Agriculture’s shock absorbing role, despite growing slower, was most
evident in the pandemic in 2020. Agriculture managed over 3 per cent annual growth in FY21-24,
braving extreme weather and loss of cultivable land to alternative uses.

Figure 2.2: Sectoral growth rates

30
25
20
15
10
Percent

5
0
-5
-10
-15
-20

Agriculture Industry Services

Sources of growth
All empirical diagnostics of Bangladesh’s growth converge on physical capital accumulation and
demographics as proximate sources of growth. They propelled growth in both agriculture and
industry.45 The surplus for industrialisation and urbanisation initially came from innovations in
farming practices and input usage complemented by growing inland connectivity. Agriculture,
industry and services harvested the demographic dividend as Bangladesh transitioned from the
second to the third stage of the demographic transition of slower population and dependency

45 Raihan et al, Institutional Diagnostics, 2023

White Paper on State of the Bangladesh Economy 24

growth.46 The private sector blossomed in crops, garments, SMEs, banking, trade,
telecommunication, migration, and media, comprising many kinds ranging from the “bottom of
the pyramid” to “headline hugging”.47 Rise in remittances from rapid growth of unskilled workers
migration to overseas market enhanced purchasing power at the lower middle class levels while
bridging external trade deficits.

Reforms unlocked accumulation and demographic dividends. Reforms in the agricultural input
market, rural infrastructure, energy, trade, and finance came together in the late 80s and early
90s. The domestic political settlement changed, and the boundaries of the market economy
expanded. Synergies from reforms came from a densely populated terrain.48 Reforms faded after
2004.49 Yet growth kept rising apparently as the long-term benefits from previous structural
improvements ran its course.

Catch up and legacy effects. Starting very poor, Bangladesh caught up with the rest of the world
outpacing the world average GDP per capita growth in past 50 plus years on the income scale.50
Better opportunities like access to technological know-how from the developed world were
available and capital enjoyed increasing returns because it was extremely scarce at the outset.
The legacy effects, measured by the lagged effects of past GDP on current GDP, controlling other
factors, made up for the second generation reforms missing in action and reversal of several first
generation reforms later.

2.3 The Acceleration Demystified

The story above stutters in explaining the acceleration during 2010-19. The share of growth
not explained by accumulation of physical capital per worker increased inexplicably in the decade
preceding the pandemic. The contribution of labour declined as did the elasticity of poverty with
respect to national income.51 The contribution of the legacy of past reforms to per capita GDP
growth declined from 3.5 percentage points during 2005-09 to 1.5 percentage points in 2015-19.
Nothing seems to matter. Maintaining the same growth requires a rising human capital intensity
when physical capital is subject to diminishing returns. The growth of human capital was muted
between 0.5-0.7% per annum, compared with the 7-8 plus per cent annual growth in the stock of
physical capital.52 Capital flight and inefficient financial intermediation are supposed to hurt
growth. No, not in Bangladesh. Rising income supposedly brings modernisation of institutions.
No again. Bangladesh consistently ranked below its peers on institutional indicators such as the
Corruption Perception Index, World Governance Indicators, Doing Business Indicators, and the
Global Competitiveness Index.

Evidence of significant upward bias. The World Bank (2022) assessed Bangladesh’s GDP
growth data. They used a panel data set covering 149 countries ranging from 1970 to 2019 and
time series regression analysis incorporating nightlight intensity as an alternative measure of
economic activity. They found that the period FY13-19 is an outlier. The deviation of officially
reported from predicted growth was, on average, 3.5 percentage points higher than in previous

46 Rizwanul Islam, Fifty years of development experience of Bangladesh: An employment and labor
perspective, in Fifty years of Bangladesh: economy, politics, society and culture, edited by Rounaq Jahan
and Rehman Sobhan, Rutledge Press, 2024.
47 Hossain Zillur Rahman, Democratizing the “middle-income” dream, in Jahan and Rehman, ibid.
48 Syed Akhter Mahmood, “Policy Actions, market responses and economic growth in Bangladesh, in Jahan

and Rehman, ibid.

49 World Bank, Change of Fabric, 2022.
50 UNCTAD, Least Developed Countries Report 2021.
51 Kazi Iqbal and Md. Nahid Ferdaus Pabon, Quality of Growth in Bangladesh: Some New Evidence,

Bangladesh Development Studies, Vol. XLI, June 2018, No. 2

52 World Bank, Towards Accelerated, Inclusive and Sustainable Growth, 2012.

White Paper on State of the Bangladesh Economy 25

periods.53 The difference between predicted and actual values was a percentage point for
agriculture and 1.7 percentage points for services. Manufacturing stood out with a difference
exceeding 7 percentage points out of the 10.6 percent average reported growth during Seventh
Five Year Plan period.54 Luis Martinez’s (2018) model estimates Bangladesh has an
“overstatement” factor of 1.28 for aggregate growth between 1992 and 2013.55

Bangladesh’s high GDP growth is a myth. Growth in the decade of 2010, on display as part of
Bangladesh’s branding and beautification, was statistically exceptional, especially compared with
peers. This is a fact noted unmistakably by those invested in branding Bangladesh as a
development model as well those puzzled by it. It looks like a puzzle only when we believe the
economy did pivot to the extent and direction suggested by official statistics. Closer scrutiny of
the data reveals such bullishness is completely misplaced. Acceleration over 2010-19 came from
an unidentified source.56

Attributable not just to data or methods. Our discussions with the National Accounts Wing of
the BBS clarified the source of the bias (see Annex for details). Data and methods relying on
government information without third-party verification make the level of estimated real GDP
downwardly rigid in several activity categories. This bounds growth from below at zero for
several sectors that together are large enough to explain why measured GDP growth looks
excessively resilient in disruptive times. It also explains why growth models under predict
Bangladesh’s growth relative to reported actuals in almost all periods.

However, data and methods cannot explain the linear growth paths in the decade preceding the
pandemic. The linear rise was orchestrated by political bosses who had a strong incentive and a
mindset to manipulate GDP growth estimate for domestic and external propaganda. It could have
had hysteresis in BBS National Accounts Wing after the most activist political influencer left.
Fearing wrath from above, they chose to err consistently on the higher than the previous year’s
side. The checks and balances BBS had through technical committees completely broke down
from 2015 onwards.57

A paradox no more. The fastest growing refrain loses its clothes when the data is discounted for
statistical aberration. The conclusion that growth was slowing four to five years before the
pandemic is then inescapable. Figure 2.3 presents the FY95-19 growth series corrected for the
annual prediction error based on an international panel data set. It shows, with the exception of
a couple of years in the mid-90s, the corrected growth is lower every year. The difference itself
grew larger over time. 58 The reported and corrected growth moved in the same direction until
2012-13. The divergence increased over the next six years as measured growth increased while

53 Large changes in prediction errors across different periods highlight potential measurement issues.
54 Ahmad Ahsan and Ahsan H. Mansur observe: “Financial indicators-which are harder numbers and more
reliable-are not moving in line with officially recorded growth in GDP.” Policy Insights, July 1, 2019.
55 Luis R. Martinez, How Much Should We Trust the Dictator’s GDP Estimates? Harris School of Public Policy,

University of Chicago, June 2018

56 World Bank, ibid.
57 Bonik Barta, October 1, 2024.
58 There is international evidence suggesting autocracies tend to exaggerate GDP growth. A seminal study

by Luis Martinez, Chicago Harris School of Public Policy, titled “How Much Should We Trust the Dictator’s
GDP Growth Estimates?” compared the self-reported GDP figures to the nighttime lights (NTL) recorded by
satellites from outer space. It showed that autocracies overstate yearly GDP growth by approximately 35%.
The assessment of Bangladesh’s GDP growth reported here was shared with Luiz Martinez. He had the
following comments: “It’s very interesting and very compelling.” Yet another compelling evidence on the
abnormal rise in growth in 7FYP period is the breakdown in the corroboration from HIES and LFS data.
Between 2010-16, household level income, consumption data from HIES and monthly earnings from LFS
were directionally consistent with national accounts data. Not so during the 7FYP period and subsequently.

White Paper on State of the Bangladesh Economy 26

corrected growth raced down. Growth declined to sub 5 per cent from FY13 along a falling trend
that our statistical system got used to missing or omitting or manipulating.59

All the cheerleading was based on a disingenuous numbers game which switched growth to
patches of two linear paths subsequent to 2010 until the pandemic in 2020.60 There was growth
no doubt, certainly in excess of population growth, but official data on the quantity and the recent
direction of growth misses the economy’s sleepwalk into a downwardly sloping growth path, not
to speak of the quality problems associated with the quantity actually achieved.61

Figure 2.3: Corrected vs reported growth

9
8
7
6
5
4
3
2
1
0

Actual Model Linear (Model)

2.4 Structural Stagnation

The movements in the corrected series are consistent with trends in several structural indicators
that have structural stagnation written all over. Structural stagnation distinguishes itself from
“recession” in terms of prolonged underemployment, low productivity, high concentration of
activity, and low mobility of labour and capital. Recessions are often temporary and reversible
with changes in fiscal and monetary policies. Structural stagnation tends to last longer because it
cannot be reversed without structural reforms.

Unhinged labour markets. Most notable is the share of employment in industry (Figure 2.4), the
fastest growing sector. The level of employment in large and medium scale manufacturing in fact
declined between 2016 to 2022.62 The share of urban employment in total employment declined
from 27.9% in 2016 to 25% in 2022. Annual employment growth in urban locations slowed from
4.6% in 2010-17 to 0.8% in 2016-22.63 Raihan and Bourguignon (2023) find that while total
labour productivity growth doubled after 2000 compared to what it was in 1991–2000, the

59 These findings take the academic load off of explaining the so called “Bangladesh paradox” of growth
without reforms, investments, and jobs.
60 Growth data from 1960s to 2010 are examined in Sabyasachi Kar, Lant Pritchett, Selim Raihan, Kunal

Sen, The Dynamics of Economic Growth: A Visual Handbook of Growth Rates, Regimes, Transitions and
Volatility, undated. They conclude that growth was episodic in Bangladesh before 2010.
61 See White Paper Chapter 13.
62 BBS, Labor Force Survey 2022.
63 This could be related to a decline in employment growth in services (from 2.6% between 2010 and 2017

LFS to 2.4% between 2017 and 2022 LFS) and a decline in the level of employment in industry (between
the 2017 and 2022 LFS).

White Paper on State of the Bangladesh Economy 27

contributions of structural change declined significantly in the last decade.64 Segmented dual
labour markets survived. Migration abroad provided a lifeline.

Figure 2.4: Sectoral shares of employment

50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2022 2023

Inds Share Agri Share Services Share

Good earnings prospects for the minority employed in the formal sector coexist with the vast
majority of poorly paid jobs in the dominant informal sector.65 With urban jobs scarce, tens of
millions of workers returned to agriculture during the pandemic to eke out meagre livelihoods.
Many have remained there. Bangladesh’s already distressed agriculture now employs 45 per cent
of the workforce.

Figure 2.5: Total investment and exports

35

30

25

20

15

10

GDI (% of GDP) Export, %GDP

64They decompose aggregate labour productivity increases into three components: within-sector effect
(WSE) reflecting the overall impact of productivity growth within individual sectors; the static reallocation
effect (SRE) capturing the impact of the reallocation of employment from less to more productive sectors;
and the dynamic reallocation effect (DRE) describing the impact of reallocating employment to sectors with
faster productivity growth. The last two effects constitute the impact of structural change on growth in
three decades.
65 Being in formal employment in either industry or services in Bangladesh “results in earnings between 56

per cent and 63 per cent large than those in the same sectors but informal.” See Simon Commander and
Saul Estrin, The Connections World, Cambridge University Press, 2022. Page 227.

White Paper on State of the Bangladesh Economy 28

Decreased export orientation. Bangladesh’s economic complexity is lower than that of any of
its peers. The share of exports in GDP increased from 5.3 per cent in 1981 to 18.5 per cent in 2010
and declined subsequently to 13.1% by FY24 (Figure 2.5) remaining well below the ratios
registered by countries at similar levels of development. The export basket is as heavily
dependent on a rather narrow basket of readymade garments as it used to more than a decade
ago. The contribution to growth from manufacturing exports was declining years before the covid
shock. Manufacturing pivoted toward domestic market-oriented industries. As of 2020,
Bangladesh’s rate of participation in Global Value Chains (GVC) was 23.7 per cent, the lowest in
Asia.66

Misallocated investments. The share of total investment in GDP peaked at above 32 per cent in
FY19 after stagnating at less than 29 per cent for more than a decade (Figure 2.5). Private
investment was flat at around 23 per cent of GDP since FY15. Investment recovery since 2010
came from public investment, which surpassed 7 per cent of GDP in the decade of 2010s, a rate
considered appropriate for high and sustained growth.67 Bangladesh, however, prioritised
overpriced mega public infrastructure, which boosted recorded investment and contributed to
GDP. The contribution of public investment to GDP growth increased from 0.2 percentage points
per annum during FY01-10 to 0.7 percentage points per annum during FY11-22. The share of
public investment in total investment increased (Figure 2.6).

Figure 2.6: Share of public investment in total investments (%)

30.0

25.0

20.0

15.0

10.0

5.0

0.0

Public investment channelled through development projects has a history of time and cost
escalation that repeats itself irrespective of political regimes. A BIDS study of 329 transport sector
projects from FY13-22 found 49.7 per cent projects had both time and cost escalation and another
36.7 per cent had either time or cost escalation. For all projects cost escalated on average by 26.3
per cent while time escalated by 94.8 per cent.68 Both indicate that the rate of return harvested
from public investments are well below rates shown to get money for the projects from the
government budget. Misallocations resulted from inflated GDP growth data as well. A significant
recent example is the power sector, where master plans projected rising electricity demand
derived from 1.27 GDP growth elasticity and projected growth rates, which were informed by

66 APO, Productivity Outlook, 2024.

67 World Bank, Commission on Growth and Development, 2008, p. 36.
68 Kazi Iqbal, Md. Taibur Rahman and Jayed Bin Satter, Time & Cost Overrun in Development Projects:

Evidence from Audit Reports of Roads Projects, BIDS Research Almanac 2023 May 18, 2023.

White Paper on State of the Bangladesh Economy 29

systematically biased GDP growth data.69 Excess and uncoordinated investments resulted in
generation capacity of which a significant part is not available for use.

High tariff protection misallocated private investments. The assumption was that the
replacement of imports would create jobs and save foreign exchange. It is clear from our
experience that import substitution became biased toward capital intensive production. Import
substitution strategy made little contribution to solving the youth unemployment and general
underemployment problem. Dependence on imports of final goods was transformed into
dependence for imports of intermediate goods. The anticipated foreign savings did not
materialise because it cost efficiency.

A trap too soon. Drawing lessons from the experience of 100 countries in the past 50 years,
the World Bank finds that countries usually hit a “trap” at about 10% of annual US GDP per person
or the equivalent of $8,000 in 2024.70 Bangladesh is not even close to these levels of per capita
income. An inverse relationship between the shares of industry in employment and production
in quarterly data, stagnating or declining productivity in industry, and GDP intensity of exports,
and stagnating private investment, public expenditures on health and education, and governance
indicators have together signal entrapment, if not entropy.71 Bangladesh sleepwalked into a low
growth trap sometimes from the mid-2010s.

2.5 Escaping the Trap

The July-August 2024 societal uprise revealed the limits of growth without inclusion. Many
of Bangladesh’s current problems in income growth are the result of weakened state capacity that
was inadequate, to begin with, plundering of resources that were scarce already, a largely
deformed system of governance that failed to keep pace with changing times and tides of
economic growth that did not lift all boats. Alleviating the most critically binding constraints to
economic activity, such as governance, business regulation, and buffering external shocks can
promote domestic and foreign investment and enhance labour productivity. Such a reform
package is estimated to have lifted the level of output by 4 per cent in two years and 8 per cent in
four years in developing economies with large structural gaps, such as Bangladesh.72 They can
also help ease macroeconomic stress, such as price pressures, bloated sovereign risk premiums,
and weak foreign direct investment inflows through increased competition and improved
investor confidence.

The interim government has inherited a slippery growth trajectory. Four years ago,
narratives and prophecies on how the economy may parse through global shocks such as Covid
and stagflation popularised a phrase called the geometry of growth.73 Figure 2.7 shows
Bangladesh’s geometry of growth in the 24 quarters ending June 2024. A pandemic induced

69 Government of Bangladesh, Integrated Energy and Power Master Plan (IEPMP), July 2023.
70 World Bank, World Development Report 2024 : The Middle Income Trap. Spence (2011) described
“middle-income transition” as the “part of the growth process that occurs when a country’s per capita
income gets into the range of $5,000–$10,000”. Agénor, Canuto, and Jelenic (2012) found that economic
growth slows when a country’s income reaches around $15,000–$16,000. Eichengreen, Park, and Shin
(2014) suggested that many countries experienced slowdowns in the range of $10,000–$11,000 and
another in the range of $15,000–$16,000.
71 See recent rounds of World Governance Indicators and Corruption Perception Index.
72 Nina Budina,. Christian H Ebeke, Florence Jaumotte, Andrea Medici, Augustus J Panton, Marina M. Tavares

and Bella Yao, Structural Reforms to Accelerate Growth, Ease Policy Trade-offs, and Support the Green
Transition in Emerging Market and Developing Economies, IMF eLibrary, September 22, 2023.
73 Economic commentators used English letters to describe the trajectory growth might take in the

aftermath of the pandemic. V indicated a sharp recovery, U a short recession, W double dip, K unequal
recovery and square root a roaring recovery.

White Paper on State of the Bangladesh Economy 30

sudden stop caused a steep fall in industrial growth in FY2020, followed by a sharp recovery in
FY2021.74 This V trajectory morphed into a falling W subsequently. Volatility increased.

Figure 2.7: Quarterly growth in industry and agriculture (y-o-y %)

40

30

20

10

0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-10 FY18 FY19 FY20 FY21 FY22 FY23 FY24

-20

Agriculture Industry Linear (Industry)

Comfort zone in sight but in the front view still. The strongest performing indicator in the first
quarter of FY26, of which more than one-third endured massive political disruption, is
remittances, with 33.3 per cent growth. Exports are showing signs of catching up with 5.1 per
cent growth in shipments. Imports entered a positive territory of 0.9 per cent growth after
declining precipitously for over two years. Foreign exchange availability is no longer the most
binding constraint on investments, production and trade. But the economy is by no means out of
the woods. Other indicators, such as tax revenues, private credit, and energy supplies, are
struggling. Nature was not benign in the first quarter. The IMF, World Bank and ADB have
converged on projecting a growth decline in FY25 to 4-4.5 per cent. Persistently high inflation has
pushed growth to the backseat of macroeconomic attention, raising the immediacy of structural
reform.

There are multiple policy issues on many fronts. The list of the nuts and bolts of reforms is
long, but the bottom lines are short. Physical capital accumulation needs to be complemented
with human capital accumulation. Imitation and infusion need to be complemented by
innovations. Institutions need to be complemented by organisations and social mobilisation.
Business as usual will deliver none of these, especially when reforms come with adverse
distributional effects, long growth lags, resistance by entrenched incumbents, and poor
administrative capacity. Promoting trust and confidence in public institutions is foundational to
all other growth seeking reforms, including financial intermediation, business regulation and
tariff rationalisation. Tight money and fiscal consolidation can be made growth friendly with
actions establishing credibility of such policy commitments going forward. A simple start in that
direction will be to craft the FY26 budget and its overarching macroeconomic framework with
realistic assumptions on GDP growth and its proximate drivers.

74Quarterly growth estimates in services are too unreliable to be of any use. Quarterly growth estimates
for agriculture and industry are better.

White Paper on State of the Bangladesh Economy 31

Annex on national accounts data
Handle with care

The current state of GDP data

The real question is how much we can trust the national accounts data as signals of the trends
and state of the real economy. Our discussions with the relevant technical staff of the BBS suggest
simple generalisations are unwarranted. The veracity of the estimates depends on the data and
methods as well as politically motivated interferences from within or outside. Here we provide
an assessment of how credible the national accounts can be in the absence of politically motivated
interferences.

There is no obvious reason to assume bias on one side or the other in many subsectors. The
data and methods used in gross value added calculations in crops, manufacturing, construction,
and wholesale & retail trade appear capable of reflecting movements in the activities they intend
to measure. These data pertain to directly observable measures of the volume of activity. There
is no obvious reason for suspecting systematic bias on either side or any upper or lower bounds
resulting from the nature of the raw data used. These estimates together accounted for about 47
per cent of GDP in the base year.

The level of real GDP estimates in several subsectors is downwardly rigid. There are
subsectors such as forestry & logging, fishing, electricity, water supply, land transport, public
administration which use the central government and autonomous bodies budget data to
estimate gross value added. Provisional estimates use revised budget data, and the final estimates
use the actuals if available. Estimates based on the revised budget, which generally tends to be
over projected, introduce downward rigidity in the level estimates as does the use of the number
of newly registered vehicles in estimating gross value added in land transport. These sectors
account for about 33 per cent of GDP in the base year. They capture good times better than bad
times.

In many sectors the GDP accountants get to exercise discretion. There are subsectors in
agriculture, transport, insurance, professional, and other services in which it is not clear what
shapes the gross value added calculations. The BBS documents describing the sources and
methods vaguely specify what data is used from which sources for what purpose.75 Apparently,
they use whatever is available at the time of making provisional and final estimates. One can only
hope there are less noises in the growth estimates than in the level estimates, but they certainly
require exercising, perhaps risk averse, discretion. These “Uncertain” estimates account for about
20 per cent of GDP in the base year.

Qualitative assessment of estimated level of Implications for growth FY16-17

real GDP seen from production side estimate GDP share
Data and methods capture reality Can be positive or negative 47
Data and methods capture rises Cannot be negative 33
Data and methods conditional on circumstances Require discretion 20

Estimates on the expenditure side are much more problematic than the production side
estimates. Consumption, the largest (65%) component of total GDP, is estimated as a residual.
They essentially deduct from GDP (estimated on the production side) investment, net exports and
a predetermined share of statistical discrepancy (SD) in GDP to get total consumption. Imposing

75BBS, Fifty Years of National Accounts Statistics of Bangladesh, October 2022 and Bangladesh National
Accounts: Sources and Methods, July 2022.

White Paper on State of the Bangladesh Economy 32

SD on data takes away the power of consistency checks of the expenditure estimates with
estimates of production. The BBS estimate of Gross Domestic Expenditure is therefore arbitrary.
Estimates of total investment, its components, exports, imports, and public consumption are not
prisoners of SD. BBS uses BB data on exports and imports and revised or actual budget data on
public investments. Private investments estimate is derived as the difference between total
investment and public investment. Total investment in construction, machinery & equipment,
and transport equipment (over 90% of the total) are estimated separately using the commodity
flow method where the raw data are the production and import of goods specific to investments
in each of these sectors. This makes total investment better connected with what it is intended to
measure—the gross additions to capital stock during a period—than either of its two
components. Public capital expenditures tend to be downwardly rigid at least in nominal terms
while private consumption carry the errors in both total investment and public investment
estimates.

Overall, therefore the data cannot be thrown away as completely useless but must be
handled with care. The downwardly rigid component acts like an automatic stabiliser in bad
times while behaving procyclical in good times. The discretionary part can also act similarly in
the presence of risk averse officials in BBS and the Statistical and Informatics Division who do not
like to report bad news upwards. These biases explain why the annual growth trajectory looks so
smooth. They cannot explain the linear upward sloping growth path in the FY15-19 SFYP period.

The revisions
Revisions to data on GDP and its components determine the accuracy of national accounts
estimates and their comparability across countries. Large revisions result from new
methodologies expanding coverage of economic activities and computing their size based on
updated input-output coefficients. These change the size of both the nominal GDP and the real
GDP. In principle, changes in the base year itself only change the size of the real GDP.

Rebasing the national accounts in practice means changing the reference period for the individual
price and volume indices used from the old base year to the new base year and aggregating from
the detailed compilation at sectoral levels to obtain estimates of production and expenditures at
the national level. Such large revisions are usually recommended once every decade.

In 2013
In November 2013, BBS published a new GDP series with 2005-06 as base year. The 2005-
06-base series included nearly 150 new products and services. For instance, 24 new items were
added to the basket of products in the agricultural and fisheries sub-sector, increasing the total
number of products to 124. Bricks, timber and round wood, fixtures and fittings have been added
to help compute the gross value added of the construction sub-sector. New elements such as
repairing of motor vehicles and household goods, economic contributions of the private airlines,
internet service provider, cable service, clearing & forwarding agent, travel agent etc. were
included in the services sector. In financial intermediation, new entrants included micro-finance
institutions, cooperative banking, new insurance companies, insurance agents, and house
building financing.

The new series estimated FY13 GDP at Tk. 11,881 billion (US$149 billion) compared with Tk.
10.380 billion in the older (i.e. 1995/96-base) series. This was about 14.5 per cent higher than
estimated earlier. GDP at current and constant prices grew at virtually identical rates in the new
and old series (14.1 per cent and 6.3 per cent per annum, respectively on average) over the 7-
year period for which data were available (2005/06-2012/13). GDP growth in the new series was
somewhat less volatile.

White Paper on State of the Bangladesh Economy 33

Based on data from the old GDP series, Bangladesh’s GNI per capita (Atlas Method) in 2012 was
$840. Factoring in the 14.5 per cent increase in the level of GDP indicated by the new series, the
country’s GNI per capita increased to $962.

Again in 2021
On December 2, 2021, BBS published the national accounts using 2015-16 as the base year.
This publication included the updated actual national account numbers for FY16-20 and
provisional estimates for FY21. This round of revision included several new sub-sectors in
industry and services. The cottage industry was added as a new sub-sector in manufacturing.
Additional sub-sectors under services included: i) accommodation and food ii) information and
communication iii) professional, scientific, and technical activities iv) administrative and support
activities, and v) arts, entertainment and recreation. These additional sub-sectors accounted for
7.7 per cent of GDP in FY21. The share of the industry sector in GDP increased after adopting the
new base year, while the share of the services sector declined.

The story on growth and investment is not very different in terms of trends relative to the
replaced series. They rise and fall similarly in each reported year. The growth rates are lower in
the new series where it never crosses 8%. The investment rates on the other hand are higher in
every reported year. This means the efficiency of investment, as measured by the ratio of growth
to the investment rate (known as the Incremental Output Capital Ratio), is lower than implied in
the old series.

The revision had a significant effect on the size of the GDP. The nominal GDP in FY20 increased to
US$ 373.9 billion, about 15.7 per cent higher than the nominal GDP in the old series. GDP per
capita measured in current USD 2,426 in FY21 is 14.7% higher relative to the old series. The GNI
per capita increased to $2,554, compared with $2,227 in the old series. This materially bridged
the gap between the per capita income level at present and the milestones such as upper Middle
Income Country status by 2031 and Higher Income Country status by 2041.

Another revision on the cards

BBS wants to “rebase” again to 2021-22 base year in next two years. This will raise the
frequency of revisions to once every four plus years, a rarity in global practice. Bangladesh is
already ahead of peers in terms of the recency of the national account’s base year. Only Maldives
(2014) and India (2011-12) come close. Pakistan (2005-06) and Sri Lanka (2010) are well behind.
All the revisions in Bangladesh have come with expanded coverage leading to spikes in estimates
of nominal GNI per capita (usually expressed in US dollars). In principle, mere rebasing should
not alter nominal estimates. Coverage changes are certainly not warranted as frequently as base
year changes. All these considerations will have to be factored in before launching yet another
revision in the near future.

White Paper on State of the Bangladesh Economy 34

Chapter III. Inflation: A Lingering Pain Afflicting Public Lives*

Inflation has risen faster and more persistently than experienced in the previous episodes
of high inflation in Bangladesh. Reported inflation has soared to heights not seen since early
2010 squeezing household budgets just as they were recovering from the pandemic. Food price
increases have hurt low income groups the most with acute impact on their living standards. The
recessionary effects of high inflation are currently percolating through the economy.

This chapter portrays the reality of inflation in Bangladesh with a focus on recent experience
spanning FY19-24, accounts for the forces contributing to the entrenchment of inflation at an
elevated level for too long, provides evidence of the likely impact on poverty and inequality, and
concludes with policy aspirations to alleviate this lingering pain in the lives of the masses.

3.1 Reality

Data distrust

Inflation is generally perceived as higher than reported. A BIDS survey (2024) of BBS data
users found the inflation data ranks the highest on the distrust scale.76 The magnitude of the
disconnect between reported inflation and public experiences came out in a South Asia Network
of Economic Modelling (SANEM) survey of 800 urban and 800 rural households. Between
September 2022 and February 2023, the monthly average household income remained the same,
while the monthly average household expenditure increased by 13.1%.77 Reported inflation (12
months moving average) during the same period was 8.1 per cent, a difference well outside the
margin of error.78

The data disconnects are hard to refute. The question essentially is whether the price data
used in CPI calculation is under-reported in their levels because of the data sources and perhaps
methods of collection. That does not necessarily bias the inflation trajectory downward over time,
but it could. The bigger problem may be in back calculations responding to political suasion.

There is some evidence that inflation of some key food items may be understated. We picked price
data of 3 varieties of rice, three varieties of meat, three varieties of fish, lentil, onion, liquid milk,
eggs and soybean oil from BBS’s CPI file. We calculated the composite inflation rate of these items,
which account for 27 and 20 per cent of entire rural and urban consumption baskets, respectively.

The inflation rates of the selected items, which figure in the day-to-day meals of most consumers,
and their contribution to the overall food inflation are way too low compared with overall food
inflation in rural and urban markets (Annex -I, Table-1). Any understatement in the inflation rates
of these items significantly understates the overall rate of inflation because these are
heavyweight items. The price charts in Annex-II present the underlying price data to nail the
“culprits” understating food inflation.

* The chapter has been prepared by Dr Zahid Hussain, Former Lead Economist, World Bank Bangladesh.
76

https://bbs.portal.gov.bd/sites/default/files/files/bbs.portal.gov.bd/page/b343a8b4_956b_45ca_872f_4
cf9b2f1a6e0/2024-09-26-09-43-9507f593c24ab8e46e24d2bd88cebd26.pdf
77 Raihan, S., Ahmed, M. T., Hasan, E., Hasan, M., & Surid, T. F. (2023). Effects of Inflation on the Livelihoods

of Poor Households in Bangladesh: Findings from SANEM’s Nationwide Household Survey 2023. SANEM
Publications, Dhaka, Bangladesh. This approximates the inflation these households experienced assuming
the change did not come from the difference in the composition of their expenditures from the CPI basket.
78 Empirical verification of inflation data is limited to reconstructing the consumer price index using

expenditure shares of marginalized groups. Selim Raihan, Do the official inflation figures in Bangladesh
reflect the actual inflation faced by the marginalized households in Bangladesh? SANEM, March 3, 2022.

White Paper on State of the Bangladesh Economy 35

What causes such understatement, if indeed it is so, is not clear but it may not necessarily be
deliberate or premeditated. However, our discussion with the BBS staff doing the calculations
suggests the conjectured presence of an invisible ceiling at 10 per cent under the previous regime
is not unfounded.

Experienced inflation rate

A ballpark estimate of the magnitude of true inflation is possible under some strong
assumptions. BBS’s CPI is based on national-level price data reflecting purchasing patterns of
the average consumer. In principle, the same information can be provided by changes in the cost
of living estimated from household survey data because they reflect the minimum cost of meeting
a fixed measure of revealed needs. The CPI weights being Household Income and Expenditure
Survey (HIES) based allow checking whether or not price changes observed in survey data match
inflation measured by the CPI. Jollif (2014) constructs general, food and non-food indices using
the 2005 and 2010 HIES data. He finds the implied national, rural, and urban inflation rates were
71 per cent, 69 per cent, and 76 per cent, respectively. The corresponding CPI based numbers
were 46 per cent, 47 per cent, and 44 per cent, respectively.79 Using the ratio of these estimates
as anchors, it is possible to get a back of the envelope sense of the true magnitudes of inflation
experienced recently (Table 3.1).

Table 3.1: Heuristic estimates of experienced inflation, 2024 (y-o-y, %)

Anchor April May June July August Sept
Headline,
national 1.5 15.0 15.3 15.0 18.1 16.2 15.3

The true inflation may have been in the 15—17 percentage range rather than the CPI’s 9
to 11 percentage range. Other corroborative evidence includes a Bangladesh Institute of
Development Studies (BIDS) survey, which found 15% food inflation in December 2023.80
Officially reported food inflation was 7.9 per cent for the same month. This implies the anchor is
1.9. Calculations based on price changes reported by the Centre for Policy Dialogue (CPD)
covering coarse rice, soybean oil, moshur dal, onion, fish, beef, mutton and eggs (using rural
weights) suggest an annual rural food inflation rate of 11.7 per cent during FY19-23, compared
with the average 6.7 per cent rural food inflation reported by the BBS for the same period.81 The
anchor, in this case, is 1.7. These suggest the 1.5 anchor used in Table 3.1 is conservative.

Stylised facts

Be that as it may, extracting signals from noisy inflation data warrants a deeper dive into some
economically interesting statistical properties of the monthly inflation series produced by the
BBS. These properties are in accord with experienced reality. Official data may censor the level
but its movements over time still reveal a lot about the sources.

Elevated and volatile: The behaviour of inflation in Bangladesh during July 2021--September
2024 was very different from the behaviour of the global inflation rate and inflation prior to this
period. Two years ago, inflation spiralled in 179 out of 194 nations compared to 2020. Since then,
inflation’s global growth slowed. Median headline global inflation was estimated at 7.2% (year-
on-year) in April 2023, down from a peak of 9.4% in July 2022 and decreased to 5.9% in 2024.82
In contrast, inflation has escalated since early 2022 in Bangladesh, moving quickly from less than

79 Lea Gimenez Dean Jolliff, Inflation for the Poor in Bangladesh: A Comparison of CPI and Household Survey

Data, Bangladesh Development Studies Vol. XXXVII, March-June 2014, Nos. 1&2.
80 Binayak Sen quoted in a Prothom Alo report, May 2024.
81 CPD, State of the Bangladesh Economy in FY2023-24, First Reading, December 23, 2023.
82 IMF, World Economic Outlook, July 2024.

White Paper on State of the Bangladesh Economy 36

6 per cent year on year in January 2022 to the 9 plus zone in August 2023. It hovered subsequently
at above 9.6 per cent as we write.

Figure 3.1: Monthly (t-o-y) headline inflation (%)

14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00

Sept

January
Jan
Mar
May

Sep

Jan
Mar
May
July

Jan
Mar
May
July

Jan
Mar
May
July

May
July
Sept
Sep

March
Nov

Nov

Sep
Nov

Sep
Nov
Jul

Jul

November
2019/2020 2020/21 2021/22 2022/23 2023/24 2024/25

Both the level and volatility of inflation have increased. A sustained decline in inflation is now a
distant memory. Inflation last peaked at 12.3 per cent in FY08, a year of global food crisis, but
declined next year to 7.6 per cent. It rose back to 10.9 per cent in FY11 and declined more or less
steadily from FY12 onwards until FY21.

Persistent: Persistence distinguishes the latest variant from its antecedents and global
counterpart. Figure 3.2 plots inflation in month t (y-axis) against inflation in month t-1 (x-axis)
covering FY19-September FY25. Last month’s inflation is almost a perfect predictor of inflation
in the current month with a slope equal to 0.97. A one percentage point increase in inflation this
month predicts almost an equal increase in inflation next month.

The range of variations is rather narrow. Monthly y-o-y inflation was never below 4% nor did it
exceed 10% except in July-August 2024.83 Most observations are clustered around a rising trend
line, suggesting the propagation of inflation from a shock. The shock in FY22 is very discernible
from the distance between the two clusters in Figure 3.2. Inflation was re-anchored higher by
around 300 basis points.

83Inflation data for July-August 2024 were released under the interim government under which BBS
presumably is not fearful of reporting >10% inflation.

White Paper on State of the Bangladesh Economy 37

Figure 3.2: Inflation persistence, FY19-September FY25

14.00

12.00
Current inflation

10.00

8.00

6.00

4.00

2.00

0.00
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00
Previous month's inflation

Changes in food-nonfood correlation: The relationship between food and non-food inflation
changed. During the 24 months in FY19-21, food and nonfood inflation had a negative correlation
(0.55). It turned positive (0.61) in the subsequent 37 months moving in tandem in the same
direction.84 The co-movement of food and nonfood inflation suggests the salience of common
drivers. These are factors such as global commodity price increases, exchange rates, administered
energy prices, and expansionary macroeconomic policies.

3.2 The Inflation Triggers and Amplifiers

A confluence of factors triggered and amplified inflation over time. Unravelling pent up
demand, expansionary policies and strained global supplies were the triggers. Inflation started
rising from January 2021, well ahead of the Ukraine war; gained momentum in April 2022 in the
immediate aftermath of the war; and subsequently got entrenched around a rising trend. Pent up
demand unleashed as restrictions on mobility and assembly eased with increased vaccination and
fading of the virus in 2021. Extended stimulus packages, rising global commodity prices and
freight rates together pulled the inflation gene out of the bottle. Outbreak of Ukraine war and its
geoeconomic consequences launched inflation to newer heights as commodity prices and freight
costs shot up further.

Inflation in Bangladesh has outlasted the global triggers too long. Global commodity prices
in the first quarter of 2023 were roughly 30% lower than their historic peak in June 2022. Energy
and food prices have dropped substantially from their 2022 peaks (Annex-I, Table-2). The theory
that inflation is all imported is irreconcilable with these facts. High inflation after the pandemic
came with falling real wages, thus ruling out the wage price spiral explanation of inflation
propagation. A number of amplifiers came into play from both supply and demand sides of the
markets for goods and services.

84The demand drag effects of food price increases can explain the negative correlation between food and
non-food inflation. A faster rise in food inflation, as was the case during FY19-21, relative to aggregate
prices, may have lowered demand for non-food products via the income effect on the vast majority of net
buyers of food. Given a 45% food share in the CPI basket, a 10-percentage point increase in food prices
implies a 4.5% decrease in real incomes on average. Reduced real income causes a proportionately greater
decline in consumption of non-food items compared to food (Engel’s law), hence taking a few breaths away
from the rise of non-food prices.

White Paper on State of the Bangladesh Economy 38

Inflationary push from supply side

Exchange rate depreciation: The US dollar reached a 2-decade high against other major
currencies in September 2022 before declining markedly in early February 2023. Bangladesh’s
trade is largely denominated in US dollars. Figure 3.3 shows as the dollar gained against the taka,
so did the rate of inflation. The correlation between the exchange rate and the headline, food and
non-food inflation was 0.94, 0.82 and 0.94, respectively during the period in question.

A more precise sense of the inflationary impact of exchange rate depreciation came from the IMF.
Their estimated pass-through from exchange rate depreciation at 0.25 implies more than half of
consumer price (CPI) inflation of 9 per cent in FY23 can be attributed directly and indirectly to
the 20 per cent exchange rate depreciation the same year.85 The proportion attributable to
exchange rate depreciation declined remarkably to less than one third in FY24 when the exchange
rate depreciated 11.4 per cent while inflation rose to 9.7 per cent.

Figure 3.3: Headline inflation and exchange rate changes (%), July 2019 - September 2024
30.00

25.00
Excahnge rate changes, % y-o-y

20.00

15.00

10.00

5.00

0.00
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00
-5.00
y-o-y inflation %

There is more than just exchange rate depreciation. Even when exchange rate changes were close
to zero. inflation varied between 5 and 6.5%. The variations around the line best fitting the scatter
between inflation and the exchange rate changes blew up considerably as inflation graduated into
the 9 to 10% range, indicating an increasing interplay of other factors.

Foreign exchange shortage: Policy interventions in setting exchange rates created a foreign
exchange shortage, which in turn led to import controls and, thus, dries production and supply
growth. Foreign exchange shortage—excess of demand over supply at the prevailing exchange
rate—is not directly observable. What was observed is banks drew down their nostro account
balances, and BB sold dollars. Yet the shortage persisted as private forex flows drained from the
system. The wider spread between the official and parallel rates diverted dollar inflows from
formal to informal channels.

85 IMF, Bangladesh Selected Issues, December 2023.

White Paper on State of the Bangladesh Economy 39

Figure 3.4: NFA growth and inflation

40.00
Net foreign asset growth, y-o-

30.00
20.00
10.00
y, %

0.00
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00
-10.00
-20.00
-30.00 y-o-y inflation, %

An omnibus correlate of the availability of foreign exchange is the stock of net foreign assets
(NFA) in the banking system. It is not unreasonable to assume the stock of net foreign assets
declines as shortage grows. Note that a direct relationship between foreign exchange availability
and supply of goods and services implies a negative correlation between the growth of net foreign
assets and headline inflation. Figure 3.4 shows such a relation emerged recently with a
correlation coefficient of -0.83. The large cluster of observations of positive and often high NFA
growth at around 6% inflation shows NFA growth variations in the positive zone did not matter
for inflation. Inflation increased with the onset of an increasing rate of NFA decline.

Administered price increases: Petrol and octane prices increased close to 50% and diesel and
kerosene 36% in August 2022 on top of a 23% increase in November 2021. Retail electricity
tariffs increased 15.7% from January to March 2023 and again by 8.5 per cent in March 2024. The
average price of gas increased nearly 23% for retail consumers in June 2023. These have a direct,
albeit transitory, effect on headline inflation going beyond the 4% weight electricity, gas, and
liquid fuel have in the urban CPI basket and about 2% in the rural CPI basket.

Figure 3.5 indicates the direct effect of energy price increase on the non-food sub-category
Housing, Water, Electricity, Gas and Other Fuels. It entered a phase of steep rise from September
2021 and onwards. This does not include the indirect effects. A 179 per cent increase in the
administered price of gas for the industrial users, coupled with an increase in administered
electricity prices, led to increases in costs of supply generally.86 All anecdotal evidence suggests
that the passthrough of energy price increases to consumer prices is rapid, with overshooting
popularly believed to be frequent.

86Higher administered diesel prices affected irrigation, transport costs and the prices of agricultural
products according to World Bank, Bangladesh Development Update, October 2023.

White Paper on State of the Bangladesh Economy 40

Figure 3.5: Housing, Water, Electricity, Gas, and Other Fuels (y-o-y, %)
14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00
Jan

September
May

Jan

May

Jan

May

Jan

May

Jan

May
Mar
Sep
Nov

Sep
Nov

Mar

July

Mar

Mar
Sep
Nov

July
Sep
Nov

July
Sep
Nov

Mar

July
Jul

Jul

-2.00

FY20 FY21 FY22 FY23 FY24 FY25

Disorderly market conditions: Extortion in the supply chain of commodities is rampant. Traders
have to pay at multiple stages to bring a product from the producer or import level to the
wholesale markets in the cities. Several layers of extortion are endemic as a commodity passes
through the upazila towns from village markets and then district and divisional cities.
Consequently, the gulf between the prices the original producers receive and the prices the final
consumers pay is wide and heterogenous across products.87

There is no hard evidence of the relationship between inflation and extortion rates. However, a
natural experiment seems to have happened in the two weeks following August 5, 2024. This was
a brief period when the incumbent extortionist fled, and their replacements were yet to gain hold.
For the first time in a long time, the newspapers reported cooling prices of essentials.
Subsequently, new players entered, and the price decreases were reversed. Variations in
extortion rates over time can influence inflation just like variations in tax rates do. There could
very well be an extortion rate-price spiral.

Profit push: Business markups, conceptually measured as the price-to-marginal-cost ratio, have
risen steadily over several years.88 There is a general perception that firms or informally
connected groups (syndicates) abuse their market power to increase prices, contributing to
inflation (price gouging). Anecdotal evidence on rising corporate profits provide prima facie
credence to this view in Bangladesh.

The presence of large players in the market for several essential food items is well known.89 The
most comprehensive and empirically well-grounded evidence on the stages of profit push in food
supply from production to wholesale to retail levels has come from a study by Dhaka Chamber of
Commerce and Industry (October 2024). Price multiples from production to retail range between
1.27 (broiler chicken) to 8.25 (turmeric). There is significant market dominance by wholesalers
in garlic, egg, rui fish and fine rice. Price multiples vary widely across products and geographies,

87 The retailers reportedly pay Tk 200 just to load the goods onto the trucks. The Daily Star, Stop extortion
to contain prices of essential items, February 29, 2024.
88 IMF, World Economic Outlook, October 2022.
89 S. Alam group alone accounts for 35 percent, 30 percent, and 20 percent market shares in sugar, edible

oil and wheat respectively. Quoted by Bhorer Kagoj from S. Alam’s letter to the Governor, BB, September
18, 2024.

White Paper on State of the Bangladesh Economy 41

indicating market segmentation. The study found localised single market power in eggs, broiler
chicken, potato, red amaranth, and green chilli.90

Profit push inflation can accelerate existing inflationary pressures. It needs enablers such as
tighter global (food, energy, metals) market conditions, exchange rate depreciation, foreign
exchange rationing, accommodative or expansionary monetary policy and regulatory
forbearance. Firms then find it opportune to increase profit margins. Beyond several essential
mass consumed food items, it is difficult to be empirically confident about the significance of
rising mark ups as an independent cause of inflation persistence. But its growing prominence is
evident from many central banks beginning to pay attention to the relationship between changes
in profit and inflation.91

Unorthodox macroeconomic management

Inflation friendly monetary policy. The lack of a stable relationship between monetary growth
and inflation does not mean the conduct of monetary policy does not matter in inflation
management. A simplistic reading of recent data shows a negative (0.75) correlation between
broad money growth and inflation! The devil is in the details.

A critical detail often overlooked is the de facto monetary policy stance. This is best indicated by
the behaviour of real interest rates (Figure 3.6). Despite significant 475 basis points increase in
policy rate in FY22-23, real lending and deposit rates declined and stayed in the negative zone
until November 2023 when real lending rates climbed to zero. This is anything but monetary
tightening.

Figure 3.6: Real Interest Rates on Commercial Lending and Deposits (weighted average, %)

-1

-3

-5

-7

Deposit Rate Lending Rate

Source: World Bank, Bangladesh Development Update, October 2024

Indirect channels of monetary transmission. Broad money comprises of net foreign and
domestic assets. The decline in NFA soaked taka liquidity from the banking system as BB sold
dollars. A large pre-existing stock of excess liquidity buffered the impact on banks’ capacity to

90 Research & Development & Policy Advocacy Dept, DCCI, Food Inflation: An Analysis on Price Dynamics
of Essential Commodities, Power Point presented by AKM Asaduzzaman Patwary, Executive Secretary
(R&D, PA Dept.) on October 17, 2024.
91 These include the Federal Reserve Bank of USA, the European Central Bank and the Bank of England.

They are all monitoring profit push inflation, especially in sectors where companies have significant market
power.

White Paper on State of the Bangladesh Economy 42

lend. The 9% cap on lending rate from April 2020 kept credit cheap, blocking transmissions of
increases in the policy rate. Pent up demand unravelled not just in the market for goods and
services but also for credit in 2021 as the pandemic faded. Monetary financing of domestic
government borrowing in FY23 added fuel to credit expansion, thus fanning inflation (Annex—
III, Chart 1).92

The correlation between domestic credit growth and inflation is weak and possibly nonlinear.
The correlation coefficient ranges between 0.18 with food inflation and 0.33 with nonfood
inflation. Indirect effects through an inverse relation between NFA growth and domestic credit
growth and direct relationship with exchange rate depreciation (Annex—III, chart 2 and 3) are
likely. Domestic credit expansion is negatively associated with a higher depletion of net foreign
assets (correlation coefficients -0.58) and positively with exchange rate depreciation (correlation
coefficient = 0.53).

Fiscal and political dominance of monetary policy exacerbated inflation volatility. Inflation
tends to be more volatile as it accelerates. This arises especially when the central bank is not
independent and the seigniorage revenue from printing money finances the government
budget.93 Links between deficits, seigniorage, central bank subordination and inflation are
stronger when inflation is high.94 Bangladesh met all these conditions. BB channelled seigniorage
through devolvement and dividends to the budget. Seigniorage revenues increased from 1 per
cent of GDP in FY20-22 to 1.1 per cent in FY23-24. The fiscal and political dominance of BB were
out in the open.

3.3 Impact on the Vulnerable Population

A substantial divergence exists between CPI inflation and increases in the cost of “minimum
needs” measured by changes in national poverty lines over time. Survey-based evidence indicates
that the changing costs of living, as experienced by the poor are better proxied by the changes in
poverty lines. Consumption patterns typically differ between the poor and non-poor.

CPI underestimates inflation faced by the poor.95 Survey-based evidence, using the HIES,
suggests that the national-level inflation rate is 35 per cent lower than the implied survey-based
inflation rate. The latter is 15 per cent lower than the poverty line-implied inflation rate.96 The
gulf between the inflation rate faced by the poor and non-poor is therefore wide. Inflation inflicts
greater pain to the poor than the non-poor. By how much can only be gauged empirically.

Deeper poverty. At least 27.51 lakh more Bangladeshis reportedly fell into poverty in 2022 due
to the global food price hike and post Covid-19 impacts. Price spikes are more important for
hunger than for GDP growth. Rising food prices directly reduce households' access to food.97 With
increasing inflation, most household reduced consumption of major food items since February
2022. Many skipped meals, especially in urban slums, more women were compelled to find work,
and an overwhelming majority reduced nonfood expenditure.98

92 The correlation coefficient is 0.7.

93 Seigniorage is approximately equal to the product of inflation and real money balances.
94 Mikhail Dmitriev a, Erasmus K. Kersting, Inflation level and inflation volatility: A seigniorage argument,
Economics Letters Volume 147, October 2016, Pages 112-115. They also make the point that “real money
balances decrease with higher inflation. When inflation is high and the seigniorage needs to generate an
additional one percent of GDP in revenues, inflation has to increase by more, since real money balances
(the tax base) are small.”
95 Raihan ibid.
96 Jolliff ibid.
97 IFPRI Post-Covid price inflation drives up poverty, Google Scholar, December 14, 2023.
98Hossain Zillur Rahman and Imran Matin, Inflation, coping and recovery challenges, PPRC-BIGD 5th

Round Survey, June 5, 2022.

White Paper on State of the Bangladesh Economy 43

The World Bank estimated about 0.5 million people in Bangladesh likely fell into extreme poverty
between the FY22-24 due to the erosion of the purchasing power. Higher food prices particularly
impacted poor households (living below $2.15 per day) who spend over half their budget on food
expenditures. Another 0.84 million could have joined the ranks of the moderately poor (living
below $3.65 per day). 99

Increased inequality. Differential impact of inflation on the poor and non-poor is one big reason
why the standard of living gap between the rich and poor has increased over time. Econometric
model based estimates show a one per cent increase in inflation increases income inequality 5
per cent in Bangladesh.100 International data set based evidence find nonlinearities in the
inflation-inequality relationship. Assessments based on a dynamic threshold panel data for 101
countries over the period 1985–2020 shows inflation rates exceeding 6 per cent are associated
with higher income inequality. The correlation is insignificant below this threshold. A higher
initial level of inequality as well as unemployment has an inequality-enhancing effect.101

Poor are net buyers in markets for goods and services. Nominal wage growth of low skilled
workers has persistently lagged behind inflation by 200 to 300 basis points for more than 36
months now. This indicates income growth of the poor has lagged inflation, putting them
decisively on the losing side. They usually lack the means to preserve their purchasing power due
to, among others, near zero bargaining power and limited access to financial markets. Inflation
boosts profits of the net sellers which generally tend to be large corporates in industry,
agriculture and trade or the government who benefit from the inflation tax.

3.4 Taming Inflation

Both very low and very high inflation have been associated with severe macroeconomic
problems.102 The “high” and “low” thresholds do not derive from a “law of nature” the nation must
adapt to. History matters. Bangladeshis are not used to double digit food inflation for so long. Nor
are they fooled by statistical disguises of inflation. There is encouraging news on both the external
and internal fronts on inflation. However, none of these will transmit to grass roots without
nimble policies.

Tailwinds in global prices. After softening by 3 per cent in 2024, the World Bank’s commodity
price index is expected to retreat by a further 5 per cent in 2025 and 2 per cent in 2026, leading
to the lowest aggregate commodity prices since 2020.103 The energy price index is projected to
fall by 6 per cent in 2024, followed by further declines of 6 per cent in 2025 and 2 per cent in
2026 if conflict in the Middle East does not intensify. Agricultural prices are projected to fall by 4
per cent in 2025, with little change anticipated in 2026 if extreme weather doesn’t go haywire.
Food commodity prices are forecast to soften 4 per cent next year before levelling off in 2026 if
Ukraine does not go into flames. The metals price index is expected to drift slightly lower over
2025-26 if China doesn’t roar back.

Pass through is not automatic. Lower commodity prices in international markets should help
BB bring headline inflation back toward the target. Food and energy form relatively large

99 World Bank, Macro Poverty Outlook 2024.

100 Md Muhibbullah and Mala Rani Das, The Impact of Inflation on the Income Inequality of Bangladesh: A
Time Series Analysis, Google Scholar, June 2019.
101 Linda Glawe1 and Helmut Wagner, Inflation and inequality: new evidence from a dynamic panel

threshold analysis, International Economics and Economic Policy, 2024.

102 Jongrim Ha, M. Ayhan Kose, and Franziska Ohnsorge, From low to high inflation: Implications for
emerging market and developing economies, Centre for Economic Policy Research, March 2022.
103 It will still be elevated nearly 30 percent above the 2015-19 average. World Bank, Commodity Market

Outlook, October 2024.

White Paper on State of the Bangladesh Economy 44

components of our consumption baskets. Given that energy and food prices tend to be
particularly salient in the consumption basket, the projected easing of commodity prices could
also temper expectations, which could feed back into reduced core inflation pressures. However,
the passthrough from international to domestic consumer prices in Bangladesh appears more
flexible upwards than downwards. Large players stock up during periods of falling prices.
Monetary tightening makes the funding of stockpiling costlier, thus making it in the self-interest
of the sellers to pass through their cost decreases.

Limits of monetary tightening. The jury on the impact of recent monetary tightening won’t be
in until a few months more. However, there is enough evidence on the causes of inflation that
suggests tightening may not be sufficient to make a visible difference to where it hurts most
people. Food inflation brings a livelihood crisis for the low-income groups, the vast majority (over
70 per cent) of our population. Prices of essentials such as rice, lentils, fish, meat, eggs, onion,
edible oil need to stabilise below current levels. They require some deflation, not just disinflation.
In addition to increasing the financial cost of hoarding, monetary tightening can help food price
deflation through a stable, or even better, appreciated exchange rate. These should not be
underestimated. But it cannot address market structure and extortion related sources of inflation.

Unintended consequences of public actions. Protection from extortion and antitrust actions
against collusion are missing in action. Our default policy option has always been market policing.
It has not delivered. Raiding markets scares sellers away. Fines are baked like taxes on the prices.
Results of recent policing efforts in egg markets reconfirm experiences elsewhere how market
policing becomes self-defeating.104

Carrying public stocks of essentials could act as a countervailing force against market dominance
by traders if managed well, a big if. A BIDS study found public stock has a statistically significant
negative association with retail and wholesale prices of different quality of rice, although the
magnitude itself is not too large. Maintaining a larger public stock may act as a threat to traders’
frequent speculation. Sadly, they often are not governed well.105 Same goes for the Open Market
Sales operations of the Trading Corporation of Bangladesh, which is intended to provide access
to essential food items at subsidised prices to lower income families. The Family Card programme
for 10 million poor has gone through trials and tribulations on inclusion and exclusion errors.

Get the priorities right. The perfect must not be the enemy of good. Expanding the size and
coverage of cash assistance to the extreme poor should be a high priority in the FY25 revised and
the FY26 budget. Fiscal policy must invest in the capacity of low income families to cope with
inflation. Getting inflation down does not mean consumer prices will all revert to what they were
before inflation ran away. Prices will just stop increasing quickly and dramatically. Re-anchoring
persistent inflation down to below 5 per cent requires domestic policy tightening to join hands
with better market management and more generous cash assistance to the poor. Public
institutional resources deployed for protecting order in markets, monitoring production, imports,
stocks, trade and prices must prioritise the markets for essential food items that constitute the
bulk of the expenditure of the poor and the lower middle class. If letting go of the crawling peg
exchange rate risks some appreciation of taka, given current weak demand and improved supply
of dollars, so be it in the interest of creating conditions for deflation in prices of many imported
essentials.

104There are no eggs in the market at ‘reasonable prices’, thecrimebd.net, October 17, 2024.
105Nazneen Ahmed, Mainul Hoque and Nahian Azad Shashi, Rice Market of Bangladesh: Role of Different
Players and Assessing Competition, 2022.

White Paper on State of the Bangladesh Economy 45

 Annex-I: Tables and additional charts

Table-1: A smell test of downward bias in inflation data (2024)

Base Year (2015-16)
Weight April May June July August Sept
Rural
Overall food inflation 0.49 9.9 10.0 9.8 11.9 14.1 10.4
Narrow food inflation 0.27 3.1 3.6 3.7 5.5 5.2 7.9
Contribution to food 0.55 1.7 2.0 2.1 3.1 2.9 4.3
Urban
Overall food inflation 0.38 9.5 9.7 9.6 11.3 14.2 10.5
Narrow food inflation 0.20 4.6 6.0 6.0 5.7 6.7 7.0
Contribution to food 0.53 2.5 3.2 3.2 3.0 3.6 3.7
Source: Author's calculation based on BBS data.

Table-2: Global commodity prices

2021 2022 2023 2024 (f) 2025 (f)
Crude Oil, Brent ($/bbl) 70.4 99.8 82.6 84.0 79.0
Coal, Australia ($/mt) 138.1 344.9 172.8 125.0 110.0
Liquified Natural gas, Japan
10.8 18.4 14.4 12.5 13.5
($/mmbtu)
Fertilizer, TSP ($/mt) 538 716 480 450 380
Cotton ($/kg) 2.2 2.8 2.1 2.1 2.2
Iron ore ($/dmt) 161.7 121.3 120.6 110.0 105.0
Soybean oil ($/mt) 1385 1,667 1,129 1,130 1,150
Source: World Bank, Bangladesh Development Update, October 2024.

White Paper on State of the Bangladesh Economy 46

 Annex-II: Price charts106

Rice prices--rural
90
80
70
60
50
40
30
20
10
0
1 2 3 4 5 6 7 8 9 10 11 12

Medium rice )Tk/kg) Fine rice Coarse rice

Rice prices--urban
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
1 2 3 4 5 6 7 8 9 10 11 12

Medium rice )Tk/kg) Fine rice Coarse rice

On the horizontal axis in the charts, 1-6 represent January-June 2023 and 7-12 represent January-June
106

2024.

White Paper on State of the Bangladesh Economy 47

 Meat prices-rural
1200.00

1000.00

800.00

600.00

400.00

200.00

0.00
1 2 3 4 5 6 7 8 9 10 11 12

Beef Sheep and goat Hen

Meat prices urban

1200.00

1000.00

800.00

600.00

400.00

200.00

0.00
1 2 3 4 5 6 7 8 9 10 11 12

Beef Sheep and goat Hen

Fish prices-rural
1400.00

1200.00

1000.00

800.00

600.00

400.00

200.00

0.00
1 2 3 4 5 6 7 8 9 10 11 12

Puti/telapia Hilsa Pangaish

White Paper on State of the Bangladesh Economy 48

 Fish prices--urban
1400.00

1200.00

1000.00

800.00

600.00

400.00

200.00

0.00
1 2 3 4 5 6 7 8 9 10 11 12

Puti/telapia Hilsa Pangaish

Liquid milk-rural
88.00

86.00

84.00

82.00

80.00

78.00

76.00

74.00

72.00
1 2 3 4 5 6 7 8 9 10 11 12

Liquid milk--urban
93.00
92.00
91.00
90.00
89.00
88.00
87.00
86.00
85.00
84.00
83.00
1 2 3 4 5 6 7 8 9 10 11 12

White Paper on State of the Bangladesh Economy 49

 Hen egg (Tk/hali)-rural
60.00
58.00
56.00
54.00
52.00
50.00
48.00
46.00
44.00
42.00
1 2 3 4 5 6 7 8 9 10 11 12

Hen egg (Tk/hali)--urban

60.00

58.00

56.00

54.00

52.00

50.00

48.00

46.00

44.00
1 2 3 4 5 6 7 8 9 10 11 12

Soybean oil (Tk/L)--rural

180.00

175.00

170.00

165.00

160.00

155.00

150.00
1 2 3 4 5 6 7 8 9 10 11 12

White Paper on State of the Bangladesh Economy 50

 Soybean oil (Tk/L)-urban
180.00

175.00

170.00

165.00

160.00

155.00

150.00
1 2 3 4 5 6 7 8 9 10 11 12

Onion (Tk/kg)--rural
120.00

100.00

80.00

60.00

40.00

20.00

0.00
1 2 3 4 5 6 7 8 9 10 11 12

Onion (Tk/kg)--urban
120.00

100.00

80.00

60.00

40.00

20.00

0.00
1 2 3 4 5 6 7 8 9 10 11 12

White Paper on State of the Bangladesh Economy 51

 Lentil, masur (Tk/kg)-rural
140.00

135.00

130.00

125.00

120.00

115.00

110.00

105.00
1 2 3 4 5 6 7 8 9 10 11 12

Lentil, masur (Tk/kg)-rural

140.00

135.00

130.00

125.00

120.00

115.00

110.00

105.00
1 2 3 4 5 6 7 8 9 10 11 12

White Paper on State of the Bangladesh Economy 52

 Annex-III: Cross charts

Chart 1: Domestic credit growth and inflation

18.00
Y-o-y domestic credit growth, %

16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00
y-o-y- inflation

Chart 2: NFA--DC growth relation

40.00

30.00

20.00
NFA growth %

10.00

0.00
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00
-10.00

-20.00

-30.00
DC growth %

Chart 3: Exchange rate changes and domestic credit growth

30.00
Exchange rate changes (percent)

25.00

20.00

15.00

10.00

5.00

0.00
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00
-5.00
Domestic credit growth (percent)

White Paper on State of the Bangladesh Economy 53

Chapter IV. The Pitfalls of External Imbalance*

External balance used to be a highlight of macroeconomic stability in Bangladesh. Since the

pandemic it turned from green to red lights with the rise of the dollar, rate hikes and commodity
price increases globally and misguided policies domestically. Bangladesh lived through three
years of uninterrupted reserve draw down taking it to the precipice of an external payments’
crisis.

This chapter lays out the reality of external balance viewed from the external lens of trade and
payments and the internal lens of the balance between national saving and investments. These
are two sides of the same coin. It discusses how the single most important absorber of external
shocks—the exchange rate policy—moved in a direction antithetical to stemming the rapid
erosion of foreign exchange reserves. The paper concludes imploring to learn from past policy
mistakes.

4.1 External Balance Hurting on Both Sides

Fundamental national income accounting identities ensure that the current account is equal not
only to the difference between exports and imports inclusive of net income from abroad but also
to the difference between savings and investment. Movements in interest rates, exchange rates,
prices, income and macroeconomic policies coordinate the decisions to export and import and to
save and invest made at a microeconomic level by firms, households and public institutions.

A tale of changing balances

The shared wisdom until June 2024 was that the current account deficit morphed into a
surplus in FY24. The trade deficit declined due to a large compression in imports, reduced
import over invoicing and a resurgence in exports exceeding the celebrated $50 billion mark from
FY22-23. Recovering remittance flows moved the current account balance from deficit to surplus.
On the hand, an unusual rise in net outflows on account of trade credit transformed the financial
account surplus into a multibillion dollar deficit.

The Bangladesh Bank’s correction of presumably unintended errors in export data in May
2024 turned the story upside down. The correction transformed the previously reported
current account surplus into a deficit and financial account deficit into surplus.107 The reduction
in the shipment values of exports in FY23-24 led to a counterpart reduction in trade credit in the
financial account.108 The opposing changes in the current and financial balances cancelled each
other with no systematic effects on errors & omissions. Consequently, the overall balance
remained essentially the same as before. The latter is mirrored by the loss of foreign exchange
reserves.

*The chapter has been prepared by Dr Zahid Hussain, Former Lead Economist, World Bank Bangladesh.
107 The standard practice is to treat the excess of the shipment value of exports over the payments received
against exports as a debit entry in the trade credit account. The over-reporting of the shipment value of
exports resulted in huge debit entries in the trade credit account, amounting to $12.2 billion (net outflows)
during July-March. The correction in exports reduced this to slightly over $2.1 billion (net outflows), a
decrease of about $10 billion that closely matches the size of the correction in exports.
108 The most significant correction is in the merchandize export data. The Export Promotion Bureau

numbers on monthly exports in FY24 showing significant growth have been raising eyebrows among the
exporters. Contrary to what was hitherto believed, merchandize exports declined 6.8% in July-April FY24
relative to the same period in FY23, driven primarily by a 6.7% decline in RMG exports. Note that EPB
reported 3.9% growth in exports during the same period, driven by 5% growth in garments. Consequently,
the current account surplus turned into a large current account deficit, notwithstanding a 12.3% decline in
merchandize imports.

White Paper on State of the Bangladesh Economy 54

Reported foreign exchange reserves had their share of significant downward correction.
An IMF report in 2021 discovered BB overstates official foreign exchange reserves.109 Of the $46
billion foreign reserves reported at the end of June 2021, only $39 billion were in accordance with
internationally accepted reserve accounting guidelines. Simply stated, BB was including in
reserves foreign exchange paid out to exporters, infrastructure builders, holdings of fixed income
securities below investment grade, deposit held in state-owned banks and the money lent to Sri
Lanka. The Fund made it a condition in its lending programme launched in 2022 to use the
Balance of Payment Manual 6 (BPM6) in counting reserves.

Figure 4.1: Gross Foreign Exchange Reserve

US$ Billions

60

50

40

30

20

10

Source: Based on BB data.

Reserves were in any case running downhill from the second quarter of 2021 (Figure 4.1).
The pressure came from the trade and current account deficits. The trade deficit increased 3.5
times from $9.5 billion in FY17 to $33.2 billion in FY22. The current account deficit increased 13.7
times from $1.3 billion to $18.6 billion during the same period (Figure 4.2). Stronger US dollar
hurt exports to markets other than the United States and commodity price hikes elevated import
payments even as real imports were compressing. Lower trade credit, the post-covid normalised
levels of multilateral borrowing, and a nearly sudden stop in rolling over private short term credit
in FY22-24 shrank the financial account surplus rapidly. Rate hikes globally increased the cost of
trade and commercial borrowings while growing distress in the banking system eroded external
creditors’ confidence.

Bangladesh Bank sold reserves as the overall balance of payments became increasingly
negative. A notable factor in this deterioration was elevated levels of unaccounted outflows
reported as Errors & Omissions, which cumulatively amounted to $19 billion during FY22-24,
compared with $1.5 billion in the preceding three years (FY19-21).110 A good guess perhaps is
capital flight, which is corroborated by a variety of anecdotal evidence unravelled in the aftermath
of the change since August 5, 2024.111 The rapid fall in foreign exchange reserves in the 36 months
prior to August 5, 2024, was preceded by a rapid buildup robust to the pandemic induced
economic shock. The overall balance of payments surplus peaked at $9.3 billion in FY21. Errors
and omissions were low until then. The situation deteriorated enough to warrant pre-emptive

109 IMF, Safeguards Assessment Aide Memoire, 2021.

110 Errors and Omissions is the part of the foreign exchange reserve drawdowns not accounted for by
official flows of foreign exchange receipts and payments.
111 See White Paper Chapter 20.

White Paper on State of the Bangladesh Economy 55

action.112 The government opted for an IMF programme to buy time for correcting external
imbalances.

Figure 4.2: External balances

20,000

15,000

10,000

5,000

0
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24
-5,000

-10,000

-15,000

-20,000

-25,000

Current account balance Financial account balance Errors & omissions Overall balance

Adverse saving-investment divergence. The current account balance reflects a divergence

between savings and investment. A deficit country spends more than it is producing. The reverse
is true for a surplus country. Inflows of foreign capital offset the difference between national
investment and national savings in the short run. Solvency constraints do not prevent a country
from running current account deficits for extended periods. However, accumulating external
liabilities on too large a scale exposes the economy to fiscal and financial vulnerabilities such as
sudden stops in financial flows.

A manifestation of internal weaknesses. Weaker national saving, stagnant investments

alongside an overvalued exchange rate, growing fiscal deficits, and excessive domestic credit
growth underpinned the behaviour of current account deficit. Gross national saving weakened
before picking up somewhat in FY24 (Figure 4.3). Investment rate was stagnant at around 31 per
cent of GDP except in FY22 when pent up investment demand got released. The real effective
exchange rate, a measure of a nation’s competitiveness in comparison with those of the nations it
trades with, appreciated.113 The primary fiscal deficit increased from 1.6 per cent of GDP in FY21
to an estimated 2.8 per cent in FY24.114 Domestic credit growth rose from 10 per cent in FY21 to
15 per cent by FY23 before slowing to 10.5 per cent in FY24.115

112 IMF’s June 2024 report assessed Bangladesh’s external position at end-FY23 as moderately weaker than
the level implied by medium-term fundamentals and desirable policies.
113 Sadiq Ahmed, Why is it taking so long to stabilize the economy? Policy Insights, Policy Research Institute,

May 22, 2024. According to Sadiq “the exchange rate has been highly overvalued for an extended period of
time, as reflected in the appreciation of the real effective exchange rate (REER) by an overwhelming 57
percent between FY2011 and FY2022. By failing to correct this overvaluation on a timely basis, Bangladesh
exposed its currency to substantial depreciation between April 2022 and September 2023. Even so, the
taka today is still appreciated by 40 percent in real terms over 2011.” Also see IMF, Second Review, Country
Report No. 24/186, June 2024, p.43.
114 IMF, Second Review, June 2024.
115 Bangladesh Bank data.

White Paper on State of the Bangladesh Economy 56

Figure 4.3: Saving and investment rates
33.0

32.0

31.0

30.0

29.0

28.0

27.0

26.0
2018-19 2019-20 2020-21 2021-22 2022-23 2022-24

GNS (% of GDP) GDI (% of GDP)

The co-movements of national saving and domestic investment rates are striking. Note that
both savings and investment have been lower on average in the first two decades than in the latter
decades of Bangladesh’s 50 plus years since inception. The correlation coefficient between the
two is 0.96 over the last 53 years. It is a classic case of the failure of inward looking import
substitution policies in improving the trade balance.116 External financing constraints limited the
excess of domestic investment over national savings. Current account deficits could only be
financed with official bilateral and multilateral flows. Solvency requires that current account
deficits eventually be followed by higher national savings or by lower investment. How this
adjustment played out was fatally struck by the so called “out of the textbook” policy response in
2022.

4.2 Disorderly Policies

The policy response undermined buffering the transmission of disruptive global shocks.
Price repression in financial and foreign exchange markets inevitably required rationing foreign
exchange and credit. The rationing occurred under regulatory dominance disrupting production,
investment and trade while building up the stock of external debt. The shifts in exchange rate and
interest rate policies were only the tip of the iceberg of structural policy reversals in trade and
external finance shaping the fundamentals of Bangladesh’s external balance.

An opaque and chaotic exchange rate regime accelerated the reserve drawdown. Exchange
rate regimes in Bangladesh’s history floated with the times until it did not. A fixed exchange rate
was in place from January 1972 to May 2003 followed by a managed floating regime from June
2003 till September 2022. BB regularly intervened in the foreign exchange market. Taka against
US dollar moved from Tk 60/USD in FY03 to 84.81 in FY21. Annual depreciation rate varied
within 4 per cent except in FY14 and FY15 when taka appreciated somewhat against the USD.
Both the nominal effective exchange rate and the real effective exchange moved together in the
same direction during this period.117

116See the White Paper Chapter 12.

117Md. Nur-E-Alom Siddique and Md. Abir Hossain, Analysis of Equilibrium Exchange Rate and Exchange
Rate Misalignment in Bangladesh, Bangladesh Bank, PN 2022-02, April 2022.

White Paper on State of the Bangladesh Economy 57

Figure 4.4: Exchange rate chaos (BDT/US$ Exchange Rates)

BB US$ selling rate

130 Interbank (BB)

120 Remittance rate

Export rate
110 Kerb Market (WB Est.)

100

90

80

Stabilized Floating Multiple Multiple Crawling

Source: Based on BB data (Formal) (de facto) Peg system

BB indulged in “excessive smoothing” leading eventually to abandoning the managed

float.118 The Bangladesh Association of Foreign Exchange Dealers (BAFEDA) and the Association
of Bankers Bangladesh (ABB) were directed to jointly set widely different, but well below market,
buying rate ceilings for exports and remittances. Multiplicity of exchange rates proliferated
(Figure 4.4). BB ramped up telephonic interventions and market policing. BAFEDA-ABB rates
crawled up discontinuously. The difference between the export rate and the remittance rate
narrowed in several discrete steps subsequently.

Interestingly, the IMF was agnostic on whether this constituted multiple currency practice subject
to Fund jurisdiction under Article VIII. It took the Fund a while to wake up to the game in which
BAFEDA—ABB, both private sector associations, were used as escape routes from the Article-VIII
jurisdictions. The IMF was cajoled to believe the multiple exchange rates “resulted from
disorderly FX market conditions”.119 However, BB was selling official reserves at a rate below the
interbank rate, which the Fund could not overlook. They noted and rationalised as follows:

“During the mission, staff learned of a multiple currency practice subject to Fund jurisdiction
under Article VIII that arises as a result of an internal governmental exchange rate used for
(i.e. transactions by BB on behalf of the government) that differs by more than 2 per cent
from the prevailing market exchange rate. The measure is not maintained primarily for BoP
reasons.”
The World Bank was careful not to trespass into Fund territory.120 They noted:

“This approach can be considered unusual, as ABB and BAFEDA have historically played an
advocacy and policy dialogue role as industry associations. The institutional arrangement
for enforcement of the exchange rate regime is also unclear. BAFEDA has indicated that
deviations from this system of rates will be addressed by regulatory authorities.”

118 As pressures on reserves mounted with BB relentlessly defending throughout FY22, the interbank
average jumped from Tk 87.1/$ in May to Tk 95 in August. BB experimented with imposing interbank
market rate, market policing, firing several treasury officials of dealer banks before getting the authorized
dealers to preannounce differentiated rates.
119 IMF Country Report No. 23/66, February 2023. P. 6, para-6.
120 World Bank, Bangladesh Development Update, April 2023.

White Paper on State of the Bangladesh Economy 58

Shortages deepened in the formal system disrupting the economy in all spheres. The other
side of headline hitting rate volatility is volatility in forex trade volume caused by arbitrarily fixed
rates. Figure 4.5 shows how forex liquidity in private banks dried during this period. With
misaligned administered rates and porous but segmented markets, the quantities supplied and
demanded over time at the fixed rate are cleared only by rare accidents. Volume shifts to the
informal in unpredictable ways. The interbank foreign exchange market went into a coma while
a de facto barter system (which came to be known as “matching”) emerged in which the exporters
had to find specific importers to make side deals and importers had to find specific exporters able
to provide the volumes they needed at rates they could afford. Bankers took up the role of match
makers to sustain their foreign trade business.

Figure 4.5: Forex liquidity (net open position) in private banks

US$ Millions
3,000
2,000
1,000
0
-1,000
-2,000
-3,000

Cronyism in forex trades. The choice of the out of the textbook model cannot be explained by
differences in technocratic views on multiple versus unified exchange rate. BB sold a record
$13.58 billion in FY23 and another $12.79 billion in FY24 at rates below the interbank rate. Banks,
especially state-owned ones, were allegedly taking dollar support from BB to pay import bills
owed by the Bangladesh Petroleum Corporation, Bangladesh Agricultural Development
Corporation and Bangladesh Chemical Industries Corporation. This official line was hard to
swallow or refute since information on how much BB was selling to whom were never public.
However, it would be a struggle to get even close to such sums by adding the total imports of
petroleum, fertilizers and chemicals by these three public entities alone in FY23 and FY24. The
regime benefited imports, but forex shortage limited the benefits to the connected importers.
Exports were hurt, but connected exporters made deals on the sides.

The ceilings became inoperative. Given the dollar’s outsized role in Bangladesh’s international
finance and trade, the underpricing and multiplicities of the rates for dollars, opportunities for
bypassing the ceiling through cross-currency trade, regulatory mood swings and corruption
created disorderly conditions in the foreign exchange market (see Annex for more details). Most
emerging markets showed resilience amid global monetary tightening partly because of stronger
fundamentals and largely because of robust fiscal, monetary, and financial policy and
implementation frameworks.121 Bangladesh went the other way. Competition for preferential
regulatory treatment backed by oligarchic market power of business conglomerates drove
foreign exchange deals to personal contact dependent shadow markets. Many banks were trading
US dollars forward to bypass the BAFEDA-ABB rates. BB put a ceiling on the taka-dollar forward
rate by fixing the 90 days forward premium at the end of September 2022, another case of ceilings
breeding ceilings.

Cian Allen and Rudolfs Berns, Emerging Markets Show Resilience Despite Global Monetary Tightening,
121

Google Scholar, July 12, 2024.

White Paper on State of the Bangladesh Economy 59

4.3 Current State of Play on Foreign Exchange Reserves

Depleting reserves forced corrections. Access to IMF programme is hard to turn down when
reserves deplete so fast. It brought the unification of the BB rate with the interbank exchange rate,
adoption of the crawling peg regime, a large (Tk 7 per USD) correction of the peg in May 2024,
the increased width of the peg subsequently in August, and letting the bank treasuries do business
without fear and favour of regulatory “moral suasion”. This has brought some relief to the foreign
exchange market. The gap between the formal and informal exchange rate has narrowed below
the historical 2 per cent norm. Reserves have been stable, albeit at depleted levels, as BB stopped
selling dollars and the interbank market returned to life from coma. But we are not there yet. The
interbank foreign exchange volume is still very thin. The interbank exchange rate has remained
fixed at Tk 120/USD ever since this upper bound came into play.

Banks maintaining net positive foreign exchange balances. The net open position of the
commercial banks has been positive in recent months. They have more assets than liabilities in
foreign currency holdings. Remittance dollars have been flowing high above $2.2 billion per
month since July 2024. There is early evidence of a decline in demand for Bangladesh destined
dollars in the hundi market, possibly reflecting a, perhaps temporary, decline in illicit capital
outflows due to the heightened noise against it in the aftermath of the change in the political
regime. BB has cut the wings of regulatory overreach.

Official reserves have no buffer. Several economies have recently experienced significant
expansions in their balance of payment surpluses, including India, China, and Vietnam. Their
reserve positions in 2024, scaled by the size of nominal GNI in 2023, are order of magnitude
greater than Bangladesh (Table 4.1). The only exception is Ethiopia. Safe to say we have very little
buffer relative to our peers. Buffers help prevent shocks tipping the economy into crisis. Another
large exogenous shock (pandemic, commodity price increases, export orders) can lead to a
balance of payment and debt servicing problem if caught unprepared. Investors and ratings
agencies derive comfort from the adequacy of reserves.

Table 4.1: Reserves compared with selected countries

$ in billions
Countries Gross Reserves, Atlas GNI Res/GNI (%)
China 3316 17634 18.8
India 701 3498 20.0
Thailand 231 503 45.9
Indonesia 150 1336 11.2
Malaysia 102 388 26.4
Philippines 112 485 23.1
Vietnam 93 407 22.9
Ethiopia 3 163 2.1
Nepal 18 41 44.5
Bangladesh 21 455 4.6
Source: Reserves (2024), IMF; GNI 2023 (WB).

Adequacy rules of thumb. Too little reserves subject the economy to risk without insurance. Too
much reserves waste opportunities for better uses of scarce resources. There is no scientific
answer on how little is too little and how much is too much. There are several rules of
thumb. Countries should, at a minimum, have enough to pay for 3 to 6 months of imports of goods
and services. That buffers shortages of essential consumption, raw materials, intermediate
inputs, and capital goods. Reserves should be sufficient to meet over 100 per cent short-term debt
to insure against sudden stops and rollover risk. Last but not least, reserves should be 20 per cent
or more of broad money to support the potential demand for foreign assets from domestic
sources.

White Paper on State of the Bangladesh Economy 60

Rebuilding needed. We don’t have ready access to liquid sources of foreign currency. The IMF
in 2023 assessed that the reserve adequacy range varies between 4.4 and 5.7 months of imports
depending on the assumed cost of reserves. However, given the tightly managed nature of the
exchange rate, Bangladesh arguably requires higher reserve coverage. For instance, the IMF’s
template for assessing reserve adequacy in economies with fixed exchange rate and without
access to international capital markets suggests 12.4 months of import cover for Bangladesh.122
Table 4.2: The safe levels of forex reserves
Metrics $ in million Criteria Optimal NIR
Imports per month 6112 4 24446
Short-term debt 14190 100% 14190
Broad money 181536 20% 36307
Decision rules
Equally weighted average 24731
Max of the metrics 36307
Min of the metrics 14190
Notes: NIR = net international reserves. Imports per month is based on FY24 total imports goods and
nonfactor services..
Short term debt equals public and private debt at end-June 2024.
Broad money at end-June divided by Tk112/$.

The safe level of reserves for Bangladesh range between $14.2 to $ 36.3 billion. The estimates,
presented in Table 4.2, use the rules of thumb illustrated above. The equally weighted average of
the three rules is $24.7 billion. The current net international reserve level of about $15.5 billion
satisfies only the reserves to short term debt criterion. Actual NIR has recently been stable in the
$14.5 to 15.5 billion range, benefiting from clamp down on BB sales and a spike in the value of
reserves held in gold from $1.06 at end-June to $1.23 billion on November 8, 2024.123

4.4 Learning from Policy Mistakes

There are important lessons to learn from the policy shifts and their unintended
consequences. Macro-critical policy errors aggravate systemic risks. Letting the exchange rate
go from the regulatory orbit to the market is easier when informal market premium is low. BB
has to weigh carefully the tradeoff between building reserves or, if the reverse diversion from the
hundi market continues, even letting taka gain some strength back to help inflation reduction.

The volume in the interbank market is abysmally low. The interbank rate has remained
remarkably constant at Tk 120/$ after the 2.5 per cent increase in the mid value of the crawling
peg immediately following the change of BB leadership in August. The wholesale forex market is
still far from vibrancy. Liquidity in foreign exchange market has recently improved enough to
warrant a faster transition from the existing crawling peg to a transparent market based flexible
exchange rate regime. The BB may be missing an opportunity here if it waits too long.

Exchange rate management reforms are part of a broader reform agenda. The broader
agenda is to modernise the monetary policy and its implementation framework. The balance
between moving swiftly and prudently is tricky. The jury is in on multiple administered rates. It
does not work. The question now is not how flexible can exchange rate be. The question is how
fast we can reform the regulatory framework to enable market determination of rates with
transparency and level field competition.

122 IMF, Staff Report for the 2021 Article IV consultation, March 2022. p. 49.
123 Gold prices in international markets increased by about 30 percent during April-November 2024.

White Paper on State of the Bangladesh Economy 61

 Annex
A chaotic detour on exchange rate management

The most powerful indicators of external balance are the behaviour of net foreign exchange
reserves and the nominal exchange rate. An economy can be considered externally balanced by a
layman if either of these two indicators are not in the news other than as part of real time elevator
economics. International trade in goods, services, labour, and assets underpin the movements in
reserves and exchange rates that can be stabilizing or disruptive to the rest of the economy.

A multiple fixed rate regime

Alignment of the exchange with the reserve fundamentals is critical for external balance.124 Two
distinctively different exchange rate regimes have been in place in Bangladesh’s history. A fixed
exchange rate regime was in place from January 1972 to May 2003 and a floating exchange rate
regime since June 2003. BB regularly intervened in the foreign exchange market. The period of
average of Bangladeshi taka against USD increased from Tk 60/USD in FY03 to 84.81 in FY21. The
nominal depreciation rate was highest in FY12 at 11 per cent. Subsequently, depreciation rate
varied within 4 per cent except in FY14 and FY15 when taka appreciated somewhat against the
USD. Both the nominal effective exchange rate and the real effective exchange moved together in
the same direction during this period.125

Excessive rate volatility has been rare in Bangladesh’s history of a managed float. There is hardly
any period in the history of weekly and monthly averages of the interbank exchange rate since
May 2003 (when BB ended fixing exchange rate) that stands out as an “excessively” volatile
period. Market determination of exchange rates weathered political instability in 2006, natural
disasters in 2009, the global financial crisis followed by food and energy price hikes in 2008-09,
political instability again in 2013-15, and the pandemic in 2020. The exchange rate stood its
ground with reserves accumulating from $10.3 billion in FY12 to over $46 billion at the end of
FY21 helped by over a decade of sustained current account surplus until FY17 and growing
financial account surplus from FY18 onwards. The exchange rate appreciated from Tk 79.2/USD
in FY12 to Tk 77.7 in FY15 before depreciating to Tk 84.8 by FY21.126

All hell broke loose with the Russian invasion of Ukraine in February 2022. The US Dollar Index
increased from a low of 96.3 in mid-January 2022 to a 20 year high of 114 in late September 2022.
The dollar appreciated 18%. The dollar strengthened against nearly every other major currency
to levels not seen in decades. The taka-US dollar rate during the same period depreciated 15.2%,
notably below the 18% catch-up rate. In 2020 and 2021 the exchange rate remained flat at around
Tk 84.8. Fearing volatility, BB indulged in “excessive smoothing”.127

124See, among others, Williamson, J. (1994). Estimating equilibrium exchange rates, The Peterson Institute
for International Economics (PIIE), Washington, DC and Jongwanich, J. (2009). Equilibrium real exchange
rate, misalignment, and export performance in developing Asia. Asian Development Bank Economics
Research Paper Series, (151).
125 Md. Nur-E-Alom Siddique and Md. Abir Hossain, Analysis of Equilibrium Exchange Rate and Exchange

Rate Misalignment in Bangladesh, Bangladesh Bank, PN 2022-02, April 2022.

126 Monzur Hossain and Mansur Ahmed note that BB’s de facto managed float system erred on the side of

overvaluation. See Exchange Rate Policy under Floating Regime in Bangladesh: An Assessment and
Strategic Policy Options, January 2009. Alom and Hossain referred above found overvaluation of the real
effective exchange rate peaked in 2019. The misalignment became narrowed to 5 percent in 2020 and 7
percent in 2021.
127 As pressures on reserves mounted with BB relentlessly defending throughout FY22, the interbank

average jumped from Tk 87.1/$ in May to Tk 95 in August. BB experimented with imposing interbank
market rate, market policing, firing several treasury officials of dealer banks before getting the authorized
dealers to preannounce differentiated rates.

White Paper on State of the Bangladesh Economy 62

BB could not maintain a certain exchange rate level or even influence the exchange rate
movements. It decided to abandon the managed float. The Bangladesh Association of Foreign
Exchange Dealers (BAFEDA) and the Association of Bankers Bangladesh (ABB) were directed to
jointly set widely different buying rate ceilings for exports and remittances well below market.
The following extract from a BAFEDA letter addressed to Managing Directors and CEOs of all
authorised dealers in foreign exchange in Bangladesh, has historic significance:128

“We would like to inform you that a joint meeting among the Executive Committee of
Bangladesh Foreign Exchange Dealers' Association (BAFEDA), Board of Governors of
Association of Bankers' Bangladesh (ABB) and the concerned Executives of Bangladesh
Bank (BB) was held on 08.09.2022, which was chaired by the Deputy Governor-l. The
meeting reviewed the present position of major economic indicators relating to foreign
exchange transactions.
It may be mentioned that another meeting was held between the Executive Committee of
BAFEDA and the Board of Governors of ABB on 1L.09.2022, where the current position of the
FX market and the movement of exchange rates were reviewed.
Considering the overall market situation and in order to bring stability to the FX market
with a view to better serve the customers, the meeting hcld on 11.O9.2022 unanimously
decided to implement/apply henceforth the following USD/BDT uniform exchange rates by
all ADs until further revision:
1. All export proceeds and all inward remittances (other than remittances from
exchange houses) irrespective of ticket size will be bought by the banks at a fixed
rate ofTk.99.00 per US dollar.
2. All remittances from exchange houses and other similar entities including
remittances from bank's own exchange houses will be bought by the banks at a rate
not higher than Tk. 108.00 per US dollar. ln other words, banks can offer maximum
Tk. 108.00 per US dollar in casc of such inward remittances. This will apply for
conversion of all other currencies into US dollars as well.
3. ln case of settling import bills and other outward remittances, banks will charge
maximum Tk. 1.00 as 'spread' over the weighted average buying cost of above item
no. 1 & 2 and, il dollars bought from interbank (excluding dollars from central bank).
This weighted average cost will be calculated on 05 (five) days rolling average basis
by each bank based on its actual cost.
4. lt is expected that when all export proceeds and all inward remittances are bought
at Tk. 99.00 per US dollar and dollars from exchange houses are bought at Tk. 108.00
per US dollar, and the selling rate is calculated on the weighted average cost of these
two, an ‘interbank rate ‘will eventually emerge around this weighted average cost
line. Treasury Heads of all banks will report their weighted average cost to BAFEDA
by 10 AM daily. BAFEDA will then calculate the average of all these rates submitted
by the banks and post it on their website. This industry average rate will be the
reference rate for revaluation purposes.
5. lt is understood that the selling rates and interbank rates emerging out of the buying
curve stated above are dynamic in nature (i.e., may change from day to day and bank
to bank). However, the calculation method will be as stated above. Similarly, the
buying rate from exchange houses are also dynamic in nature (i. e., it is expected to
come down from maximum rate of Tk. 108.00 as demand for US dollar falls).”

The subject line said: “Fixation of Uniform USED/BDT Exchange Rates in Foreign Exchange
Dealings.” The operative word is “uniform”. Adding fuel to the fire, the remittance rate was
revised down to Tk 107.5/USD with effect from October 1, 2022.

Bangladesh Foreign Exchange Dealers’ Association, No.: BAFEDA-ABB/EXCHANGE RATE/2022/98,

128

Date: 11.09.2022.

White Paper on State of the Bangladesh Economy 63

BB ramped up interventions as diversion to informal channels flourished. BAFEDA-ABB rates
crawled up and the difference between the export rate and the remittance rate narrowed (Figure
4.2) as shortages emerged in the formal system disrupting the economy in all spheres.

This experience shows rate volatility that always hit headlines is one side of the foreign exchange
coin. The other side is volatility in forex trade volume resulting from fixing the rates arbitrarily.
This other side became painfully vivid more than ever before. Figure 4.3 shows how forex
liquidity in private banks dried during this period. The downsides to rate volatility are contingent
on the quantities supplied and demanded clearing over time at the fixed rate. That does not
happen with misaligned administered rates and segmented markets with porous lines of
formality. When formal market rates are overvalued, quantities shift to the informal, thus
cramping international transactions through the formal channels.

Longer than anticipated global monetary policy tightening, inadequate domestic policy response,
and expectation of further currency depreciation contributed to financial outflows. The policy
rate gap between Bangladesh and the U.S. has declined but the inflation gap with the US has
widened. As Bangladeshi firms reduced foreign borrowing, private external credit inflows
declined sharply. Repayments outpaced new loans. Frequent changes to exchange rate policy
setting and uncertainty surrounding the forex management framework made forex trade volume
jittery.

Getting back to the basics

The institutional weakness revealed in the process of handling the crisis and payment deferrals
eroded confidence leading to difficulties in rolling over short term debt. The administratively
determined “float” was not compatible with the reality of large, ready to fly safety haven seeking
capital. BB dictations encouraged speculative one-sided bets. The expectation that more increases
are on cards found self-fulfillment. The digitised and word-of-mouth informal exchanges are
beyond the regulatory ambit. The ones the regulator can reach—the kerb market—flee when BB
inspectors raid.

Currency markets are vulnerable to speculation, herd behaviour, sticky dollar prices (due to
dollar invoicing) and irrational mood swings. But they are not easy to manipulate. Traders can of
course change the value of a currency to profit from inside information. However, without
regulatory connections, it is hard for currency manipulators to survive in markets with near
instantaneous contestability such as the forex market. Market manipulation of the kind reported
in rice, wheat, onion, edible oil, sugar for instance have no parallels in currency markets.

The price levels in the economy typically reflect the substantial and sustained spread between
the official and parallel rates. Allowing market participants in such circumstances to use a market
clearing rate benefits economic activity without necessarily leading to more inflation when fiscal
and monetary policies are supportive.129 Policymakers must adjust early and quickly, especially
in smaller countries that “aren’t anchors of the international system".130

The authorities took a few measures to arrest the decline in NIR. The most notable is greater
exchange rate flexibility and a credible signal after the change in August that BB reserves will not
be used to support the market, except for some emergency requirements to meet critical import
needs. On May 8, 2024, BB implemented a crawling peg with a narrow Tk 1 per USD plus and
minus band regime together with an upfront devaluation of 6.4 per cent (from 110 to 117
Tk/USD). BB subsequently adjusted the band to Tk 3 per USD plus or minus. The new
arrangement brought the exchange rate a further step closer to market-based flexibility. Over

129 IMF, Recognizing Reality, 2021.

130 Stanley Fischer, a former IMF Chief Economist and the US Federal Reserve Vice Chairman.

White Paper on State of the Bangladesh Economy 64

time, the parameters of the new regime will be periodically reviewed to ensure consistency of the
rate of crawl with market conditions and the monetary policy settings.

Although belated, the unification of the exchange rate and adoption of the interim crawling peg
regime needs to move quickly to a fully flexible market-based exchange system. The interbank
foreign market is still not functioning like it used to before BB embarked on an out of the box
model of exchange rate management. The volume is very thin (rarely above $100 million daily)
and the interbank exchange rate has not moved a decimal from the BB announced upper bound
of Tk 120/USD rate since the Treasury officials of Authorised Dealer banks agreed not to pay or
charge any different and the BB raised the upper bound of the peg to this level. There are
important lessons to draw from this experience so that the authorities do not repeat such macro-
critical policy errors going forward.

White Paper on State of the Bangladesh Economy 65

Chapter V. The Growing Burden of Public Debt*

Public debt intensity has increased in Bangladesh. The debt to GDP ratio looks distant from
growth reducing thresholds and compared with peers.131 The trends in debt intensity appear
much less comfortable, especially on metrics not contaminated by data fogs. Debt distress can
arise even at “low” levels when debt servicing competes for domestic and foreign currency
liquidity in a shortage situation. Such an experience is still not in the rear view in Bangladesh. A
spike in already increasing debt servicing burden is imminent.

This chapter looks at the level and composition of Bangladesh’s external and public debt. It
identifies the factors providing comfort on the debt outlook. The comfort is a prisoner of the
metric. Change that lens, the comfort looks illusive. The chapter makes a case for using metrics
capturing not just the cost and scale of debt but also the liquidity in taka and dollars needed to
keep the debt wheel rolling without friction. Inattention in policy and practice to value for money
in decisions to borrow from domestic and external sources has been the Achilles heel of public
debt management in Bangladesh in the last decade and a half. The chapter lists the sources of
discomforts and concludes with a plea for better prudence in government borrowing.

5.1 The Level and Composition of Debt

Bangladesh government is the largest single borrower in the domestic debt market. It has
privileged access to borrowing from external sources, especially the official creditors. As on June
30, 2024, Bangladesh’s financial system had one taka of public domestic debt for every 4.5 taka
of private domestic debt. The opposite is the case in external indebtedness. For every dollar of
private external debt, the government counterpart was 4 dollars.

Increases in public indebtedness driven by domestic borrowing. By end-June 2024, total

debt is estimated to have reached 41.3% of GDP, from 35.6 per cent just two years ago. The bulk
of the US$166.7 billion equivalent public and publicly guaranteed (PPG) debt at the end of FY23
was domestic debt denominated in local currency. It accounted for 55.6 per cent of PPG debt
stock. Almost 50 per cent of the domestic debt is treasury bonds and bills. Most of these are held
by banks. The Bangladesh Bank (BB) holds a little less than one fifth and the rest are held by
nonbank financial institutions. National Saving Certificates (NSCs) make up 20.3 per cent of total
domestic debt. Interests and amortisations of domestic debt amounted to US$ 19.4 billion
equivalent in FY23 (11.7 per cent of GDP).132

External debt is catching up. External debt was 44.4 per cent of PPG debt stock and 17.7 per
cent of GDP in FY23, compared with 15.1 per cent in FY21. External PPG debt is predominantly
owed by the central government to multilateral and bilateral lenders, accounting for 52 per cent
and 34 per cent respectively at the end of FY23. The rest are short-term, sovereign bonds held by
non-resident Bangladeshis, and guaranteed SOE debt. Private sector external debt was 5 per cent
of GDP in FY23, declining from FY22. It declined another 7.5 per cent by end-June 2024 relative
to the same point in time in 2023. Total interest and amortisations related to external debt in
FY23 amounted US$ 3.9 billion (0.9 per cent of GDP).

*The chapter has been prepared by Dr Zahid Hussain, Former Lead Economist, World Bank Bangladesh.
131 A large majority of studies on the debt-growth relationship find a threshold somewhere between 75
and 100 percent of GDP. See Veronique de Rugy and Jack Salmon, Debt and Growth: A Decade of Studies,
Google Scholar.
132 IMF, Country Report, June 2024.

White Paper on State of the Bangladesh Economy 66

5.2 The Comfort Narrative

There is an overall sense of comfort among policymakers and multilateral institutions on

the intensity of public debt. This is rooted in two sets of facts. First, including guarantees, PPG
debt is lower than in India, China, Thailand, and Vietnam, recent increases notwithstanding
(Figures 5.1 and 5.2). Second, as before, the June 2024 joint IMF-World Bank Debt Sustainability
Analysis (DSA) maintained their “low risk of external and public debt distress” assessment. They
discount the “short duration breach of low magnitude” in the present value of debt-to-export
ratio. Overall public debt-to-GDP ratio in these projections move to a declining path over the
medium term. Note that such declines projected in previous iterations have not materialised of
late.

Figure 5.1: General Government Debt in Figure 5.2: General Government Debt 2022
Bangladesh Percentage of GDP
50% Percentage of GDP 120

40%
80
30%

20% 40
10%
0
0%

Total Debt External Debt Total Debt External Debt

Source: World Bank, Public Finance Review 2024

Changes in debt intensity. Changes in debt are decomposed into primary budget balance,
representing fiscal policy, and a part called “automatic debt dynamics” accounting for the effect
of GDP growth, interest rates and exchange rates on the debt to GDP ratio. The latter are called
“automatic” because of their market driven nature. The dynamics are favourable when interest
rates are low, growth is high and domestic currency is strong. They are unfavourable otherwise.
The primary budget balance is the difference between government revenue and government
expenditure before interest.133 Primary deficits add to debt and primary surplus decrease it.

Table 5.1: The analytics of the comfort view

Per cent of GDP
2021 2022 2023 2024 (p)
Public debt 35.6 37.9 39.8 41.3
ow external debt 15.1 15.4 17.7 18.9
Changes in debt 1.1 2.2 1.9 1.5
Primary deficit 1.6 2.1 2.6 2.8
Automatic debt dynamics -0.8 -0.5 0 -2.4
Real interest rate 1.6 0.3 0.3 -0.4
Real GDP growth -2.2 -2.4 -2.2 -2.0
Real exchange rate depreciation -0.2 1.6 1.9 ..
Residual (primary deficit + auto - change in debt) -0.4 -0.6 0.7 -1.2
Source: IMF Report, June 2024; p=projected.

133The sign (+/-) and size (scaled usually by nominal GDP) together define the fiscal policy stance and the
impact on debt bequeathed to the future. Primary budget deficit, especially when it increases over time,
tagged as expansionary fiscal policy, adds to indebtedness. Since debt cannot grow forever, even for
governments, primary budget deficits in the present necessarily require primary budget surpluses in
future. This means debt ratios, however measured, have to find some stable level to be regarded as
sustainable.

White Paper on State of the Bangladesh Economy 67

Negative interest growth differentials dampened debt increases. Debt still increased due to
growing primary deficits (Table 5.1). A low deficit together with strong officially measured
growth resulted in public debt declining steadily from 37 per cent of GDP in FY08 to 31 per cent
at the end of FY18, driven entirely by favourable debt dynamics. Debt has been uphill ever since
but still well below the debt carrying capacity.

IMF estimates overall debt carrying capacity is 55 per cent of GDP and external debt 40 per
cent.134 This is based on a Composite Index (CI) – a weighted average of real GDP growth,
remittances, international reserves, world growth and the World Bank score on the Country
Policy and Institutional Assessment. April 2024 World Economic Outlook vintage uses 10 year
averages of the variables with 5 years of historical data and five years of projections. Bangladesh
is rated medium on the CI.

The low risk assessment of debt distress hinges on baseline optimism. IMF-WB analysis is
founded on a baseline with 7 per cent long term average economic growth, primary budget
deficits averaging 2.6 per cent of GDP, 5-6 per cent inflation and stable exchange rates. Such a
happy conjunction of macroeconomic conditions is increasingly looking farfetched going into
2025. Growth projections for the current year have already been drastically revised down to
between 4 to 5 per cent. The timing of projected recovery is highly uncertain. All other variables
have moved in directions incongruent with the baseline. These include contingent liability,
financial market, natural disaster and export shock. The IMF-WB debt sustainability analyses are
beginning to gather a reputation of often underestimating economic downturns, leading to
delayed debt relief and hurriedly designed increases in austerity measures.135 In all fairness, their
message is not don’t worry, be happy. But it is lost amidst their deeply baked optimism.

5.3 The Devil’s Advocates

The pillars of comfort are fragile. Historically, negative interest growth differentials have
proven inadequate for preventing countries from falling into debt distress. Drawing from a
sample of 150 emerging and developing economies going back to the 1970s, an IMF study
revealed that in the face of persistent primary deficits, debt service tends to rise abruptly, and a
fiscal crisis ensues. A large part of the debt build-up around crises stems from valuation effects
associated with external debt and the materialisation of contingent liabilities. Low interest-
growth differentials “cannot fully offset the deleterious effects of large fiscal deficits, forex
exposures, or hidden debts.”136 Bangladesh has these features wrapped all around its fiscal policy
playbook.

The unknown exceeds the known. The standard debt accumulation equation, which provides
the framework for the calculations reported in Table-1, does not hold in the data. GDP growth,
interest rate, and real exchange rate are just the ones that meet the eye. They account for only 0.4
of the 1.5 percentage point increase in the debt/GDP ratio in FY24. The unexplained residual has
increased in absolute value. Large residuals frequently arise because of financial operations
below the line, exchange rate changes and other valuation effects.137 The increase in residual
over time could also be signalling nontransparency in debt reporting. This unaccounted part of
the increase, at 73 per cent, is too large to be satisfactorily explained by contingent liabilities and
balance sheet effects of exchange rate and interest rate changes.

134 IMF, Debt Sustainability Analysis in Country Report, June 2024.

135 Kristina Rehbein, Understanding IMF Debt Sustainability Analysis, A Toolkit for CSOs to critically
engage with the IMF, October 2023.
136 Marialuz Moreno Badia, Juliana Gamboa Arbelaez, and Yuan Xiang, Debt Dynamics in Emerging and

Developing Economies: Is R-G a Red Herring?, IMF Working Paper Fiscal Affairs Department, 2021.
137 Nikhil Patel and Adrian Peralta-Alva, Public Debt Dynamics and the Impact of Fiscal Policy, IMF

Working Paper, Research Department, 2024.

White Paper on State of the Bangladesh Economy 68

GDP based frame could be missing the elephant. It is not very assuring that a decline of long-
term growth to 6.5 per cent does not change external and overall debt risk ratings. Fogs in the
integrity of GDP data suggest maybe even 6.5 per cent is no more than an upside risk and certainly
not a downside risk as tagged in the DSA. Bangladesh may never have exceeded 5 to 5.5 per cent
annual growth except in the volatile decade of the 70s. The reported rise in the extent of
indebtedness could be understated and the favourability of debt dynamics overstated because of
significantly rising upward bias in GDP growth and perhaps even the level of nominal GDP
estimates. Moreover, there is a limit to the extent to which favourable debt dynamics can reduce
indebtedness in the face of large primary deficits or below the line adjustments. The latter often
make a big difference.

External debt carrying capacity is weaker than perceived. Key factors weighing on
Bangladesh’s debt vulnerability are its growing exposure to foreign currency-denominated non-
concessional debt for mega projects, elevated refinancing risks, and low fiscal and external
buffers. Deploying a modified version of the standard debt sustainability framework, a CPD study
concluded that Bangladesh’s external debt carrying capacity, scaled by exports plus remittances,
has indeed weakened in recent years.138 They estimate the optimal debt to export plus remittance
ratio at 124 per cent. Figure 5.3 shows Bangladesh debt exceeded this threshold in FY22. Given
doubts about the veracity of data on real GDP growth and nominal GDP levels, the external debt
to foreign exchange earnings metric has better credibility. It has also gained more currency as
Bangladesh struggled to manage the recent crunch in foreign exchange liquidity.

Figure 5.3: External debt to Foreign exchange earnings (%)

160.0
146.2
136.4
140.0
118.7 118.1 121.1
120.0
100.4 99.1
100.0 90.9

80.0

60.0

40.0

20.0

0.0
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24
Note: Foreign exchange earnings include exports of goods and services plus remittances. External debt
includes public and private debt.
Source: Based on Bangladesh Bank data.

The dynamics of this metric are far less comfortable. The framework for breaking down the
dynamics of the external debt to foreign exchange earnings ratio is analogous to the equation of
motion of the debt to GDP ratio. The difference is obviously in the denominator of the external
debt ratio and not so obviously in the primary deficit measure. In this case, the latter is the current
account balance before interest (primary current account balance) and not primary budget deficit
of the government since we are looking at total external debt, not just the government external
debt.

138Mustafizur Rahman, Mahtab Al Rahman and Anika Tasnim Arpita, Bangladesh’s External Public
Borrowing and Debt Servicing Capacity, Centre for Policy Dialogue, Dhaka, July 2024.

White Paper on State of the Bangladesh Economy 69

 Table 5.2: Decomposition of changes in external debt/forex earnings ratio
Percentage points FY18 FY19 FY20 FY21 FY22 FY23 FY24
Change in external debt 9.5 -1.2 19.6 -0.6 3.0 15.2 9.8
Interest-growth factor -8.8 -10.6 13.0 -18.3 -13.9 15.8 6.4
Primary CAD/earnings* 16.1 6.0 6.5 4.5 18.6 10.0 3.2
E & O/Earnings -1.1 -1.1 -0.5 -1.0 -7.3 -5.5 -4.1
Capital grants/Earnings 0.6 0.4 0.4 0.7 0.8 0.7 0.8
Predicted change 7.8 -3.8 19.6 -13.5 11.2 30.6 12.9
Residual (actual-predicted) 1.7 2.6 0.0 12.9 -8.2 -15.4 -3.1
*CAD= external current account deficit

The dynamics of the debt ratio now depend on the effective interest rate on external debt, the
rate of growth of foreign exchange earnings, the primary current account balance to foreign
exchange earnings ratio and a few other below the line factors such as capital grants, errors &
omissions and so on. The dynamics have recently become unfavourable, accounting for a very
large part of the increase in the external debt ratio in FY23-24.

Earnings growth has been highly variable while the effective interest rate has multiplied.
Decreasing concessional loans, rise in the share of commercial sources from multilaterals, growth
of relatively expensive bilateral loans, and sharp increases in global interest rates increased the
effective interest rate on external debt (Figure 5.4). Shrinking primary current account deficit in
FY23 and FY24 slowed the extent of increase in the debt ratio in FY24. Considering the
vulnerability of the primary current account balance to global demand and price shocks, this
cannot be counted on. Large residuals during FY21-23 indicate the need for digging deeper into
the effects of exchange rate changes and other adjustments in the value of debt not accounted for
in the balance of payments.

Domestic debt is no less problematic: Indicators of domestic debt sustainability such as debt
to government revenue ratios have been rising and variable.139 Domestic debt relative to
government revenue increased from 212 per cent in FY19 to 258 per cent in FY23, the last year
on which comparable actual data is available. The concentration of the investor base, dominated
by commercial banks and BB, crowd out lending to the private sector. The fundamentals have
moved from strength to weakness. Revenue growth is weak, interest rates higher, and budget
deficits have crawled up. The growing share of pension payments vis-à-vis budgetary funding has
increased the complexity of domestic debt management.140

The cost of domestic debt Is rising (Figure 5.4). The government debt yield curve shifted by about
400 bps on the short term bills and 250 bps on the long-term bonds in FY23-24. BB termination
of devolving on the primary government securities auctions since August 2023 triggered a
significant interest rate increase of the marketable instruments. Interest payments on domestic
debt relative to revenues increased from 17.6 per cent in FY18 to 22.5 per cent FY23, thus
shrinking fiscal space. It may shrink even more as tighter monetary policy necessitated by high
inflation is increasing interest rates on treasury bills and bonds.

139 This indicator is preferable over the debt to GDP ratio because it captures the fiscal capacity to
accumulate debt.
140 Rigorous and updated functional reviews of the government expenditures are not available. Pension

payments to retired civil servants has recently been one of the fastest growing items in the national
budget. There was almost a ninefold increase since FY07.

White Paper on State of the Bangladesh Economy 70

Figure 5.4: Effective interest rates
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
FY19 FY20 FY21 FY22 FY23 FY24

Effective interest rate, foreign (%) Effective interest rate, domestic (%)

Debt revenues often eluded. Increasing tax revenues or rolling over existing debt are typically
used to manage the debt servicing burden. A growing literature has emerged on a third method
to collect some new revenue every time new public debt is issued. This is known as debt
revenue.141 Creditors usually give the government a discount, charging less on the public debt
than the market rate. This discount times the amount of debt is the debt revenue. The discount
allows the government to collect lower future taxes to repay debt. Concessional external finance
has been a significant source of such revenue for Bangladesh.

Not so, particularly in recent times, in case of domestic debt. There is debt revenue as long as
there is a discount i. e. the effective rate is less than the market rate. The closest to the market
rate we can observe is the rate on advances charged by the commercial banks. As Table 5.3 shows,
the discount was negative during FY20-23, a period when retail bank lending rates were capped
at 9%. There was no such cap on treasury bills, bonds, and national savings certificates. The
effective rate on government’s domestic debt exceeded bank lending rate, making it extremely
attractive for banks to invest in risk free government securities with higher returns—a
combination rare in financial history. The government incurred “debt expenditures” that reached
Tk 13,642 crores in FY23. The future taxpayers would have been better off if the government took
advance from the banks instead of selling to them bills and bonds. With the removal of the 9%
cap in FY24, the debt revenue became positive in FY24.

Table 5.3: Illustrative debt revenue calculations

2019 2020 2021 2022 2023 2024
Effective interest rate on domestic debt (%) 8.4 8.4 9.2 8.6 8.8 9.1
Bank lending rate (%) 9.6 8.0 7.3 7.1 7.3 11.5
Debt revenue (%) 1.2 -0.5 -1.8 -1.5 -1.4 2.4
Debt revenue flows, Tk in crores 6503 -2902 -13254 -13059 -13642 23712
Source: Author’s calculation based on BB and Ministry of Finance data.

Amortisation payments on public external debt are projected to expand in the near term.
Early warnings were flagged by many analysts.142 Grace periods of several big loans have ended

141 Ricardo Reis, Debt Revenue and the Sustainability of Public Debt, Journal of Economic Perspectives—
Volume 36, Number 4—Fall 2022—Pages 103–124.
142 Sadiq Ahmed, Bangladesh external debt situation and vulnerabilities, Policy Insights, Policy Research

Institute, September 25, 2022.

White Paper on State of the Bangladesh Economy 71

and many more will end in the near future. Maturity of new loans, including grace periods, has
become shorter. A majority of externally funded infrastructure projects that generate income in
local currency saw the materialisation of exchange rate risk in the 2020s.143

An examination of active loans to assess the increase in amortisation payments shows sharp
increases are imminent (Figure 5.5).144 These include repayments for 213 loans as at end-June
2023, including the Rooppur Nuclear Power Plant, the Padma Bridge Rail Link, the Karnaphuli
Tunnel, the Expansion and Strengthening of the Power System Network, the Dhaka Mass Transit
projects, the disbursed amount of the Indian Line of Credit and several Asian Development Bank,
Asian Infrastructure Investment Bank and World Bank credits.

Figure 5.5: Projected gross increase in public external debt amortisation payments
($ in millions)
2500.0

2093.2
2000.0 1900.8

1635.4

1500.0

1000.0
796.2

500.0

0.0
2025 2026 2027 2028

Source: Based on ERD data.

The additions to annual amortisation payments may triple by 2028. These are fluid estimates
subject to changes in parameters such as the exchange rate, cancellations, restructurings or even
rescheduling. But the magnitude and direction of change in amortisation payments is robust to
realistically conceivable changes in these parameters. The debt servicing stress is racing
upwards. Revenue and foreign currency cashflow constraints can make modest debt levels needle
severe pain. The Government has projected amortisation at $2.6 billion in FY25, rising from $2.47
billion in FY24 and $1.74 billion in FY23. The projections are 2.73 billion in FY26, reaching $3.2
billion by FY27.145 Considering these include the legacies and the new additions, the levels
projected look rather low, compared to estimates of gross additions presented in Figure 5.5.146
There is agreement on a spike in FY27 in both projections.

Low value from borrowed money is typical. The value for money assumption underlying the
assessment by the WB and the IMF does not hold. To the extent the infrastructure related debt

143Mustafizur Rahman, Bangladesh’s external debt management: Some emerging concern, Global
Bangladesh, July 6, 2024.
144 The calculations underlying Figure 5 are based on data on active loans in Economic Relation Division,

Flow of External Resources into Bangladesh (as of 30 June 2023, 10 December 2023.
145 Finance Division, Medium-term Macroeconomic Policy Statement 2024-25 to 2026-27, June 6, 2024.
146 The difference could be due to a possible decline in legacy payments, not accounted for in the gross

estimates, which offset part of the gross additions. Externally funded projects which started repaying 30 or
so years ago are approaching book closures. Whether they are large enough to explain slower than the rise
expected from estimates of gross additions is an open question.

White Paper on State of the Bangladesh Economy 72

increases served as a vehicle for siphoning money from the public exchequer, as for instance
apparent from an increasingly expensive energy mix and massive cost overruns in almost all
development projects, debt is passed on to the future generation without creating assets to
service the debt. Debt is a double-edged sword. It can be beneficial or disastrous depending on
how it is used.147

Signals of distress blinking already. Fiscal management in recent years has struggled to stem
the accumulation of arrears. Increased demands from independent power producers and
fertilizer suppliers have resulted in domestic arrears of about 1 per cent of GDP.148 They were
caused by liquidity pressures resulting from revenue and external finance shortfalls. Desperate
measures such as the issuance of special bonds to commercial banks at below-market interest
rates to pay these off only kicked the can down the road. The government is forced to turn to the
multilaterals and bilateral for budget support to clear the arrears. Shocks to macroeconomic
variables and calls on contingent liabilities are materializing. Outflows from civil servants’
pension scheme, the General Provident Fund, are growing.

Risks derived from the government’s deficient institutional capacity have taken a heavy toll on
fiscal aggregates, as evident from a plethora of scam stories on mega projects. Payment stress
from external public debt has depleted foreign exchange reserves. Monetary financing of
domestic borrowing has fueled inflation. Fiscal aggregates are particularly sensitive to shocks to
commodity prices and exchange rates.149The currency and interest rate composition of debt, the
maturity structure of debt, and the availability of assets to pay debts have all moved in the wrong
directions in recent years.

Liquidity problems can arise independently of a solvency problem. A solvent Bangladesh

government was not able to pay the bills on time in recent years. A self-fulfilling “run” on a
country’s liquidity occurs when creditors lose confidence and undertake transactions that lead to
pressures on the international reserves of the economy. A sharp drop in foreign exchange
earnings, or an increase in interest rates, or import prices can trigger the loss of confidence.

5.4 Prudent Borrowing

Government debt links successive governments. Preferences over fiscal policy in the past have
produced the current level of debt which will influence the fiscal choices of the interim
government as well as the governments to come. Fiscal preferences in turn are deeply
intertwined with the core of political conflict involving individuals, regions, and generations.
Politicians in charge of the government have used the government’s borrowing power recklessly
for their own benefits in the past. They tended not only to take whatever foreign currency loans
were on offer but also to incur even larger implicit obligations via unfunded, off-balance sheet
liabilities. Our most living nightmares of such borrowing are in, but not limited to, energy,
transport and banking. Both external and domestic borrowings add to macro vulnerabilities
when they do not come with value for money.

Debt servicing record cannot be taken for granted. Revenue mobilisation has faltered, foreign
exchange reserves are low, and debt service payments are rising. One good news currently is the
likely easing of monetary policies by systematically important central banks in the world. The
Secured Overnight Financing Rate (SOFR), which constitutes the base in many of our existing
multilaterals and bilateral loans, declined nearly 50 basis points as the US central bank reduced
the policy rate in mid-September 2024. Such developments will help contain the rise in the
interest payment burden. Bangladesh’s credit ratings have recently sloped downwards. Fitch

This is analysed in much greater detail and depth in the chapter on mega projects.
147

148 IMF, Second Review, Country Report, June 2024.

149 Leandro Medina, Assessing Fiscal Risks in Bangladesh, IMF Working Paper, May 19, 2015.

White Paper on State of the Bangladesh Economy 73

downgraded Bangladesh’s default rating in May 2024 because of sustained weakening of external
buffers, leaving the country more vulnerable to external shocks.150 Earlier in July, S&P Global
Ratings downgraded Bangladesh's long-term foreign and local currency sovereign credit ratings
citing persistent pressure on Bangladesh’s external metrics.151

Dealing with sovereign debt problems preemptively is better than waiting until those
problems fester. Managing the increase in amortisation payments warrants exploring
renegotiations with lenders such as Japan, China, Russia and India. Bangladesh was not eligible
for debt waiving Highly Indebted Poor Country initiative in 2003 and opted not to seek
suspension of debt repayments under the G20 Debt Service Suspension Initiative in 2020. It does
not carry the stigma of incurring debt distress in the past. Transformative debt management
reforms will be needed to make a credible case for renegotiations supported by the global lenders
such as the IMF and the World Bank. Renegotiations only buy time to reform fiscal institutions
and practices responsible for the negation of comfort.

Fitch Ratings, Fitch Downgrades Bangladesh to 'B+'; Outlook Stable, May 27, 2024.
150

S&P Global, Bangladesh Long-Term Ratings Lowered To 'B+' On Elevated External Vulnerabilities,
151

Outlook Stable, July 30, 2024.

White Paper on State of the Bangladesh Economy 74

 B. STRUCTURAL

White Paper on State of the Bangladesh Economy 75

Chapter VI. The Illusive Goal of Domestic Revenue Mobilisation*

6.1 Introduction

One of the most significant challenges faced by Bangladesh is the inability to generate sufficient
domestic resources to meet the financing needs for growth and poverty alleviation. The resultant
shortfall has forced Bangladesh to rely on borrowing from internal and external sources to fund
development projects and social programmes. Yet, there remains a clear opportunity to manage
domestic resource mobilisation more innovatively to enhance its impact.

Historically, Bangladesh has experienced persistently low domestic revenue generation.

Currently, the revenue-to-GDP ratio hovers around 8 per cent, a figure significantly below the
potential of a country that has enjoyed sustained GDP growth since 2000. Despite impressive
economic progress, revenue generation has not kept pace with income growth. Furthermore, tax
revenue as a percentage of GDP has seen a downward trend in recent years, with direct taxes
constituting just one-third of the total revenue. This is markedly lower compared to peer nations
and the average of lower-middle-income countries.

The reliance on indirect taxation has several disadvantages over direct taxation. Firstly, it
imposes a higher burden to generate the same amount of revenue, minimising allocative
inefficiency. Secondly, indirect taxes contribute to worsening income distribution, increasing
income inequality. Finally, efforts to enhance revenue through direct taxation have the added
benefit of shrinking the informal economy, which in turn supports the growth of indirect tax
revenues.

This chapter of the white paper provides a critical analysis of the current state of revenue
generation, the challenges that hinder progress, and potential avenues for reform and
improvement. The methodology of this white paper on domestic resource mobilisation in
Bangladesh involved a comprehensive review of secondary data from key national sources,
including the National Board of Revenue (NBR), the Ministry of Finance, and the Bangladesh
Bureau of Statistics (BBS). Consultations were held with various stakeholders, such as
representatives from the NBR, Finance Division, local government bodies, and private sector
associations. The findings were synthesised to develop and finalise recommendations for
enhancing revenue mobilisation in the country.

6.2 Six Stylised Facts of Domestic Resource Mobilisation

Persistent Low Tax-to-GDP Ratio

Bangladesh has one of the lowest levels of revenue generation in the entire Asia and Pacific region
(Figure 6.1). Bangladesh, with a tax-to-GDP ratio of 7.5%, is positioned near the bottom, just above
Sri Lanka (7.4%). In contrast, developed economies like Japan (34.1%), OECD countries (34%),
and New Zealand (33.8%) lead with the highest ratios. Many Asia-Pacific countries, including
Samoa (29.5%) and Korea (32%), significantly outpace Bangladesh. The data underscores
Bangladesh’s low domestic resource mobilisation compared to regional and global peers.

*The chapter has been prepared by Dr Mohammad Abu Eusuf, Professor, Department of Development
Studies and Director, Centre on Budget and Policy, University of Dhaka; and Executive Director, Research
and Policy Integration for Development (RAPID).

White Paper on State of the Bangladesh Economy 76

Figure 6.1: Tax-to-GDP ratio of Bangladesh compared to other Asian and Pacific economies
and regional averages, 2022

Source: OECD report on revenue statistics in Asia and the Pacific 2024. 152

Bangladesh's tax-to-GDP ratio has remained significantly lower than the Asia-Pacific
average during 2007-2022. Starting at 6.3% in 2007, it gradually increased but has remained
consistently below 8%. By 2022, it reached 7.5%, reflecting only a slight improvement over the
years. In contrast, the Asia-Pacific region's tax revenue range is much higher, hovering around
30-40%, demonstrating a considerable gap in domestic resource mobilisation between
Bangladesh and its regional counterparts.

This underscores Bangladesh's chronic challenge in domestic resource mobilisation, aligning

with the global understanding that "taxation is the price we pay for a civilised society."153 For
sustainable development, this low tax-to-GDP ratio signals a need for reforms to increase revenue
collection, especially from direct sources to reduce inequality and reliance on external financing.

Greater Contribution of Indirect Tax to Revenues

Bangladesh's tax revenue structure is dominated by "value added taxes," making up 40%,
which is higher than most regions. Figure 6.2 compares the composition of tax revenue in
Bangladesh with several regions, including Asia-Pacific, Africa, Latin America and the Caribbean
(LAC), and the OECD. Corporate income tax accounts for 20% in Bangladesh, similar to the Asia-
Pacific and Africa averages, but lower than the OECD. Personal income tax in Bangladesh stands
at 13%, which is below the OECD average of 24%. Notably, Bangladesh has no significant social
security contributions compared to other regions, particularly the OECD (26%) and LAC (17%).
This shows a tax system heavily reliant on indirect taxes, with less contribution from personal
taxes compared to more developed economies.

152 https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/global-tax-
revenues/revenue-statistics-asia-and-pacific-bangladesh.pdf
153 https://quoteinvestigator.com/2012/04/13/taxes-civilize/

White Paper on State of the Bangladesh Economy 77

Figure 6.2: Tax structure of Bangladesh compared to the regional averages

Source: OECD report on revenue statistics in Asia and the Pacific 2024. 154

The underutilised capacity to collect more direct taxes also affected the country’s ability to tackle
inequality. Bangladesh has one of the lowest direct tax-GDP ratio (Figure 6.3). Cross-country
evidence suggests increasing direct tax can help address inequality (Figure 6.4). Bangladesh has
so far performed very poorly in addressing inequality through direct taxation (Razzaque et al,
2023).

Figure 6.3: Direct tax as per cent of GDP and per capita GDP
20
Direct tax % of GDP (avg of 2015-19)

18 DNK
16 AUS
14 UK
12
USA
10 BTN PHL MAL
IND VNM THA KOR
8 SGP
IDN
6 CHN
4 CAM
2
0
MMR BGD SRL

6 7 8 9 10 11 12
Log of GDP per capita, 2020 (current US$)

154https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/global-tax-
revenues/revenue-statistics-asia-and-pacific-bangladesh.pdf

White Paper on State of the Bangladesh Economy 78

Figure 6.4: Cross country comparison of direct tax and inequality

55
Direct tax and inequality
Gini coefficient

50 BGD

45 PHL
MAL USA
SRL CHN
40 IDN
BTN UK
35
THA
VNM
KOR
30

25 DNK

20
0 2 4 6 8 10 12 14 16 18 20
Direct tax (% of GDP)
Source: Razzaque et. al (2023).155

Low Tax Net

Bangladesh's tax net, which refers to the total number of individuals or entities eligible to
pay taxes, remains very low. According to data from the National Board of Revenue (NBR),
as of June 2024, there were 1.04 crore Taxpayer Identification Numbers (TINs), yet only
43 lakh tax returns were filed—an increase of 22% compared to the previous year (Figure
6.5).156 In other words, nearly 59% of registered individuals did not file their tax returns for the
2023-24 fiscal year. NBR data also reveals that 2 lakh TIN holders have passed away, and 3 lakh
individuals acquired TINs for migration purposes.

While the number of registered taxpayers continues to rise, the submission of tax returns is failing
to keep pace with the country's economic growth. As a result, the collection of taxes necessary for
public expenditure falls short of its potential.

Many firms registered as companies have become inactive. The NBR identified approximately
1.37 lakh inactive companies listed under the Registrar of Joint Stock Companies and Firms, with
many people obtaining TINs to secure trade licenses, only for those firms to later become
dormant.

155 https://www.theigc.org/sites/default/files/2023-
10/Razzaque%20et%20al%20Working%20paper%20January%202023.pdf
156 59% of TIN Holders in Bangladesh Don't File Tax Returns | Nearly two-thirds of TIN-holders don’t

submit tax returns (thedailystar.net)

White Paper on State of the Bangladesh Economy 79

Figure 6.5: Number of TIN and return filing in Bangladesh (in lakh)

104.35

88.4
81.2

62.22
50.57
41.77 43.01
35.5 35.29

24.3 24.3
19.18 21.14
18.03

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

TIN Return Filling

Source: National Board of Revenue as reported in The Daily Star 157

High Direct Tax Expenditure, and VAT Gap

Direct tax expenditure has seen a some decline in recent years, but it has largely been
shaped by political and business influence, often without any evidence-based policy
analyses. 'Direct Tax Expenditure' refers to tax subsidies such as rebates, exemptions, reduced
tax rates, and the exclusion of certain income from the total taxable income. This means that if
these subsidies were instead collected as taxes, the overall tax revenue would rise significantly.

According to the budget speech for FY2024-25, the direct tax expenditure for the fiscal year 2021-
22 is estimated at Tk 1,15,616 crore, with Tk 71,954 crore attributed to companies and Tk 43,662
crore to individuals. This expenditure accounts for 2.91% of the total GDP for FY2021-22,
compared to 3.56% in the previous fiscal year. Here the arrangement may be a bit nuanced. All
countries have some expenditure. The problem in Bangladesh is two-fold. Often times they are in
place without time-bound limits, and there is no attempt at estimating the benefits to the sector
and whether such incentives have generated additional revenue for the government down the
line thanks to the incentives.

According to an analysis by the World Bank (2024a), Bangladesh suffers from a significant VAT
gap, which is the difference between the potential VAT revenue and the actual VAT revenue
collected. In FY2019, the VAT gap was estimated at Tk 2 trillion—more than double the actual
VAT revenue of Tk 850 billion.158 This gap is primarily driven by policy distortions, such as
exemptions, reduced rates, and high registration thresholds, which accounted for 69% of the total
gap, while the remainder was attributed to compliance issues. Notably, Bangladesh’s compliance
gap is particularly large compared to other countries, with an estimated 42% of potential revenue
remaining uncollected, highlighting systemic inefficiencies in VAT collection.

157 59% of TIN Holders in Bangladesh Don't File Tax Returns | Nearly two-thirds of TIN-holders don’t
submit tax returns (thedailystar.net)
158 According to the latest VAT Expenditure Study Report by the NBR, total expenditure on VAT amounted

to 3.26% of GDP in 2022, which is significantly large when compared to NBR or VAT revenue.

White Paper on State of the Bangladesh Economy 80

Low Non-tax Revenue

Non-tax revenue as a share of GDP declined from 1.5% in FY14 to 0.9% in FY19 (Figure 6.6). It
later increased in FY20 and FY21, supported by a new law allowing the transfer of idle funds from
state-owned enterprises to the government exchequer.

Figure 6.6: Non-Tax Revenue over Time (% of GDP)

Source: Ministry of Finance data as reported in World Bank (2024a).

Despite this increase, non-tax revenue fell back to 0.9% of GDP in FY23 and remained lower than
in most comparable countries (Figure 6.7). In Bangladesh, primary sources of non-tax revenue
include dividends, profits, interest, tolls, levies, and various administrative and service fees.
Preliminary data from the Ministry of Finance (MoF) indicate that non-tax revenue growth was
strong during the first quarter of FY24 (World Bank, 2024a).

Figure 6.7: Non-Tax Revenue Relative to Others (% of GDP)

Source: Ministry of Finance data as reported in World Bank (2024a).

Persistent Shortfall in Achieving Revenue Targets

Total revenue collection has consistently failed to meet the targets set during each fiscal
year. For instance, NBR was given an ambitious target of BDT 4300 billion for taxes in FY24 (22%
higher than the provisional FY23 collection). However, revenue collections have persistently
fallen short of budgeted targets in recent years (Figure 6.8). The annual average shortfall over
FY18 to FY22 was Tk 749 billion (2.4% of GDP). The main contributors to the shortfalls are VAT
and supplementary duty collections (World Bank, 2024b).

White Paper on State of the Bangladesh Economy 81

Figure 6.8: Budget Estimate vs. Actual Total Revenue Collection

Source: Ministry of Finance data as cited in World Bank (2024b).

In addition to the above-mentioned facts, it is also worth noting that Bangladesh faces significant
revenue losses due to illicit capital outflows through various channels. This also has serious
implications in terms of revenue generation. The chapter on illicit financial flows (Chapter 20) of
the White Paper highlights this issue.

6.3 What Factors Constrain Domestic Resource Mobilisation

Bangladesh's stagnant tax-to-GDP ratio, hovering around 8% despite the high pace of economic
growth, highlights a significant challenge. Although per capita income has risen significantly, tax
collection remains far below that of countries with similar income levels. Key factors constraining
the domestic resource mobilisation include the following:

Reforms Struggle as Political and Business Elites Protect the Status Quo: Although various
successive plan documents (7th Five Year Plan, 8th Five Year Plan) outlined various tax reforms
and underscored the need for digitalisation, the pace of envisaged reforms have been slow due to
a complex political economy where powerful lobbies, political elites, and business interests resist
changes to the status quo. It is worth noting that the 7th Five Year Plan had set a target of raising
the revenue-GDP ratio from 10.9% (2015) to 16.0% by the end of the plan period (16.0%). The
so-called drive for digitalisation has remained slow due to the same reasons. The informal and
discretionary tax system benefits these groups, making reform difficult. The success of the 1991
VAT reform contrasts with later failures, highlighting the need for strong political support,
technical preparation, and stakeholder ownership to achieve meaningful tax reforms.

Fragmented automation: The half-hearted automation of the National Board of Revenue’s

(NBR) tax collection system is a major barrier to effective revenue generation, deepening
inefficiencies and fostering a climate of non-compliance. One of the most glaring examples is the
lack of integration between the NBR and other relevant government agencies, which severely
limits the effectiveness of the taxation system. While the NBR has introduced some automated
systems for tax filing and payment, these efforts are fragmented and not fully integrated with
other critically important and relevant institutions such as the Bangladesh Bank, the Ministry of
Finance, the Registrar of Joint Stock Companies, etc. This siloed approach means that the NBR
cannot access real-time data on individuals and businesses, hindering its ability to track income,
monitor business activities, and prevent tax evasion effectively. Without a holistic view of a
taxpayer's financial dealings across multiple sectors, the NBR is left vulnerable to underreporting,
false declarations, and fraud.

Corruption and Weak Governance Undermine Tax Revenue, Stalling Reform and Service
Delivery: Low tax revenue in Bangladesh is driven by weak governance, widespread corruption,

White Paper on State of the Bangladesh Economy 82

and a lack of trust in how tax revenue is used. Corruption, particularly in tax administration, leads
to widespread tax evasion and poor compliance. NBR had a rather reluctant approach to
development partners’ support to digitalisation. Weak local governance and limited fiscal
decentralisation hinder public service delivery, discouraging citizens from paying taxes. Although
there is growing public demand for better services, the centralised system and resource
constraints prevent substantial improvements. Despite some efforts towards tax reform and
public consultation, implementation has lagged due to political and administrative challenges.
Strengthening local institutions, improving governance, and enhancing service delivery could
improve tax mobilisation.

Governance issues further impede tax reform and administration, contributing to low tax
compliance. Since the introduction of VAT in 1991, major reforms have stalled, with initiatives
such as the 2011 Tax Modernisation Plan and the 2012 VAT Law facing implementation
challenges. These efforts, influenced by political interests, have lacked the necessary support and
technical foundations, limiting their success and leaving the tax system inefficient.

The absence of comprehensive tax reforms has contributed to Bangladesh's weak revenue
performance. While the 1991 VAT reform succeeded, subsequent attempts, such as customs
duties reform and VAT expansions, faced opposition and were poorly implemented. Efforts like
the 2011 and 2012 reforms failed to modernise the tax system, which remains outdated and
ineffective in generating sufficient revenue.

Rather than an evidence-based approach to revenue forecasting and target setting, it is the
Finance Division which arbitrarily sets annual revenue target without any meaningful
consultation with the NBR. The overall philosophy driving such an approach appears to be the
higher the target the higher the revenues.

Frequent ad hoc changes to tax laws through Statutory Regulatory Orders (SROs) have
worked against transparency and predictability, distorting trade and reducing revenue.
NBR had to accept the orders to issue the SROs as per the directives of Ministry of Finance, mostly
influenced by business groups and high-level government officials. For instance, reportedly many
business conglomerates, among others, received tax exemptions based on political
considerations. Such practices have favoured politically connected groups, weakened the tax base
and enabled corruption. The excessive use of SROs has become a tool for distributing political
favours, undermining the effectiveness of Bangladesh's tax policies. Although not exhaustive,
Table 6.1 provides a brief overview of granted to selected large conglomerates.

Table 6.1: Income tax exemptions granted to selected large conglomerates

Conglomerat Industry Tax Company Name Exemptio Exemption Comments/Additional Info
e Name Sector Exemption and Beginning n Period Amount/
Type year of Percentage
exemption
LNG Income Tax Summit LNG 15 years 100% Exemptions on project income,
Terminal Exemption Terminal Co (PVT) income earned by foreigners,
Operation Limited royalties, technical know-how
fee and technical assistant Fees,
2018 capital gain arising from transfer
of shares and tax on foreign
interest loan under conditions of
Summit maintaining accounts and
Group submitting Income tax returns.
Power Plant Income Tax 1. Ashulia Each of 100% Exemption on income arising
(Operating Exemption Power Plant the 15 from power generation, income
on non-coal I- Sep 1, powerpla earned by foreigners for three
based fuel) 2003 nts is years from their arrival in
Total 15 2. Chandina enjoying Bangladesh, tax on foreign
power plants Power Plant tax interest loan, royalties, technical
in I-Sep 1, 2003 exemption Know-how fee and technical
Bangladesh starting assistant fees provided by the

White Paper on State of the Bangladesh Economy 83

 Conglomerat Industry Tax Company Name Exemptio Exemption Comments/Additional Info
e Name Sector Exemption and Beginning n Period Amount/
Type year of Percentage
exemption
3. Madhabdi from company and capital gain arising
Power Plant Commerci from transfer of shares and
I- Sep 1, al under conditions of abiding all
2003 Operation rules of Income Tax Act, 2023
4. Chandina Date. and Private Sector Power
Power Plant Generation Policy of Bangladesh.
II- Nov 14,
2006
5. Madhabdi
Power Plant
II- Dec 16,
2006
6. Ashulia
Power Plant
II- Dec 3,
2007
7. Ullapara
Power Plant-
March 2,
2009
8. Maona
Power Plant-
May 11,
2009
9. Rupganj
Power Plant-
June 9, 2009
10. Jangalia
Power Plant-
June 25,
2009
11. Narayanganj
Power Plant
I- April 1,
2011
12. Narayanganj
Power Plant
I I- February
29, 2016
13. Barisal
Power Plant-
April 5, 2016
14. Gazipur II
Power Plant-
May 10,
2018
15. Gazipur II
Power Plant-
July 12, 2018
S Alam Group Energy Income Tax SS Power I Ongoing 100% Exemption on tax on fees arising
Exemption Limited from loans provided to SS Power
1 Limited by lenders
2019
Power Plant Income Tax Banshkhali Power 15 Years 100% Exemption on income arising
(Operating Exemption Plant- September, from power generation, income
on coal based 2023 earned by foreigners for three
fuel) years from their arrival in
Bangladesh, tax on foreign
interest loan, royalties, technical
know-how fee and technical
assistant Fees provided by the
company and capital gain arising
from transfer of shares and
under conditions of abiding all
provisions of Income Tax Act,
2023 and Private Sector Power
Generation Policy of Bangladesh.
Walton Refrigerator, Income Tax Walton Hi Tech 12 years 95% Exemptions on income from
Group motor cycle Exemption Industries PLC Refrigerator, motor cycle and air
and air 2009

White Paper on State of the Bangladesh Economy 84

 Conglomerat Industry Tax Company Name Exemptio Exemption Comments/Additional Info
e Name Sector Exemption and Beginning n Period Amount/
Type year of Percentage
exemption
conditioner conditioner manufacturing
manufacturer business.
Hi-Tech Park Income Tax Walton Hi Tech 10 years First 7 years Exemptions on income from
Exemption Industries PLC 100% business operation in Hi Tech
2022 Next 3 years Park.
Walton Digitech 70%
Limited
2021
Beximco Sukuk Bond Income tax 2021 Ongoing 100% Exemption on SUKUK related
Group Exemption income of the Special Purpose
Vehicle (SPV) on condition that
the SPV will follow the
provisions of the Income Tax
Act.
Transactions between the
Originator and SPV relating to
SUKUK kept out of the purview
of tax withholding on condition
of following the provisions of
the Income Tax Act.
Source: NBR.

Bangladesh's personal income tax system suffers from low compliance, excessive
exemptions, and inefficient administration. Despite rising per capita income, personal income
tax yields remain low, at just 1% of the GDP. Tax evasion is common, especially among high
earners, driven by corruption, political connections, and informal deals with tax collectors. Efforts
to boost taxpayer registration have seen limited success, with burdensome filing requirements
such as wealth statements, further discouraging compliance.

Corporate tax compliance is also low, with many businesses, particularly small
enterprises, operating outside the formal system. Tax evasion is widespread, aided by
political connections and informal settlements with tax officials. The tax system is complex, with
varying rates across sectors, and high rates in sectors such as tobacco and telecommunications,
discouraging investment. Fear of harassment from tax authorities further drives businesses to
remain informal, limiting tax revenue.

The VAT system is characterised by inefficiencies, low compliance, and numerous

exemptions. Despite reforms, including a new VAT law, the system remains underproductive,
with a compliance rate of only 12%. Administrative issues like multiple registration systems,
burdensome audits, and the lack of a fully computerised system hinder VAT’s effectiveness in
revenue generation. Poor progress in Electronic Fiscal Devices (EFDs) and SDC (Sales Data
Controller) units has been observed where the vendor (Genex Infosys Ltd.) was decided
politically and with a very generic agreement. The vendor did not comply with the contract terms
of the agreement and was not held accountable for the unsatisfactory execution (Table 6.2).

Table 6.2: Poor implementation of EFD and SDC initiative

Terms of contract Implementation progress
Initially, 20,000 businesses have To setup 60000 EFD machines, 42235 BIN information was
been registered, with a target to provided. But only, 11313 machines have been set up.
increase this to 60,000 through the
installation of EFD (Electronic 4662 machines are in hand. Of these, 757 shops are reported as
Fiscal Devices) and SDC (Sales Data closed, and 2,550 businesses have refused to install the required
Controller) units. By FY23, an devices
additional 30,000 installations are
planned, with a further 60,000 The vendor claimed that 195 SDC has been set up. But in reality,
installations targeted by FY24. only 97 SDCs have been set up.

White Paper on State of the Bangladesh Economy 85

 Terms of contract Implementation progress
Despite 7958 machines in stock, those were not set up. Set up
machines are suffering from synchronisation problem. Progress
achieved is thus 19% only.
Provide recorded tutorial for No data found on recorded tutorial
future training
Provide training to taxpayers to Although some markets have conducted awareness sessions, no
ensure the proper use of machines training has been provided according to the list
Provide training to each device No training was provided to the device users according to the list.
user in 6-hour sessions over a 3- Only the procedures were explained during the time the machine
day batch was installation

Human resource development Information has been provided for human resource
along with SMART (Specific, development. According to the organisation's data, a total of 144
Measurable, Achievable, Realistic personnel is employed across various institutions. Among them,
and Time bound) task completion 31 are from the Chittagong regional office, and 106 work at the
planning. main office located in Dhaka, Gulshan. Out of 11,410 institutions,
106 personnel, i.e., 1 person for every 79.26 institutions, are
Preparation of a vigilance plan for responsible for overseeing them.
collecting information on the
regulation of taxes for machines Vendors lacked necessary expertise in the assigned work. The
established by EFDS/SDC. number of appointed personnel is insufficient, and proper
training was not provided to EFD and SDC users

No SMART planning has been done for the expansion of the

machines. Information regarding the preparation of a vigilance
plan to monitor irregularities could not be obtained
The vendor will handle the No information was found about FAQs and Survey Reports
preparation and preservation of all
team documents, including FAQs,
surveys, and reports
The vendor will present the plan No plan for supervision and human resource development has
for supervision and human been provided by the vendor
resource development
Through vigilance, using Such mismanagement related information has not been
EFD/SDCS, collecting information submitted to the commissioner. From the commissioner’s office,
on tax collection issues and it was found that representatives of certain organisations went to
informing the commissioner various businesses and issued a significant number of challans.
concerned for taking legal action An examination of the returns shows that, according to EFDMS
data, more tax has been collected through returns than the
expected amount.
Source: National Board of Revenue.

Customs system is better managed compared to other taxation systems in Bangladesh,

with modern tools such as the Automated System for Customs Data (ASYCUDA) and
simplified clearance processes in place. However, tax evasion persists due to collusion
between importers and customs officials, leading to lost revenue. High transaction costs and
delays at ports further increase the cost of doing business, negatively affecting private
investment.

The National Board of Revenue (NBR) faces significant capacity constraints, lacking both
autonomy and expertise in tax policy analysis. The research and statistics wing suffers from
serious capacity constraints in undertaking analytical work. Traditional job rotation also impedes
with institutional memory retention. Frequent leadership changes and the lack of a clear
separation between tax policy and administration have hindered meaningful reforms. The NBR’s
focus on enforcement rather than encouraging voluntary compliance has limited the effectiveness
of revenue collection efforts.

White Paper on State of the Bangladesh Economy 86

The current process for appointing the Chairman of the National Board of Revenue (NBR)
presents significant challenges to the effective administration and governance of the
institution. Earlier, NBR order 1973 was the reference point for appointing the NBR Chairman.
The order stipulated that NBR Chairman was to be from one of the NBR members. However, in
1979 and ordinance was passed that allowed NBR Chairman to be selected from Administration
cadre. Such appointments created problem in NBR administration. This had implications for
properly grasping and adequately addressing the complexities of the NBR’s operations. This lack
of familiarity with the intricacies of revenue management hampers their ability to implement
strategic reforms. Additionally, the tenure of the NBR Chairman is structured in such a way that
it encourages short-term objectives (quick gains) over long-term, sustainable reforms. This focus
on quick gains rather than comprehensive, transformative changes undermines the potential for
meaningful progress within the NBR. Such a system diminishes the opportunity for the Chairman
to pursue lasting systemic improvements in the revenue administration framework and revenue-
related work.

6.4 Key Messages

For tax reform to succeed, it’s not just about policy; it is also about overcoming political and
bureaucratic resistance and addressing corruption. Bangladesh’s tax collection woes reflect a
deeper issue: reforming the system means dismantling decades of political influence and culture
of favouritism. The way forward to greater domestic resource mobilisation lies in better
governance and stronger institutions. The key messages that emerge from this chapter that
focuses on the state of domestic resource mobilisation are the followings:

Digitalisation Delayed and Fragmented under Prevailing Political Economy Scenario:

Powerful elites and vested interests are blocking the reforms needed to modernise the tax system
through digitalisation and integration—leaving growth potential untapped. Integrated
digitalisation and automation should be the topmost priority to modernise tax
administration, reduce errors, and streamline compliance. Some actionable measures are
suggested below.
• Investment in Automated Compliance and Enforcement System: A key component is
the allocation of funds specifically for developing a comprehensive, automated system for
tax compliance within the National Board of Revenue (NBR). This system will automate
reminders, penalties, and audit flags for TIN holders, which will ensure that all registered
individuals and entities actively comply with tax laws. In the budget, earmarking funds
for automation initiatives such as electronic Tax Deduction at Source (e-TDS) is critical to
streamline tax deductions and improve accuracy in income tax collection.
• Funding for Risk-Based Audit Systems: High-risk sectors such as real estate, wholesale
trade, and import-export often see higher non-compliance rates. The government should
allocate specific funds to implement a centralised, risk-based audit system, allowing NBR
to conduct data-driven audits in sectors with higher evasion risks. This audit system
should be designed to reduce manual interventions, which will improve efficiency and
accuracy.
• Infrastructure Development for Digital Tax Management System: Setting aside funds
to establish an integrated digital tax data management system will allow NBR to centralise
taxpayer records and create a single database accessible across agencies. This system
should be capable of real-time updates to facilitate tax filing, payment, and compliance
monitoring.

Tax evasion is rampant. Building digital data-sharing capabilities across government

agencies will help improve compliance tracking and identify tax evaders. Following
measures could be taken immediately to facilitate inter-agency data interoperability:

White Paper on State of the Bangladesh Economy 87

 • Investment in Data-Sharing Infrastructure: Allocating funds for infrastructure to
support inter-agency data-sharing between NBR, banks, telecom providers, and other
entities will improve taxpayer data accuracy. This infrastructure will allow NBR to cross-
check taxpayer data with third-party sources, identifying non-compliance patterns and
improving audit effectiveness.

• Third-Party Data Integration: Funds should also support initiatives that integrate data
from third-party sources, such as credit bureaus or mobile payment platforms, enabling
NBR to cross-reference taxpayer information with transaction data. This integration will
strengthen the government’s ability to identify tax evasion and expand the tax base.

Policy chaos through exemptions hurt revenue collection: Unpredictable changes to tax laws
through Statutory Regulatory Orders (SROs) favour politically connected groups, undermining
fairness and transparency. Reviewing tax exemptions and rationalising unnecessary ones
will increase Bangladesh’s tax-to-GDP ratio. To rationalise the tax exemptions, the following
initiatives can be taken:
• Establish a Tax Exemption Review Mechanism: Allocating funds for a review board
within the Ministry of Finance to periodically assess the efficacy of current tax exemptions
is essential. This board will conduct cost-benefit analyses to determine which exemptions
contribute to economic growth and which can be rationalised.
• Gradual Phasing Out of Ineffective Exemptions: Using the insights gained from the
review board, NBR should propose a budget to phase out exemptions in sectors where
they do not meet their intended economic objectives. The revenue saved from these
exemptions can be reinvested into sectors that need support, thereby maximising
revenue potential.

Lack of evidence-based decision making and capacity constraints of NBR must be

addressed urgently. Revenue targets and tax policies are often set arbitrarily by the Finance
Division, without consulting the National Board of Revenue (NBR) or relying on data-driven
insights—leading to unrealistic goals and ineffective tax collection strategies. NBR’s lack of
capacity, human resource scarcity and short tenure of NBR chairman remain serious concern.
Strengthening NBR’s capacity through increased staffing, advanced analytics, and longer
leadership tenures of NBR Chairman will help improve administration effectiveness. In this
regard, the following should be taken immediately:
• Staffing and Training Budget for NBR: NBR requires additional staff and ongoing
training in digital tax systems and compliance enforcement. Upcoming budget should
include provisions for hiring compliance officers, auditors, and data analysts, as well as
continuous technical training to keep staff updated on emerging best practices in tax
administration.
• Advanced Analytics and Surveillance Tools: Allocate funds for advanced analytics tools,
including AI and data analysis software, which will support NBR in identifying and
monitoring potential tax evasion cases. This technological investment will improve NBR’s
ability to detect tax evasion patterns, targeting non-compliant entities effectively.
• Ensure Longer Tenures for NBR Leadership with NBR experience: Establishing a
minimum tenure of at least three years for the NBR chairman will enhance policy
continuity, enabling effective implementation of multi-year reform plans and reducing
politically motivated leadership changes. This can be done by going reinstating the 1973
NBR order.

Reluctance of taxpayers emanates from lack of trust in the system. Proactive efforts must
be directed towards increasing taxpayer education, sensitisation and awareness
campaigns. Rolling out educational campaigns, possibly through media and local events, will
inform taxpayers of their responsibilities, helping drive voluntary compliance in a low-cost and
scalable manner. Some immediate actionable measures to increase awareness are:

White Paper on State of the Bangladesh Economy 88

 • Public Awareness Campaigns for Taxpayer Education: Taxpayer education is crucial to
increase voluntary compliance. The forthcoming budget should allocate funds for rolling
out extensive public education campaigns across media, local events, and digital
platforms to inform individuals and businesses about tax obligations. These campaigns
can help demystify the tax process, encouraging people to register and file accurately.
• TIN Registration Expansion Programme: Allocate funds to support TIN registration
campaigns targeting urban centres and high-income regions. This programme should
focus on registering all adults, especially those reaching 18, with a universal Tax
Identification Number. Outreach programmes in major economic zones and urban areas
will bring a larger portion of the population into the formal tax system and broaden the
tax base.

In addition to the above, various short-, medium-, and long-term recommendations are provided
in the Annex 6A to this chapter while Annex 6B provides a case study on South Korea’s initiatives
to enhance domestic revenue mobilisation.

White Paper on State of the Bangladesh Economy 89

References
Ahmed, S. (2020). Institutional dimensions of tax reforms in Bangladesh. Cambridge University
Press. Retrieved from https://www.cambridge.org/core/services/aop-cambridge-
core/content/view/B5943BF2FF02144F107473C7BCCB5620/9781009284691c9_185-
217.pdf.
Ministry of Economy and Finance. (2022). Korean Taxation, Retrieved from
https://english.moef.go.kr/upload/eco/2022/12/FILE_20221209085229_3.pdf
Ministry of Economy and Finance. (2019). Korean Taxation, Retrieved from
https://english.moef.go.kr/upload/eco/2019/11/FILE_20191107190702_3.pdf
Organisation for Economic Co-operation and Development (OECD). (2009). Reforming the Tax
System in Korea to Promote Economic Growth and Cope with Rapid Population Ageing,
Retrieved from https://www.oecd-ilibrary.org/economics/reforming-the-tax-system-in-
korea-to-promote-economic-growth-and-cope-with-rapid-population-
ageing_226518762318
Organisation for Economic Co-operation and Development. (2024). Revenue Statistics in Asia and
the Pacific: Bangladesh. Retrieved from
https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/global-tax-
revenues/revenue-statistics-asia-and-pacific-bangladesh.pdf.
PricewaterhouseCoopers. (2024). Korea, Republic of - Individual - Taxes on personal income,
Retrieved from https://taxsummaries.pwc.com/republic-of-korea/individual/taxes-on-
personal-income.
Quote Investigator. (2012, April 13). "Taxes are what we pay for civilized society". Retrieved from
https://quoteinvestigator.com/2012/04/13/taxes-civilize/.
Razzaque, M. A., Rahman, J., Rabi, R. I., Islam, M. D., & Eusuf, A. (2023). Using direct taxation to
boost revenue and tackle inequality: A political economy analysis. Bangladesh Working
Paper. International Growth Centre. Retrieved from
https://www.theigc.org/sites/default/files/2023-
10/Razzaque%20et%20al%20Working%20paper%20January%202023.pdf.
World Bank. (2024a). Bangladesh Development Update (April 2024). Retrieved from
https://thedocs.worldbank.org/en/doc/f6dd176b982714b6e3b04d7ac672a0ab-
0310012024/original/Bangladesh-Development-Update-April-2024-w-cover.pdf
World Bank. (2024b). Bangladesh Development Update (October 2024). Retrieved from
https://thedocs.worldbank.org/en/doc/f6dd176b982714b6e3b04d7ac672a0ab-
0310012024/original/Bangladesh-Development-Update-April-2024-w-cover.pdf

White Paper on State of the Bangladesh Economy 90

Annexes

Annex 6A: Recommendations for Enhancing Domestic Resource Mobilisation

Based on our analysis of the current state of DRM, we propose a detailed and structured set of
policy recommendations aimed at improving domestic resource mobilisation in Bangladesh.
These are categorised into short-term, medium-term, and long-term actions, providing a
comprehensive roadmap to modernise the country's tax system, increase revenue collection, and
ensure sustainable economic growth.

Short-term Policy Recommendations

1. Enforce Tax-Linked Access to Public Services: Expanding the requirement for proof of tax
return submissions for accessing essential services, such as trade licences and bank loans, will
promote compliance. Bangladesh should enforce and expand this measure to increase the
number of active taxpayers.
2. Strengthen Compliance for TIN Holders with Automated Systems: Many TIN holders do
not currently file returns. A new automated system should send compliance reminders,
enforce penalties, and track compliance, while periodic audits target non-filers.
3. Make E-TDS Compliance Mandatory to Improve Collection Accuracy: By enforcing
Electronic Tax Deduction at Source (E-TDS) across sectors, NBR can streamline income tax
collection and ensure accuracy, reducing reliance on manual compliance checks.
4. Automate Tax Deductions and Refunds to Increase Trust: Automating tax deductions and
refunds for timely processing can improve transparency and encourage compliance. An
automated refund system will ensure that taxpayers receive overpaid amounts without delay,
reducing evasion and enhancing public trust.
5. Introduce a Risk-Based Automated Audit System: Implementing a centralised, risk-based,
fully automated tax audit system will reduce manual errors and prevent malpractices.
Prioritising high-risk sectors such as real estate and import-export will target areas with
greater potential for compliance improvement.
6. Separate Policy and Administration Functions in NBR: By creating a dedicated policy unit
within the Ministry of Finance, NBR can focus on efficient collection and enforcement, leaving
strategic tax policy formulation to a specialised team.
7. Ensure Longer Tenures for NBR Leadership with NBR experience: Establishing a
minimum tenure of at least three years for the NBR chairman will enhance policy continuity,
enabling effective implementation of multi-year reform plans and reducing politically
motivated leadership changes. This can be done by going reinstating the 1973 NBR order.
8. Increase Taxpayer Education and Awareness Campaigns: Rolling out educational
campaigns, possibly through media and local events, will inform taxpayers of their
responsibilities, helping drive voluntary compliance in a low-cost and scalable manner.

Medium-term Policy Recommendations

1. Restructuring Tax Circle Offices for Greater Efficiency: The current structure of Tax Circle
Offices, where the Deputy Commissioner of Taxes oversees multiple responsibilities such as
tax assessment, field reporting, and enforcement, hampers service efficiency and frustrates
taxpayers. To address this, Tax Circle Offices could be reorganised into three specialised
sections: Reporting, Assessment, and Enforcement. Each section would be led by an Extra
Assistant Commissioner or an Inspector, with overall supervision provided by the Deputy
Commissioner or an Assistant Commissioner of Taxes. This restructuring would enhance
service delivery, improve the quality of tax assessments, and foster greater taxpayer
satisfaction.
2. Implementing Faceless Tax Assessments: The Finance Act 2024 abolished regular
assessments for normal tax returns submitted by corporate taxpayers, reducing the

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 compliance burden for honest taxpayers. However, this change has created loopholes for
unethical taxpayers to evade taxes, as only 2–3% of returns are audited annually. Moreover,
the practical enforcement of Section 55 of the Income Tax Act 2023 (previously Section 30 of
the Income Tax Ordinance, 1984) has weakened, potentially encouraging non-compliance in
tax deduction at source. Introducing faceless assessments could address these challenges by
eliminating direct interaction between taxpayers and tax officials, fostering greater
transparency, reducing tax evasion, and enhancing compliance.
3. Expand the Registered Taxpayer Base through Strategic Outreach: NBR should conduct
targeted registration campaigns in urban and economic centres, aiming to double the
taxpayer count within five years. Socio-economic surveys can identify potential taxpayers and
bring them into the formal system.
4. Introduce a Universal Tax Identification Number at Adulthood: A universal tax number
assigned at 18 will integrate adults into the formal tax system, supporting the formalisation
of the informal economy over time. This unique identifier will simplify registration and
broaden the tax net.
5. Simplify Corporate Tax Rates to Improve Compliance: Bangladesh’s corporate tax
structure is complex and prone to evasion. Rationalising the number of corporate tax brackets
can simplify compliance while targeting under-taxed sectors like retail and small businesses
can broaden the base.
6. Systematically Review and Rationalise Tax Exemptions: Conducting a cost-benefit
analysis of all tax exemptions will reveal opportunities for revenue optimisation. Reducing
exemptions that do not stimulate targeted growth can help lift the tax-to-GDP ratio.
7. Establish a Centralised, Digital Data and Office Management System: Setting up a digital
data management system across NBR’s offices will improve operational efficiency and create
a single source of taxpayer information. This system should integrate third-party data sources
for robust compliance tracking.
8. Strengthen NBR Capacity with Staff Expansion and Training: Increasing NBR’s workforce
and providing technical training on compliance and digital systems will strengthen its
capacity to manage reforms. Expanding the number of enforcement officers in high-
compliance areas can also raise revenue.
9. Promote Fiscal Decentralisation for Improved Local Service Delivery: Local
governments should be empowered to manage fiscal resources and increase service delivery
quality. Fiscal decentralisation, particularly at the municipal level, can improve governance
and drive local revenue generation.
10. Enhance Digital Interoperability with Other Agencies: Building inter-agency data-sharing
capabilities with banks, telecom providers, and other entities will enable NBR to access more
comprehensive taxpayer data, helping improve compliance and track potential tax evaders.
11. Implement a National Invoice Automation System for VAT: Establishing an automated
VAT invoice system for real-time transaction monitoring will reduce evasion. A phased
rollout, starting with high-revenue businesses, will improve VAT compliance and help
increase collections over time.

Long-term Policy Recommendations

1. Create a Multi-Year Roadmap for Direct Tax Reforms: Bangladesh should develop a
phased roadmap to increase its direct tax revenue share gradually, targeting a 5% increase in
the tax-to-GDP ratio. Setting milestones over a 10-year period will help achieve sustained,
measurable growth in revenue collection.
2. Fully Digitise Tax Administration to Improve Transparency and Reduce Corruption:
Complete digitisation across all tax processes, from registration and filing to audit and
payment, will streamline compliance and eliminate manual inefficiencies. NBR should aim to
centralise data processing to prevent redundancies and improve tax policy enforcement.
3. Introduce a Modern Property Tax System to Support Local Government Revenue: The
existing practice of using mouza values instead of market values for property registration is

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 contributing to the generation of black money. Implementing a property tax based on current
market values, starting with Dhaka, could help generate sustainable revenue for urban
municipalities. Integrating this system into a digital property database would enhance
accuracy and ensure consistent assessments.
4. Implement Customs Modernisation to Facilitate Trade and Reduce Costs: Fully enacting
NBR’s Customs Modernisation Plan will streamline the customs process, lower transaction
costs, and improve trade logistics, making Bangladesh more competitive in the global market
and potentially increasing revenue from customs duties.
5. Design and Roll Out a Comprehensive Wealth Tax System: Moving beyond the current
wealth surcharge, Bangladesh can design a wealth tax on asset values to raise additional
revenue. Enhancing asset registration accuracy and tracking will enable a more progressive
taxation model, with the potential to significantly bolster public revenues.
6. Strengthen Monitoring and Surveillance for Tax Evasion: Expanding surveillance and
enforcement efforts against tax fraud, particularly in high-evasion sectors, will improve
compliance. Strengthening legal frameworks around tax enforcement and providing NBR
with advanced analytics tools can enable effective targeting of non-compliant entities.
7. Mainstream the Informal Economy and Discourage Cash Transactions: Bangladesh
should incentivise digital payments and limit high-value cash transactions, which facilitate
tax evasion. Providing tax credits for digital transactions and imposing penalties on excessive
cash use will support formalisation and improve traceability

To implement these short-, medium-, and long-term policy recommendations, a policy action
matrix is devised below.

Policy Responsible Lead Action Timeline Outcome

Recommendation Ministry Department
Short-term Policy
Recommendations
(1-2 years)
Separate tax Ministry of Tax Policy Establish a 1 year Improved tax
policy formulation Finance (MoF) Unit (to be dedicated Tax policy and
from tax created) Policy Unit streamlined
administration administration
Adjust personal Ministry of National Restore the Next fiscal Increased
income tax rates Finance (MoF) Board of 30% personal year fairness and
and raise the Revenue income tax higher revenue
minimum tax (NBR) rate and raise from wealthier
exemption the exemption individuals
threshold. threshold
Enforce tax return Ministry of National Automate 6 months Reduced tax
submissions for all Finance (MoF) Board of reminders and evasion and
TIN holders Revenue penalties for closed
(NBR) non- loopholes
compliance
Automate tax Ministry of National Implement an 1 year Increased
deductions at Finance (MoF) Board of automated efficiency and
source and refund Revenue refund system trust in the tax
systems (NBR) for overpaid system
taxes
Implement a Ministry of National Introduce a 1 year Reduced
centralised, Finance (MoF) Board of risk-based corruption and
automated tax Revenue automated improved tax
audit system (NBR) audit system compliance
targeting 10%
of taxpayers
annually

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 Policy Responsible Lead Action Timeline Outcome
Recommendation Ministry Department
Ensure longer Ministry of National Ensure Immediate Greater stability
tenures for the Public Board of professional and continuity
NBR chairman Administration Revenue appointments in tax
(MoPA) (NBR) with at least 3 administration
year tenure
Fully digitise the Ministry of ICT Bangladesh Fully 1 year Improved
personal income (MoICT) Computer automate the efficiency and
tax system Council tax filing and increased
(BCC) and payment revenue
NBR process collection
Medium-term
Policy
Recommendations
(3-5 years)
Restructuring Tax Ministry of National Reorganise 3-4 years Enhanced
Circle Offices for Finance (MoF) Board of Tax Circle service delivery,
Greater Efficiency Revenue Offices into improved tax
(NBR) three assessment
specialised quality, and
sections: increased
Reporting, taxpayer
Assessment, satisfaction
and
Enforcement.
Implementing Ministry of National Introduce 3-4 years Increased
Faceless Tax Finance (MoF) Board of faceless tax transparency,
Assessments Revenue assessment reduced
(NBR) mechanisms opportunities
to eliminate for tax evasion,
direct and
interactions strengthened
between compliance
taxpayers and mechanisms.
officials.
Increase taxpayer Ministry of National Expand efforts 3 years Increased tax
registration to 10 Finance (MoF) Board of in urban and base and
million Revenue emerging revenue
(NBR) economic
centres
Introduce a Ministry of National Assign unique 3 years Formalisation
universal tax Finance (MoF) Board of ID numbers of the economy
registration Revenue for individuals and simplified
system (NBR) at the age of 18 tax compliance
Rationalise Ministry of National Reduce 2-3 years Simplified
corporate tax Finance (MoF) Board of corporate tax compliance and
rates Revenue rates to 3-4 increased
(NBR) brackets revenue
Review tax Ministry of National Conduct cost- 2-3 years Increased
exemptions and Finance (MoF) Board of benefit transparency
incentives Revenue analyses to and reduced
(NBR) rationalise revenue leakage
exemptions
Strengthen NBR’s Ministry of National Hire officers 3-4 years Enhanced tax
capacity by hiring Finance (MoF) Board of and provide collection and
more officers Revenue specialised compliance
(NBR) training based
on an

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 Policy Responsible Lead Action Timeline Outcome
Recommendation Ministry Department
assessment of
human
resources of
NBR
Promote fiscal Ministry of Local Empower 3-5 years Improved local
decentralisation Local Government local governance and
Government, Division governments revenue
Rural and improve mobilisation
Development, accountability
and Co-
operatives
(MoLGRD&C)
Reform the Ministry of National Broaden the 3 years Increased
income tax system Finance (MoF) Board of tax base, voluntary
to simplify Revenue reduce compliance and
compliance (NBR) marginal tax reduced evasion
rates, and
digitise
Implement a Ministry of National Automate the 3-4 years Increased
National Invoice Finance (MoF) Board of VAT collection compliance and
Automation and Ministry of Revenue and reduced evasion
System ICT (MoICT) (NBR) monitoring
system
Enhance Tax Ministry of National Automate the 3-4 years Reduced
Reporting and Finance (MoF) Board of reconciliation evasion and
Reconciliation and Revenue of the VAT increased
Focus on High- (NBR) invoicing and revenue
Contributing the income collection
Businesses returns
Long-term Policy
Recommendations
(5+ years)
Develop a multi- Ministry of Tax Policy Create a 5-10 years Sustainable
year roadmap for Finance (MoF) Unit (to be phased increase in
direct tax reforms created) roadmap for direct tax
direct tax revenue
reforms
Fully digitalise the Ministry of National Digitalise all 5-7 years Reduced
tax administration Finance (MoF) Board of tax processes corruption and
system. Revenue including improved
(NBR) registration, efficiency
return
submissions,
and payments
Introduce a Ministry of Local Develop a 5-10 years Increased local
modern property Local Government market value- revenue and
tax system Government, Division based support for
Rural property tax fiscal
Development, system decentralisation
and Co-
operatives
(MoLGRD&C)
Fully implement Ministry of Customs Complete the 5-7 years Enhanced trade
the Customs Commerce Division National efficiency and
Modernisation (MoC) (under NBR) Board of lower
Plan Revenue’s transaction
Customs costs

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 Policy Responsible Lead Action Timeline Outcome
Recommendation Ministry Department
Modernisation
Strategic
Action Plan
Design and Ministry of Tax Policy Introduce a 5-10 years Additional
implement a Finance (MoF) Unit (to be wealth tax revenue from
comprehensive created) based on the wealth taxes
wealth tax system market value
of assets
Source: Author’s presentation.

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Annex B: Case Study

South Korea's Tax System and Policies

South Korea has made significant strides in increasing its tax-to-GDP ratio, primarily through the
enhancement of direct taxation while maintaining indirect taxes at a relatively stable level (Ministry of
Economy and Finance of South Korea, 2022). This approach has been instrumental in boosting government
revenue and supporting economic growth (OECD, 2009).

Key Tax Reforms and Policies

Income Tax Reforms
Progressive Taxation: South Korea has implemented a progressive income tax system, where tax rates
increase with income levels. This ensures that higher-income earners contribute a larger share of their
income to taxes (PricewaterhouseCoopers, 2024).

Tax Deductions and Credits: Various tax deductions and credits have been introduced to encourage savings,
investment, and social welfare. These measures help to reduce the tax burden on lower and middle-income
earners while promoting economic activities (Ministry of Economy and Finance of South Korea, 2022).

Corporate Taxation
Corporate Tax Rates: South Korea has maintained competitive corporate tax rates to attract foreign
investment and support domestic businesses. The corporate tax rate is structured to encourage
reinvestment and growth (Ministry of Economy and Finance of South Korea, 2022).

Tax Incentives: The government has introduced tax incentives for research and development (R&D) and
other activities that contribute to economic development (PricewaterhouseCoopers, 2024). These
incentives help businesses to innovate and expand.

Indirect Taxes
Value-Added Tax (VAT): The VAT rate in South Korea is set at a standard rate of 10%, which is relatively
low compared to other countries. This helps to keep the cost of goods and services affordable for consumers
while generating revenue for the government (Ministry of Economy and Finance of South Korea, 2022).

Stable Indirect Tax Rates: By keeping indirect tax rates stable, South Korea has avoided sudden increases
in the cost of living, which could negatively impact consumer spending and economic stability (Ministry of
Economy and Finance of South Korea, 2022).

Tax Administration and Compliance

Efficient Tax Administration: South Korea has invested in modernizing its tax administration systems to
improve efficiency and reduce tax evasion. This includes the use of technology and data analytics to track
and collect taxes more effectively (Ministry of Economy and Finance of South Korea, 2022).

Public Awareness Campaigns: The government has conducted public awareness campaigns to educate
citizens about their tax obligations and the importance of tax compliance. This has helped to increase
voluntary compliance and reduce tax evasion (Ministry of Economy and Finance of South Korea, 2022).

Impact and Results: The combination of these tax reforms and policies has led to a significant increase in
South Korea's tax-to-GDP ratio. The government has been able to generate more revenue to fund public
services, infrastructure projects, and social welfare programs, contributing to overall economic growth and
stability (Ministry of Economy and Finance of South Korea, 2022).

South Korea's approach to tax reform, focusing on direct taxation and maintaining stable indirect tax
rates, has proven to be effective in increasing the tax-to-GDP ratio. This case study highlights the
importance of strategic tax policies in supporting economic development and ensuring fiscal
sustainability.

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Annex 6C: Progress in Domestic Resource Mobilisation by the NBR

To strengthen the domestic resource mobilisation efforts in Bangladesh, the National Board of
Revenue (NBR) has implemented a series of reforms aimed at modernising the tax system,
enhancing compliance, and expanding the taxpayer base. Key initiatives are mentioned below:

Automation and E-TDS Implementation: NBR has introduced automation initiatives such as E-
Return and the Electronic Tax Deduction at Source (E-TDS) system to streamline tax filing and
reduce human errors. These advancements help to simplify processes for taxpayers, minimise
manual handling, and limit opportunities for corruption by creating a more transparent and
accountable system. As more taxpayers adapt to these digital methods, overall tax compliance
and revenue mobilisation are expected to improve significantly.

Mandatory Online Return Submission for Certain Groups: Recognising the advantages of
digital filing, the NBR has mandated online return submissions for specific public sector
employees, including those in Dhaka, Gazipur, and Narayanganj city corporations. Taxpayers
employed in banks, multinational corporations (MNCs), and mobile operators are also required
to file electronically. This move targets high-income sectors and larger corporations, making
compliance easier for both the taxpayer and the NBR, while ensuring more accurate and timely
filings.

Unified MLTRS for Direct and Indirect Taxes: The NBR is in the final stages of developing a
unified Medium and Long-term Revenue Strategy (MLTRS) to manage direct and indirect taxes
cohesively. Integrating these strategies will allow for more effective tracking and cross-
referencing of tax data and streamlining the existing high volume of tax expenditures. This unified
approach will enable a comprehensive view of tax collection, reducing unnecessary tax
exemptions.

Introduction of Bangla Tax Law in 2023: To enhance accessibility and understanding, the NBR
introduced tax legislation in Bengali, ensuring that taxpayers can more easily navigate tax
obligations and legal requirements. The Bangla Tax Law aims to reduce language barriers and
promote tax compliance by making regulations more inclusive and comprehensible to a broader
audience, including small business owners and individual taxpayers who may not be fluent in
English.

Expansion of Income Tax Field Offices: The NBR has expanded its presence with ten new
income tax zones in Dhaka, allowing for improved taxpayer engagement and service delivery. By
establishing more field offices, the NBR aims to increase accessibility and encourage tax
compliance, especially among local businesses. These offices will enhance local oversight and
contribute to more efficient revenue collection in the region.

Establishment of New Monitoring and Investigation Units: To strengthen enforcement, the

NBR has set up dedicated units, including an E-Tax Management Unit, an E-TDS Monitoring Unit,
and a Tax Intelligence & Investigation Unit. These specialised divisions focus on identifying tax
evasion, monitoring compliance with electronic filing requirements, and improving oversight.
Such measures provide a robust framework for addressing complex tax issues, enhancing overall
governance within the tax system.

Revamped Tax Academy: Recognising the need for advanced training, the NBR is establishing a
modern tax academy at a new facility. This institution aims to build capacity within the NBR,
providing training in best practices and emerging digital tax systems. Enhanced training will
foster a more knowledgeable and efficient workforce, ultimately contributing to improved
taxpayer services and more effective revenue collection.

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Digital Partnerships with Development Partners: The NBR has forged partnerships with
development partners to support comprehensive digitalisation initiatives. These collaborations
provide the technical expertise and financial resources needed to implement advanced digital
systems, fostering a modernised and transparent tax administration. Digitalisation efforts aim to
streamline processes and enhance data accuracy, making it easier to track taxpayer compliance
and identify potential revenue sources.

Mandatory Proof of Tax Return Submission for Services: To broaden the tax base, the NBR
now requires proof of tax return submission as a prerequisite for accessing certain public
services. This policy incentivises filing compliance by making tax return proof essential for
everyday services, thereby reducing tax evasion and increasing the number of registered
taxpayers within the formal tax system.

Mandatory Self-Assessment for All Taxpayers: The NBR has extended the self-assessment
scheme to all taxpayer categories, making it a mandatory requirement. This scheme allows
taxpayers to evaluate and declare their own income, thereby simplifying tax filing while reducing
administrative burdens on the NBR. By encouraging honesty and transparency, the self-
assessment system aims to build trust and foster voluntary compliance across all income levels.

API Integration with Third-Party Agencies: In a bid to enhance compliance, the NBR has signed
Application Programming Interfaces (APIs) with various agencies to obtain third-party
information on potential taxpayers and tax evaders. This data-sharing initiative aims to broaden
the taxpayer base by identifying non-filers and under-reporters, enabling more accurate and
efficient tax assessments through real-time data from external sources.

Alternative Dispute Resolution (ADR) Mechanism: The NBR has introduced an Alternative
Dispute Resolution (ADR) mechanism to expedite the resolution of tax disputes, alleviating the
backlog of cases in the tax system. ADR offers a quicker, less adversarial process for resolving
conflicts between taxpayers and the NBR, encouraging greater cooperation and ultimately
improving compliance by simplifying the resolution of tax-related issues.

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Chapter VII. Public Investment: The Roots of Corruption*

7.1 Introduction: The Critical Role of Public Goods in Bangladesh's Economic Growth

In countries like Bangladesh ensuring the availability and quality of public goods is vital for
sustainable economic growth. Essential services such as infrastructure, education, healthcare,
and clean water play a crucial role in fostering an environment that promotes economic activity
and enhances the quality of life for citizens. At the macro level public investment promotes
economic growth, investment and aggregate productivity while at the micro level public
investment reduces poverty, and smoothen income distribution (Anderson et al., 2006). However,
it is the choice of public investment that becomes crucial to achieve these goals.

A dependable supply of public goods is fundamental for economic stability and attracting private
investment. If public goods are insufficient, investors may perceive high risks and be reluctant to
invest. Quality infrastructure, including roads, railways, ports, energy, and telecommunications, is
essential for facilitating trade and connectivity. Inadequate infrastructure can lead to higher costs
and delays, deterring business investment. Similarly, a well-educated workforce is key to driving
innovation and productivity. Investing in public education equips citizens with the skills needed
in the labour market, attracting industries that require skilled workers. Conversely, poor
education systems can result in skill shortages, hindering businesses' ability to operate effectively.

In recent decades, there has been a notable increase in public investment projects, particularly in
infrastructure such as bridges, roads, electricity, highways, expressways, and urban
transportation. These projects have been financed mostly through public debt, including foreign
and domestic sources, as well as multilateral and bilateral loans. As a result, Bangladesh's
cumulative domestic debt has reached $155 billion, or ৳17,050 billion, with 60.73 per cent being
domestic and 39.27 per cent foreign (Finance Division, 2023). This translates to a per capita
cumulative debt of ৳98,554. Given this substantial fiscal burden, concerns arise over whether
such public investment is a prudent approach for the country’s economic development.

This chapter analyses the patterns of public expenditure by the Government of Bangladesh over
the past decade, exploring the strategies, magnitude, and roles of government officials, politicians,
and other stakeholders in contributing to a corruption crisis, which has resulted in Bangladesh's
low ranking on the global corruption index.

7.2 Share of Public Expenditure in Selected Countries

Bangladesh has adopted an aggressive strategy to expand its public sector investments over the
past decade, undertaking mega projects such as the Padma Bridge, a nuclear power station, metro
rail in Dhaka, and tunnels in Chattogram. While the country's recent public expenditure growth
has often been described as "breaking historic records," it is crucial to recognise that Bangladesh's
spending remains significantly lower than that of many of its competing nations.

Figure 7.1 illustrates the trends in public expenditure across selected Asian countries, revealing
that Bangladesh significantly lags behind other major Asian nations. This disparity suggests that
Bangladesh's public expenditure is not excessive or overly ambitious; instead, it is relatively low,
being the lowest among comparable Asian economies. The country's inability to allocate more
funds serves as a reminder of the importance of careful public expenditure management to

*The chapter has been prepared by Professor A K Enamul Haque, Deputy Vice Chancellor, UCSI
University, Bangladesh Branch and Director, Economic Research Group, Dhaka.
Data support received from Mr Estiaque Bari, Senior Lecture, Department of Economics, East West
University and Mr Robart Shuvro Guda, Analyst, PwC Bangladesh is duly acknowledged.

White Paper on State of the Bangladesh Economy 100

maximise efficiency and returns on its modest investments. This approach is crucial for
maintaining competitiveness in export potential with other countries.

The underlying inefficiencies in our public expenditure are rooted in the misuse and
mismanagement of funds alongside weak and opaque governance, which have likely aggravated
the country's economic challenges. Therefore, it is crucial to undertake a comprehensive analysis
and foster discussions aimed at addressing these obstacles to improve the effectiveness of public
spending in Bangladesh.

Figure 7.1: Trend in the Ratio of Government Expenditure to GDP (selected Asian economies)
50
45
40
35
30
25
20
15
10
5
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Bangladesh Bhutan Cambodia China India

Indonesia Myanmar Sri Lanka Thailand

Source: World Economic Outlook data, 2023 (IMF).

7.3 Surge in Public Investment, Fiscal Burden and Impact on Private Investment

As Bangladesh’s public expenditure surged to a historic high, analysis of non-development public

expenditure indicates that there has been a notable increase in salaries and allowances since the
fiscal year 2015-16 (see Error! Reference source not found.7.3). Many believed that the salary i
ncrease was intended to appease the bureaucracy that aided the government in rigging the 2014
election. However, given the low tax-GDP ratio, and due to heavy public debt, interest payments
on loan have surged since 2017-18 and it surpassed even the amount of salaries and allowances
of the government.

Economic crisis and political unrest gave rise to public agitation. Allegation against corruption in
public expenses rose. This led to restrictions on the Right to Information Act and the use of the
Digital Security Act—which saw over 7,000 cases between 2018 and 2023 (CGS, 2024)— and
limited transparency of the government. These measures concentrated power within the
executive, reducing accountability and enabling corruption. A requirement for the Prime
Minister's approval before prosecuting government employees under the Anti-corruption Act
further shielded officials from accountability.

A Transparency International Bangladesh (TIB) survey in 2021 highlighted rising corruption,

with 70.9% of households encountering corruption in public services. Law enforcement, the
Passport Office, and the Road Transport Authority were notably corrupt, with 56.8% of
respondents experiencing judicial system corruption and 48.7% in public health. This corruption
rise, from 66.5% in 2017 to 70.9% in 2021, led to bribes amounting to BDT 1.83 billion—5.9% of

White Paper on State of the Bangladesh Economy 101

the 2020-21 government budget—indicating pervasive corruption even within the judiciary.
(Bertelsmann Stiftung, 2024)

In the 2010s, Bangladesh aimed for robust economic growth, launching its Vision 2021 with
targets of 7.4% annual growth as per the 7th Five Year Plan, and 8.5% for the 8th Plan. This growth
was expected to come from infrastructure investments spurring private investments. However,
rising corruption, the COVID-19 pandemic, and economic slowdowns led to stagnation by late
2022. Although the GDP growth was 6.94% in 2020-21, the anticipated growth rates for
subsequent years were not achieved, resulting in slowed employment growth and heightened
unemployment among educated youth.

A report noted that unemployment among tertiary-educated youth rose from 9.7% in 2013 to
27.8% in 2022 (Star Business Report, 2024), as many struggled to find suitable jobs. The situation,
described as "jobless growth," was exacerbated by government job quotas that limited
opportunities for graduates. Growing discontent led to student protests in July 2024, ultimately
resulting in the government's ousting. This diagnostic study was initiated to re-evaluate the state
of the economy and propose corrective measures.

The Pattern of Public Expenditure and Issues

To address this dilemma, we analyse the trend and pattern of the Government of Bangladesh's
development expenditure over the past decade. A prominent theme during this period has been
an emphasis on large-scale infrastructure projects, aimed at facilitating development and
transitioning Bangladesh away from its Least Developed Country (LDC) status. This focus on
infrastructure has formed the central narrative of the government's growth strategy.

As shown in Figure 7.2, public expenditure in terms of revised ADP is shown from 2010 to 2023.
It shows an average annual growth rate of 6.6% in ADP and annual amount of public expenditure
in 2023 is about 1.45 times that of 2011. There are, however, two peaks: one in in 2014 – the
election year, and other one in 2017-18 fiscal years – prior to election. One of the major
investment items in these years was the construction of Padma Multipurpose Bridge Project with
an actual investment of $3.868 billion. The original cost of the project was $1.2 billion – an
increase by 222% (Bangladesh Bridge Authority, n.d.). The project was completed in 7 years from
2014.

Figure 7.2: Amount of revised public expenditure (ADP) from 2010-2023

Source: Data from selected Budget Documents of the Government of Bangladesh.

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Between 2010 and 2023, around 7 lakh crore taka were spent on projects across various sectors
through the Annual Development Plan. However, an analysis of the budget by the Center for Policy
Dialogue (CPD, 2024) reveals that in 2016, 38% of projects were financed fully or partially by
foreign funds, a sharp decline to just 11% in 2023, indicating a significant decrease in foreign-
funded projects. Additionally, nearly 40 projects (3.2%) had an allocation of only 1 lakh,
representing ghost projects that lacked legitimate justification for financing. The analysis also
highlights that approximately 31.4% of the projects experienced time overruns of 6 to 10 years,
with nearly 3% facing overruns exceeding 10 years. These findings suggest issues related to
project management, accountability, and the effectiveness of public expenditure in Bangladesh.

The revised budget reveals a considerable allocation of 21.2% to Public Administration, indicating
an emphasis on strengthening the civil bureaucracy, which could be seen as a reward from the
government for 15 years of 'service' amid criticisms of democratic backsliding. While significant
investments in transport, rural infrastructure, and power are essential for economic development
and attracting foreign direct investment (FDI), the high levels of corruption within these sectors
raise serious concerns about the effective use of public funds. The five sectors that received the
most public expenditure—Transport and Communication, Power and Energy, Education, Housing
and Community Amenities, and Health—together account for nearly 71% of total expenditure
(CPD, 2024).

In addition to these issues, there are criticisms on spending surrounding the "last quarter
syndrome" in our expenditure pattern, where a significant portion of the annual budget is spent
hastily in the final quarter of each fiscal year, resulting in a near-dumping of funds during the rainy
season. Efforts to address this through the introduction of a three-year rolling budget have not
successfully resolved the problem. Moreover, many argue that a "construction bias" in public
expenditures contributes to inefficiencies. This phenomenon often leads to projects being
designed primarily with construction in mind, neglecting important operational components in
the Annual Development Programme (ADP) packages. For instance, many school buildings are
constructed without accounting for essential furnishings needed for classrooms or laboratory
equipment required to equip science labs.

To address the issues of misallocation, mismanagement, and inefficiencies in public expenditure

in Bangladesh, it is essential to have a clear understanding of its institutional framework. The
following section offers insights into the design, monitoring, and implementation of projects in
Bangladesh to inform the development of effective strategies for improvement.

7.4 Navigating the Public Expenditure Decision-Making Process

Many people in Bangladesh believe that a significant portion of public expenditure over the past
decade has been misappropriated by the the-then ruling government and its institutions. This
deeply rooted perception is difficult to alter, leading us to begin our investigation with a critical
question: How did this happen? More specifically, how has such a high level of corruption
persisted over time despite the existence of numerous agencies responsible for monitoring these
irregularities? To understand this issue, we must first examine the decision-making process
behind public expenditure in the government.

Project Selection and Implementation: Processes and Weaknesses

Government expenditures in Bangladesh are classified into two main categories: a) recurrent
expenditures, which include salaries, allowances, and consumables necessary for the regular
operation of government entities; and b) development and capital expenditures, which are
allocated for investments and the maintenance of public infrastructure. Development
expenditures are typically organised into specific projects by various government agencies and
are subject to rigorous evaluation by several ministries, including the Ministry of Planning,

White Paper on State of the Bangladesh Economy 103

Ministry of Finance, Ministry of Environment, Forests and Climate Change, and the Ministry of
Women and Children Affairs during the initiation process.

Each project must meet several requirements, and it includes: a) an economic and financial
feasibility analysis for projects with investments exceeding 50 crores taka; b) environmental
clearances from the Department of Environment for projects classified as Red and Orange; c)
financial clearances from the Ministry of Finance for investments provided by the Government of
Bangladesh; and d) gender analysis conducted by the Ministry of Women and Children Affairs. In
addition, the Ministry of Planning is responsible for analysing its contribution to poverty
reduction. These are in addition to other technical requirements used in project formulation.

Furthermore, each project is developed and designed using Logical Framework Analysis, which
outlines its goals, objectives, outputs, and activities to ensure proper project design. Once project
formulation is complete, those with an Internal Rate of Return (IRR) exceeding 12% in recent
years (previously it was 15%)—the social discount rate—are submitted for approval at the
Executive Committee of the National Economic Council (ECNEC) meetings. However, it is unclear
whether this discount rate is based on real or nominal values.159 This is because when all data in
the cost benefit analysis are in constant prices, the relevant discount rate should be a real discount
rate.

However, once approved by the ECNEC, which is chaired by the Prime Minister and co-chaired by
the Minister for Planning, the projects are implemented by the respective agencies. During the
implementation phase, the line ministry of the implementing agency, along with the
Implementation, Monitoring, and Evaluation Division (IMED) of the Ministry of Planning, and the
Ministry of Finance, monitors the project's progress on a quarterly basis to ensure timely
execution. The Project Directors cannot spend any money beyond the expense limits outlined
within the project document known as DPP or Development Project Proforma.

According to the ECNEC guidelines, a project document may be revised up to three times to
accommodate unforeseen changes in expenses or in activities. Each revision must receive
approval from the relevant ministry and may also require re-approval from the Executive
Committee of the National Economic Council (ECNEC) if the revised costs exceed 15% of the total
allocation. Unfortunately, these revisions often lead to increases in both project costs and
durations, with actual expenses in some cases rising as much as 400% above the original planned
amounts.

However, the revised Development Project Proposals (DPP), which represent the total
expenditure of the projects, do not receive the same rigorous evaluation concerning the return on
investment for these adjustments. This lack of thorough scrutiny may suggest that many of the
revisions lead to investments that are "uneconomic" and infeasible.

Finally, upon project completion, a Project Completion Report is submitted by the Project
Directors, and IMED evaluates the project. Additionally, the Comptroller and Auditor General
(CAG) of the Government of Bangladesh reviews each project, including all expenditures, to check
for any unlawful practices or processes. Finally, the CAG's report is submitted to the Public
Accounts Committee of Parliament for discussion and further action. The ACC is also responsible
for investigating any wrongdoings during the implementation of the project.

The process for expenditure management is standard in many countries, yet it is often followed
in a clerical manner across project offices. Despite this system of control and monitoring, there is

159 In theory, it is supposed to be the real discount rate which excludes inflation. As such, a 12% real
discount rate is very high and may lead to non-selection of projects that have long gestation periods
leading to bias in selecting projects which have immediate returns.

White Paper on State of the Bangladesh Economy 104

a widespread public belief that nearly 40% of all government expenditures are misappropriated.
This concern has been frequently voiced in discussions throughout our public consultation
process, prompting us to examine the spending process and the institutional oversight
mechanisms in place.

7.5 Scrutinising Public Spending: Processes and Oversight Mechanisms

Despite initiating major projects such as the Padma Bridge, Karnaphuli River Tunnel, and the
metro rail in Dhaka, Bangladesh continues to grapple with significant infrastructure deficiencies.
While the government underscores the necessity of infrastructure development, many projects
appear to have been approved without thorough evaluation of their long-term economic impacts
and are often influenced by political motivations. On average, each year the Government used to
fund nearly 1200-1500 projects in the ADP.

Many projects have been part of election campaigns, with ceremonies like laying foundation
stones or cutting ribbons used to "officially" declare them open, even when they were not ready
for public use. A stark example of this is Terminal 3 at Dhaka airport. This trend is evident even
for caretaker governments, which might seem unusual since they have no electoral incentive. For
instance, the Caretaker Government of 2006 inaugurated the Bijoy Sarani flyover in Dhaka before
it was fully completed and ready for public use. Consequently, while these projects adhere to the
established selection process, they are frequently implemented hastily, without adequate analysis
of their costs and benefits. This approach results in many projects becoming unviable, ultimately
imposing a significant burden on the government budget.

Additionally, there is a widespread perception that many of these projects serve merely as
showpieces for the government, designed to cultivate a false sense of national pride and allow the
ruling political party to showcase superficial progress. Given the pervasive concerns about
corruption expressed by many individuals consulted during our investigation, we felt it necessary
to examine several key documents to uncover the true narratives behind these initiatives for the
public.

Oversight Mechanisms and Their Limitations

In addition to the line Ministries and the Ministry of Finance, several other institutional
mechanisms exist to scrutinise public expenditure and prevent misappropriation. These include
the Office of the Comptroller and Auditor General (CAG), the Public Accounts Committee of
Parliament, the Anti-Corruption Commission, and the Implementation Monitoring and Evaluation
Division (IMED) of the Ministry of Planning, which is responsible for producing evaluation
reports. Below, we examine some of their key recommendations.

CAG’s observations

In 2022, the Comptroller and Auditor General's office of the Government of Bangladesh produced
51 compliance reports after auditing various organisations and ministries. Key observations
regarding the causes of irregularities included: a) violations of government rules by multiple
agencies, including regulatory bodies such as Bangladesh Bank; b) expenditures on non-existent
projects; c) embezzlement of funds; d) non-compliance with public procurement acts and
regulations; and e) violations of government orders or directives from regulatory agencies.

In 2021, the CAG’s Office noted over 13,000 audit observations involving a total of 1,26,592 crore
taka. The highest number of audit discrepancies came from the Energy and Mineral Resources
Division, amounting to 32,946 crore taka, followed by the Ministry of Housing and Public Works
at 26,089 crore taka, the Power Division at 16,214 crore taka, the Ministry of Home Affairs at

White Paper on State of the Bangladesh Economy 105

6,577 crore taka, the Prime Minister’s Office at 6,111 crore taka, and the Bridge Division at 4,372
crore taka, among others (CAG, 2023).

A High number of audit observations reflects the incompetencies within the bureaucracy who
were overseeing these projects. There is a noticeable positive correlation between the budget
allocations for various sectors and the number of audit observations they receive. This situation
is concerning. When the Comptroller and Auditor General (CAG) reports audit violations
amounting to thousands of crore taka in projects, even those under the Prime Minister's office, it
conveys a detrimental message to others and undermines trust in the management of public
funds.

Public Accounts Committee

In 2022, the Public Accounts Committee (PAC) of Parliament addressed audit observations and
managed to resolve 357 out of over 22,000 observations from 2021, totaling 10,537 crore taka.
Of this amount, 4,052 crore taka were successfully recovered or adjusted. Notably, nearly half of
the recovered funds were linked to the Ministry of Road, Transport, and Bridges, which were duly
recovered and accounted for. According to PAC records, it took over 200 days to resolve these
issues. The high volume of audit observations make it challenging for the PAC to address them
effectively every year.

Anti-Corruption Commission

The Anti-Corruption Commission (ACC) is a statutory organisation established by the

Government of Bangladesh in 2004. However, its effectiveness has been questionable, with a brief
period of notable performance between 2007 and 2008. Although the Commission is intended to
function as an “independent and impartial institution for the control and prevention of
corruption,” it has often been influenced by political authorities.

Public trust in the ACC has significantly declined, evidenced by a 29% drop in the number of
complaints received between 2019 and 2023 (ACC, 2024). The rate of investigations initiated in
response to these complaints has remained low, at nearly 5%, and the number of cases referred
to ministries for action has decreased from 17% in 2019 to just 5% in 2023. This gradual erosion
of the Commission's power to combat corruption is a key factor contributing to the rising levels
of corruption in the country. On the contrary, the ACC is accused of being used to silence the
political opponents in the country. Despite the significant sums of taka reported to be embezzled
in various projects, the Anti-Corruption Commission (ACC) appears to have taken little to no
meaningful action against those responsible. This lack of accountability raises concerns about the
effectiveness of the ACC in addressing corruption and safeguarding public funds.

IMED of the Ministry of Planning

The Implementation, Monitoring, and Evaluation Division (IMED) is a key branch of the Ministry
of Planning, responsible for overseeing development projects during implementation and
providing comprehensive evaluation reports on completed projects. Discussions with individuals
associated with IMED and examination of various evaluation reports have highlighted several
reasons for delays and cost overruns in these projects.

Key factors contributing to these issues include: a) difficulties related to land acquisition and
associated litigations; b) poor-quality feasibility studies and inaccurate cost estimates; c) the
fragmentation of contracts into smaller packages, which results in inefficient execution often
linked to local extortion and payouts to local political figures; d) rising costs of construction
materials; e) damages from water-logging caused by inadequate drainage designs during road
construction; and f) frequent transfers of Project Directors, among others.

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Many of these inefficiencies are intricately linked to corruption, even if this connection is not
explicitly acknowledged in their reports. For example, the Implementation Monitoring and
Evaluation Division (IMED) reported inadequate cost assessments and subpar feasibility studies
as far back as 2012, yet there has been little meaningful progress in these areas within the
Planning Ministry. This lack of improvement continues to result in escalating project costs.

Moreover, the persistent absence of proper drainage systems in road designs has been highlighted
in many evaluation reports, yet this issue remains unaddressed, leading to damage in newly
constructed roads and increased maintenance costs for these projects. Evaluation reports are
intended to serve as valuable input for designing similar future projects; however, this essential
practice appears to be lacking within the ministry.

7.6 Understanding the Roots of Corruption: Systemic Issues and Systemic Failures

Given the observed trends within institutions tasked with monitoring corruption in public
expenditure, it is crucial to assess the extent of corruption in Bangladesh. It is evident that many
public institutions are either non-functional, ineffective, or lack the sophistication needed to
accurately depict the rampant corruption and misuse of public funds. Nevertheless, these
institutions have indirectly highlighted bottlenecks, raised concerns regarding public spending,
and identified practices that contribute to the mismanagement of public resources.

The clear lack of institutional oversight on government expenditure, the absence of accountability
for culprits, and the failure to impose sanctions on corrupt officials, combined with extortion at
both national and local levels, have all contributed to the misappropriation of significant public
funds. Lapses within government offices regarding efficient cost estimation and appropriate
project design, along with collusion among politicians, bureaucrats, and contractors, have further
exacerbated the problem.

This cycle of corruption has intensified over time as public spending has increased; it can also be
argued that the funds that fuelled corruption have led to the development of increasingly larger
projects – a reverse causality. Consequently, public expenditure has grown significantly over the
years, creating a perpetual loop where corruption begets more spending, which in turn fosters
greater corruption.

The situation mirrors that of government initiatives aimed at capacity building, where powerful
individuals within the bureaucracy exploit opportunities for personal gain. Many of these officials
travel abroad using public money, often leaving those who would genuinely benefit from exposure
or training behind – a glaring example of misuse of public funds. This issue is closely tied to the
hierarchical nature of power and authority within civil bureaucracy. The opaque decision-making
processes foster collusion, whereby various groups participate in these so-called “tour” programs,
traveling abroad without a legitimate need. Furthermore, the institutions and individuals
responsible for oversight are often complicit in this collusion, undermining the integrity of
capacity-building efforts.

During one of the consultations, it was reported that the National Board of Revenue (NBR)
developed software for the online submission of VAT returns with support from A2I (access to
information office160), marking a positive step toward reducing the hassle for businesses.
However, users encountered a significant issue: one user noted the absence of a "SUBMIT" button,
rendering the software ineffective.

160 a2i is a flagship project at the PM Office and was funded by UNDP.

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This could indicate a fault in the software's design or, more disturbingly, a deliberate attempt by
the VAT office to render the software useless in order to profit illegally from the physical
submission of VAT returns. The failure to detect this problem or issue an apology by the VAT office
strongly suggests corrupt intent within the organisation.

The Government of Bangladesh initiated a Livelihood Improvement project known as the

“Leveraging ICT for Growth, Employment, and Governance Projects” from 2013 to 2018, with an
original budget of 521.97 crore taka. However, the actual expenditure amounted to 774.72 crore
taka, reflecting a 43% increase over the initial allocation. This large capacity-building initiative
aimed to promote the IT sector and train 30,000 individuals for employment within it.

The evaluation report from IMED stated a high level of satisfaction with the project's success.
However, it inaccurately attributed the benefits solely to the project, overlooking the
contributions of training institutions, colleges, and universities that also played a role in
advancing the sector. Additionally, the quality of the evaluation report was inadequate, as it failed
to distinguish the marginal impacts of training 30,000 individuals on the entire IT sector.

This analytical weakness in assessing the project's impacts has contributed to the continuation of
various ICT sector and other projects that lack tangible benefits. It highlights the need for more
robust evaluations to ensure that future initiatives are grounded in a clear understanding of their
actual contributions to the sector.

7.7 Measuring the Magnitude of Corruption in Public Spending

In this section, we provide a rough estimate of the level of corruption based on secondary research
materials and insights gathered during consultations conducted throughout the brief period of
our study.

Discussions with a diverse range of individuals, including public officials, social leaders, local
elites, and youths during our inquiry, have led us to conclude that corruption was rampant due to
the abuse of authority by bureaucrats, law enforcement agencies, and political powers. This
pervasive issue is worsened by the absence of law and order and a lack of justice in society. Many
individuals find the prevailing situation intolerable yet feel powerless to effect change due to the
opaque nature of governance in Bangladesh. At all levels, the government lacks accountability to
public scrutiny, there are no opportunities for public consultation in project design, and the costs
associated with these projects are often concealed from the general public.

Transparency International, Bangladesh has been working on tracing practices of corruption in

Bangladesh for many years. In its report in 2024 on infrastructure projects, it estimated that
nearly 5-6% of project costs are paid by contractors as bribes to Project Team, nearly 6-8% is paid
by contractors as bribes to field inspection teams, as such about 11-14% of the project costs are
bribes. The report suggests that in road sector and infrastructure projects nearly 10-20% are paid
to local politicians, other contractors and senior officials for ensuring a collusive practice that
exists during bidding process for awarding contracts; 2-6% are paid for renting tender licenses,
selling work orders, compromises, collusive or coercive practices like bribes or extortions, etc.
Consequently, for construction projects nearly 23-40% of the project costs is the corruption rate.
Of all the development expenditure of the government, nearly 80% of the projects are linked to
procurement of goods and services including construction, land purchase, land development,
equipment purchases and so on, while the rest are capacity building or technical support projects.
As such, the government had initiated several procedural changes including e-procurement using
e-GP portal on 10 procuring entities in 2012, and the PPR or public procurement regulation
(2008) on their purchases.

White Paper on State of the Bangladesh Economy 108

Analysis of e-GP data shows that procurement processes have primarily been adhered to within
the Local Government Division and the Transport sector. However, while the use of the e-GP
system reached its peak in 2019, it has since declined. Further investigation reveals that despite
compliance with the e-GP system, nearly 70% of contracts were awarded to local contractors (TIB,
2023). This trend suggests the existence of a powerful local collusion among contractors, making
it challenging to disrupt entrenched practices in the procurement process.

All these practices and irregularities have resulted in significant misuse of public funds. Over the
past 15 years, approximately 7,00,000 crore taka have been allocated for procuring various goods
and services, including the construction of roads, bridges, power infrastructure, hospitals, and
educational facilities, among others. It is thus estimated that between 1,61,000 crore and 2,80,000
crore taka may have been used as bribes and extortions at various levels, solely derived from
public expenditure on development projects. Between 77,000 and 98,000 crore taka of these were
simply bribes paid to government officials while between 70,000 and 1,40,000 crore taka were
extortions by politicians and their accomplices and the rest are spent on collusive payments.

Much of this money is often paid in cash or in kind, both domestically and internationally, by
contractors to bureaucrats and politicians who have family members living abroad. This practice
facilitates the laundering of significant amounts of corrupt funds outside the country.
Domestically, a significant portion of these funds is invested in sectors such as real estate,
fisheries, agriculture, and transportation, where investments are often technically non-traceable.
This lack of transparency makes it challenging to track the origins and flow of these funds,
allowing for the potential misuse of resources.

7.8 Toward a Solution: Strategies for Addressing Corruption in Public Spending

While it is challenging to define a singular approach to combat corruption in Bangladesh, certain

common themes have emerged. The discussions and consultations that occurred during this
deliberation have led us to propose the following measures.

Professional approach to feasibility studies

One significant lapse in the process is the absence of professionalism being applied to feasibility
studies, resulting in underestimating project costs and subsequently inflating the internal rate of
return estimates to get the projects approved at ECNEC. Although the government allocates funds
for efficient project design, this is often done hastily and without the necessary professional rigor,
particularly in projects financed by the Government of Bangladesh compared to those funded by
donors. Since 2021, ECNEC has mandated the use of economic analysis for all projects; however,
due to persistent errors in cost estimations, this requirement may ultimately prove ineffective. All
project costs and benefits shall be measured in constant price and a real discount rate shall be
used for economic feasibility analysis.

Ensuring Integrity: Mitigating Political Influences in Project Selection

While it is acknowledged that project selection often reflects political priorities, it is essential to
ensure that chosen projects do not lead to the mismanagement of public funds and create debt
traps for a developing country like Bangladesh. There has been a noticeable bias towards projects
that serve as political showpieces for the government. To mitigate this issue, it is crucial for the
Minister of Planning and the Planning Division to operate with professionalism and be staffed by
individuals with the necessary expertise. Additionally, the planning units within each line
ministry should be supported by a strong professional team to ensure sound decision-making and
effective management of public resources. For this, competencies must be developed through
training.

White Paper on State of the Bangladesh Economy 109

Disrupting the Nexus: Breaking Collusion Among Civil Bureaucracy, Contractors, and
Politicians

While it is widely believed that political powers at both local and national levels engage in
extortion, upon closer examination, it becomes clear that there exists a robust nexus among civil
bureaucracy, contractors, and politicians that facilitates the embezzlement of public funds for
personal gain. This alliance is a fundamental driver of corruption and must be prioritised for
disruption at the national level.

The strength of this nexus allows civil and military bureaucrats to amass wealth through unethical
practices, often challenging politicians and businesses in their own arenas. During our public
consultations, there was a strong consensus that government officials have increasingly adopted
political roles over the past 15 years, mirroring a similar trend among business leaders. As a
result, there is a growing sentiment that bureaucrats and businessmen are gradually positioning
themselves to occupy seats in Parliament, further entrenching this corrupt system.

Government institutions such as the Anti-Corruption Commission (ACC) should focus their efforts
on addressing this nexus among civil bureaucracy, contractors, and politicians, rather than being
utilised to target political leaders whom the ruling party views as their primary adversaries in
constituencies. By challenging all three elements of this alliance, the ACC can more effectively
combat corruption and promote accountability within the system.

Empowering Communities: Ensuring Public Participation in Project Design

The opaque nature of our civil administration, coupled with corrupt intentions, frequently leads
to the concealment of information from the public. Local communities are the ultimate
beneficiaries of projects designed to enhance their welfare. Public discussions have revealed that
many high-cost projects fail to deliver benefits to these communities due to poor design. For
instance, while the Karnafully Tunnel in Chattogram is a technically sophisticated project, its
current location has not been well-received by local residents, who lack insight into the project’s
full design. To the community, it appears to serve no purpose for either side of the Karnafully
River, resulting in perceptions of it as a waste of public funds. Similarly, the Hitech Park in Sylhet
and Rajshahi offers no tangible benefits to local residents yet.

Such public sentiment can be detrimental to project proponents, as communities struggle to

appreciate initiatives that could potentially benefit them. To address this issue, many countries
have established mandatory public consultation processes during project feasibility studies, and
this practice should be adopted for all development projects. Implementing such consultations
would help shift public perception toward understanding and supporting well-designed projects
that aim to deliver social benefits.

Sensitivity analysis on IRR, BCR and NPV

Many projects characterised by weak cost estimates often undergo significant changes in their
overall costs during implementation. Additionally, projects may require adjustments to better
align with local needs. For instance, a highway project passing through a local market may disrupt
traffic flow, leading to congestion and necessitating design changes, such as the construction of a
flyover. Such modifications inevitably increase project costs.

To address these challenges, it is essential to implement a requirement for sensitivity analysis on

all parameters assumed in the project, including cost estimates. This analysis would establish an
explicit upper limit for project costs, providing clarity to both the project team and the planning
ministry. By incorporating sensitivity analysis, the planning process would be better informed,

White Paper on State of the Bangladesh Economy 110

guiding decision-makers in revising project documents and ensuring that financial adjustments
align with realistic assessments of local impacts.

Calls for Transparency: Scrutinizing the Offshore Wealth

It has been widely suggested that many bribes and extortions occur abroad, leading to substantial
sums of money being transferred out of the country to evade detection by various agencies. Public
servants, who are often at the heart of these corruption schemes, have shown reluctance to
declare their assets to the government. However, increased public pressure for transparency has
prompted businesses, civil servants, and politicians to seek safe havens for concealing their
corrupt funds.

Countries such as Canada, the USA, UAE, Singapore, and the UK are frequently criticised for
providing such havens. Many corruption payments are made overseas to avoid scrutiny by
government agencies. Therefore, it is essential that government officials, project directors, and
ministers be subjected to public scrutiny regarding their wealth held abroad, whether in their
names or under the names of family members.

White Paper on State of the Bangladesh Economy 111

References
ACC. (2024). Annual Report 2023—Uniting the World Against Corruption for Development, Peace and
Security. Anti-Corruption Commission, Bangladesh.
Anderson, E., De Renzio, P., & Levy, S. (2006). The role of public investment in poverty reduction: Theories,
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Bangladesh Bridge Authority. (n.d.). Padma Multipurpose Bridge Project. Retrieved November 22, 2024,
from http://www.padmabridge.gov.bd/rdpp.php
Bertelsmann Stiftung. (2024). BTI 2024 Country Report—Bangladesh. Bertelsmann Stiftung. https://bti-
project.org/fileadmin/api/content/en/downloads/reports/country_report_2024_BGD.pdf
CAG. (2023). Annual Activity Report 2022. Comptroller and Auditor General of Bangladesh.
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Years of Digital Security Act 2018-2023, Dhaka, Bangladesh. https://cgs-bd.com/article/24476/The-
Ordeal--Five-years-of-the-Digital-Security-Act-2018-2023
CPD. (2024, June 7). An Analysis of the National Budget for 2024-35. Post Budget Press Conference, Dhaka.
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Erden, L., & Holcombe, R. G. (2005). The Effects of Public Investment on Private Investment in Developing
Economies. Public Finance Review, 33(5), 575–602. https://doi.org/10.1177/1091142105277627
Finance Division. (2023). Debt Sustainability Analysis—Bangladesh. Ministry of Finance, Government of
Bangladesh.
Fournier, J.-M. (2016). The positive effect of public investment on potential growth.
Khan, S. Md., & Jahan, S. I. (2016). Public and Private Investment Nexus in Bangladesh: Crowding-in or out?
(Working Paper Series 1609). Chief Economist’s Unit, Bangladesh Bank.
MoF. (2023). Medium Term Macroeconomic Policy Statement 2023-24 to 2025-26 (MTMPS).
Macroeconomic Wing, Ministry of Finance, Government of Bangladesh.
https://mof.portal.gov.bd/sites/default/files/files/mof.portal.gov.bd/page/c8f50e8b_1e35_4697_81
ba_29ed66b1b2d1/MTMPS%202023-24%20English.pdf
Star Business Report. (2024, October 16). Jobless rate among graduates tripled in nine years: WB. The Daily
Star. https://www.thedailystar.net/business/news/jobless-rate-among-graduates-tripled-nine-years-
wb-3728571
The Daily Star. (2023, May 21). Private investment falls for second time in 3 years | The Daily Star. The
Daily Star. https://www.thedailystar.net/business/economy/news/private-investment-falls-second-
time-3-years-3325256
TIB. (2023). e-Government Procurement in Bangladesh: A Trend Analysis of Competitiveness (2012-2023).
Transparency International Bangladesh. https://ti-bangladesh.org/articles/research/6768

White Paper on State of the Bangladesh Economy 112

Chapter VIII. Food Security in Peril*

8.1 Introduction

The agriculture sector plays a vital role in Bangladesh's growth and rural development,
contributing nearly 14 per cent to the gross domestic product (GDP) and providing jobs for over
40 per cent of the workforce. In addition to employing a significant number of workers, both men
and women, it serves as the primary food supplier for the country's 172 million residents. Given
the current challenges of foreign exchange reserve shortages, ensuring a stable domestic food
supply is essential for Bangladesh's economic strategy. It is also a key goal in SDGs – Bangladesh
wants to achieve its targets for reducing poverty and hunger. As such, food security has been one
of the major drivers in our agricultural policies.

Figure 8.1: Growth rates in Agriculture and its sub-sectors

Source: World Bank Databank.

Agricultural production in South Asia relies heavily on inputs like fertilizers and irrigation,
primarily focusing on staple crops such as rice. However, continued growth in the sector faces
several challenges, particularly in Bangladesh, including declining input productivity, resource
degradation, and insufficient crop diversification. Given the high population density, expanding
agricultural land is not feasible; thus, improving efficiency in production is crucial for enhancing
benefits to small producers (Bryan et al., 2018).

Figure 8.1 illustrates the growth rates of various agricultural sub-sectors. Fisheries, for example,
grew at approximately 6% annually from 2010 to 2016 but declined to 3% by 2023. The crop sub-
sector, however, experienced low growth in 2012-13 and 2015-16, spiking in 2013-14 before
stabilizing at 3% by 2022-23. The animal and livestock sub-sector maintained a steady growth
rate of 3% from 2010-11. The overall performance of the agriculture sector is closely linked to the
crop sub-sector, highlighting its significance. This suggests that the agricultural sector's potential
is currently constrained by a lack of innovation in the crop sub-sector. Combined with population

*The chapter has been prepared by Professor A K Enamul Haque, Deputy Vice Chancellor, UCSI
University, Bangladesh Branch and Director, Economic Research Group, Dhaka.
Data support received from Mr Estiaque Bari, Senior Lecture, Department of Economics, East West
University and Mr Robart Shuvro Guda, Analyst, PwC Bangladesh is duly acknowledged.

White Paper on State of the Bangladesh Economy 113

pressures and decreasing agricultural land due to land conversions, the challenges confronting
agriculture are substantial.

A study conducted by Rahman et al. (2024) indicates that while Bangladesh has made significant
strides in food security, the country still encounters major challenges in achieving nutritional
security, as reflected in the 2023 Global Hunger Index, which classifies it at a "serious" hunger
level. The research highlights that, although undernourishment has significantly decreased,
micronutrient deficiencies—referred to as “hidden hunger”—continue to be a critical issue in
Bangladesh (also see Figure 8.2). Note that HIES 2016 data is not entirely comparable to other
years because the Household Income and Expenditure Survey (HIES) for 2016 was designed to
better represent the districts of Bangladesh and involved a significantly larger sample size. The
inconsistency in the estimates of HIES 2016 raises doubt about the technical feasibility of the
sample.

Figure 8.2: Food Intake and Protein Intake per person over time

Source: HIES Survey of selected years.

8.2 Navigating Food Security in Bangladesh

Since gaining independence, Bangladesh has consistently boosted its food production. By 2022,
the country was close to achieving food self-sufficiency in rice, with rice output increasing nearly
fourfold over the past fifty years. At the same time, Bangladesh lost agricultural land due to
conversion into other uses and its population grew by two and a half fold. However, there are still
production gaps for certain non-rice crops, including wheat, maize, pulses, oilseeds, and onions.
In terms of access, the average daily wage in the agricultural sector now allows workers to
purchase approximately 11.4 kg of rice, compared to just 4.8 kg in 2016 (Ahmed et al., 2024).

However, it is important to note that the average does not capture the full picture, as there are
seasonal fluctuations in employment and significant wage disparities between men and women.
A study examining HIES data from 2010 to 2016 highlights a considerable gender wage gap, with
women earning 22.9% less than men in 2010, which rose to 62.2% by 2016 (Mamun, 2024).
Evidence from other studies indicates that non-farm employment in rural Bangladesh has started
to increase, resulting a gradual shift in the gender dynamics of agricultural labour. This change is
driven in part by rising non-farm job opportunities for men and, in part, by decreasing residual
income for farming households. This decline in income is attributed to a policy mismatch, where

White Paper on State of the Bangladesh Economy 114

price controls on rice, coupled with rising farming costs, have led to a steady reduction in the
earnings of farming families.

In addition to existing challenges, Bangladesh is confronting new obstacles in achieving food

security due to climate change and natural disasters. Global conflicts, rising food prices, and
political polarisation further impede progress in food security and negatively impact the
nutritional status of impoverished households. A study by Rezvi (2018) examines the impacts of
declining agricultural growth and found that population growth, urbanisation, and the loss of
arable land contribute to reduced agricultural production. This decline in agricultural growth
poses significant challenges to food security in Bangladesh.

In conclusion, while Bangladesh has made significant progress in boosting food production and
nearing rice self-sufficiency, it faces multifaceted challenges—ranging from production gaps in
non-rice crops and gender wage disparities to the impacts of climate change—threatening its food
security and the livelihoods of vulnerable populations.

8.3 ADP Expenditure in Agriculture

One of the primary goals of the Bangladesh government has been to achieve self-sufficiency in
food production and improve farming incomes in rural areas. This policy is particularly important
in light of the growing trend of people migrating from rural areas to cities—a phenomenon that
can create significant challenges for both urban centres and the agricultural sector. When rural
populations decline, it often results in labour shortages on farms, which can hinder agricultural
output and threaten food security. Moreover, the influx of people into cities can strain urban
resources, leading to overcrowding, inadequate housing, and increased pressure on public
services.

To realise these objectives, the government allocates resources toward various development
activities within the agricultural sector. This is reflected in allocation and use of funds through the
Annual Development Program. These investments are vital as they help build the necessary
infrastructure, provide advanced training for farmers, and support the adoption of new
agricultural technologies. Improved infrastructure, such as irrigation systems and transportation
networks, allows farmers to cultivate crops more efficiently and access markets more effectively.
Such strategic investments play a crucial role in not just boosting food production but also
elevating the living standards of rural households.

The priorities of the government’s investment strategy can be illustrated through the revised
Annual Development Programme (ADP) expenditures across key ministries, including
Agriculture, Fisheries and Livestock, and Water Resources (Figure 8.3). Upon examining the data,
it becomes clear that there has been a marked increase in the allocation for the Ministry of Water
Resources since 2015-16. This signifies a recognition of the importance of effective water
management—essential for agriculture in a country which is frequently challenged by flooding
and water scarcity. However, the same intensity of funding is not mirrored in the allocations for
the Ministries of Agriculture and Fisheries and Livestock. This discrepancy raises critical
questions about the long-term health of the agricultural sector. The limited funding for
Agriculture and Fisheries and Livestock could have severe ramifications.

White Paper on State of the Bangladesh Economy 115

Figure 8.3: Revised ADP Expenditure on Agriculture, Fisheries & Livestock, and Water
Resources since 2010-11
14,000
12,000
10,000
Crore Taka

8,000
6,000
4,000
2,000
-
2011-12

2012-13

2013-14

2014-15
2010-11

2015-16

2016-17

2018-19

2019-20

2020-21

2021-22

2022-23

2023-24
2017-18
Ministry of Agriculture
Ministry of Fisheries and Animal Resources/Livestock
Ministry of Water resources

Source: Ministry of Finance for selected years.

In summary, it is crucial to critically assess its resource allocation strategies. A balanced approach
that ensures adequate funding across all relevant sectors—especially Agriculture and Fisheries
and Livestock—will be essential for fostering sustainable rural development and ultimately
keeping populations rooted in their communities. Investing in the agricultural sector is not just
about producing more food; it is about maintaining the social fabric of rural life and ensuring that
all farmers, regardless of their size or resources, have the opportunity to thrive.

8.4 Agricultural Value Chain and Prices

Low farm income is also caused by the pricing gap between farmgate and retail markets. An
analysis of the agricultural value chain indicates that farmers in Bangladesh receive only about 7–
29% of the total value of rice produced, over and above their production costs. Similar trends are
observed in the value chains of other commodities, such as potatoes and brinjal (Murshid et al.,
2013). According to this report, small rice farmers face significant disadvantages due to various
factors, including limited access to credit from institutional sources, reliance on tied credit from
informal markets, price volatility in agriculture, and other production risks. Many marginal
farmers, who succumb to distress sales of rice and other agricultural products during harvest
time, often complain about the presence of a ‘syndicate’161 in the market that uses its market
power to deprive farmers of a fair price for their crops. Mujeri et al., (2021), however, identified
rice millers as the most powerful group in the value chain, as they earn a substantial share of the
total value generated from rice trade.

Mujeri et al., (2021) also found that alternative value chains have minimal impact on farm gate
prices. While millers create differentiated rice with specific quality characteristics for the
supermarket value chain, this price differentiation primarily reflects broader categories (e.g., fine,
medium, and coarse varieties) at the farm gate level, offering little benefit to farmers.
Consequently, the main beneficiaries of this differentiation are the millers and other downstream

161 The term ‘syndicate’ in Bangladesh emerged as an alternative to the concept of cartels. It is important to
note that these local ‘syndicates’ exert control over farmgate prices in local markets, often preventing
farmers from receiving what they consider a ‘fair’ price for their products. However, it remains uncertain
whether, in the absence of these large buyers in local markets, farmers would actually receive higher prices
for their goods.

White Paper on State of the Bangladesh Economy 116

participants, including wholesalers, retailers, and supermarkets. The analysis further reveals that
although rice farmers bear the highest production risks, they receive the least benefit from the
value chain.

The Public Food Distribution System

To deal with fluctuating prices of essential goods, successive governments have established
several food distribution channels to ensure that poor households receive essential commodities
at fair prices. These channels are categorised into two types: monetised channels and non-
monetised channels. Monetised channels sell food grains at subsidised prices and include
programs such as Essential Priorities (EP) for the armed forces, police, and Rapid Action Battalion
(RAB); Other Priorities (OP) for government employees, jail and hospital inmates, and student
hostels; and Large Employers (LE) for industrial and tea garden workers. Additionally, Open
Market Sales (OMS) and the Food Friendly Programme (FFP) target the poor specifically.

In contrast, non-monetised channels serve the poor through various food-based safety net
programs, including Food for Work (FFW), Gratis Relief (GR), Vulnerable Group Feeding (VGD),
and Vulnerable Group Feeding (VGF) programs. While the Ministry of Food manages the
monetised channels, the non-monetised channels involve multiple ministries, such as the Ministry
of Disaster Management and Relief, the Ministry of Women and Children Affairs, the Ministry of
Primary and Mass Education, and the Ministry of Local Government, Rural Development, and
Cooperatives.

However, a study by Jahan (2013) revealed that these interventions are neither adequately
planned nor sufficient to help rural people escape the poverty trap. On the other hand, as the retail
prices of essential products increases, urban dwellers get annoyed and often demand government
interventions in the market to control rising prices. The Government of Bangladesh has been
addressing regular fluctuations in rice prices by employing open market sales (OMS) during peak
price seasons. While this has been effective in many cases, our field investigation suggests that
even the OMS operators have created a cartel and do not allow competing OMS operators to enter
their territory. Many of these sellers were associated with the ruling political parties and family
members of the local ward commissioners.

The Egg Market

Recently, there has been significant price fluctuation in egg prices, which has embarrassed the
Interim Government.

Figure 8.4: Wholesale Price of Eggs (per 100 pieces) from 2021 to 2024 (Nov)
2000
price per 100 eggs in taka

1500

1000

500

0
July
January

June
February

March

May

August

October

November
April

December
September

2021 2022 2023 2024

Source: Ministry of Agriculture (2024).

White Paper on State of the Bangladesh Economy 117

Error! Reference source not found.Figure 8.4 illustrates the prices over 12 months for 2021, 2
022, 2023 and 2024. The average price increase was 26% between 2021 and 2022, 20% between
2022 and 2023, and 16% between Jan-Oct of 2023 and 2024.

According to data from the DAM, the price changes in eggs during August, September, and October
of 2024 were -2%, -1%, and 2%, respectively, despite the market showing a historic rise in egg
prices since 2010. Rising egg prices over years is a clear indication of growing supply shortages
over years. This deserves a thorough investigation to find out whether the supply shortages
occurred due to rising demand or falling supply. Unfortunately, no such investigation took place
and every year including this year, the crisis prevailed, and government is embarrassed by it.

The Department of Agriculture should have taken corrective actions to increase the supply of eggs
in the market to make the prices stable. This failure highlights a lack of coordination between the
two departments of the Ministry of Agriculture, revealing a classic failure that necessitates
significant structural changes in their operations.

8.5 Enhancing Agricultural Resilience

Figure 8.5 illustrates the benefit-cost ratio (BCR) of agricultural products in Bangladesh for 2013
(Miah & Haque, 2013). The data indicate that the BCR varies from nearly 1 to over 3 across
different crops, with Aus rice close to 1 and blackgram exceeding 3. In the livestock sector, the
BCR ranges from approximately 1 for broilers to nearly 1.8 for goats. Among nuts and spices,
groundnut registers as the least profitable, while ginger emerges as the most profitable product.
In aquaculture, catfish (Koi) ranks as the least profitable, whereas carp (Rui) is the most
profitable. Notably, fruit production is particularly lucrative, with BCR values ranging from 1.5 for
guava to over 5 for orange.

Figure 8.5: Agricultural Products and their profitability (by BCR)

Source: Miah & Haque (2013).

This profitability analysis suggests that among the field crops, which is nearly 44% of agricultural
value addition, the least profitable product is rice whereas the most profitable product is
blackgram or mashkalai. Mungbean, garlic and gingers are the most profitable field crops with
BCR greater than 2 whereas groundnut, seasame, onion, mustard, soybean, turmeric and chilli
producers get less than 2 BCR. For fruits, guava, pineapple, mango and orange are all with BCR
greater than 2.

White Paper on State of the Bangladesh Economy 118

Clearly, any commercial agriculture will shy away from these non-profitable crops and would
make their markets vulnerable to price fluctuations. This means that production shortages in
these crops are well-anticipated. Producers are likely to shift away from production of onions,
chilies, mustard, and several other crops. This shift poses a significant risk to food security and
the price stability in the market for staples.

This means that uniform support for farmers is unlikely to stabilise markets for rice, wheat,
lentils, groundnuts, sesame, onions, mustard, chicken, and eggs. To address the recurring crises
in many of these essential crops, such as onions, and rice, there is a need to provide differentiated
support to these products so that farmers find them more profitable compared to many other
non-essential products. This support was absent in the past, and even current policies may not
adequately support the cultivation of these essential items, leading to neglect and insufficient
investment in their production. By revisiting these policies, the government can encourage
farmers to prioritise the cultivation of onions and chilies, ensuring a more stable supply and
preventing future crises.

Similarly, in the livestock sector, chicken meat and eggs rank among the least profitable products,
which could lead to reduced supply or fluctuations in supply if this trend continues. Without
proper attention and incentives to stimulate production in these products, repeated supply
shocks are likely to occur. Establishing better incentive structures, including subsidies or support
programs for poultry farmers, is essential to encourage increased and stable production of
chicken and eggs. By creating a more favourable economic environment for these sectors, it would
not only help stabilise supply but also enhance the overall resilience of the agricultural system in
the face of changing market dynamics.

8.6 Profitability Declines and Shifting Labour Dynamics

Given the current situation where agricultural profitability is low for major crops such as rice,
onions, and livestock products like chicken meat and eggs—which are essential components of
the Bangladeshi economy—it is clear that farm incomes for these producers are also relatively
slow compared to those of other farmers. This creates a challenging landscape for agricultural
workers who rely on these products for their livelihood.

Compounding this issue is the decline in agricultural value addition, while employment in
agriculture and dependency on farming are not decreasing sharply. Farmers are facing rising costs
for essential inputs such as water, seeds, fertilizers, and pesticides, further squeezing their profit
margins. Additionally, the agricultural sector is experiencing a mechanical transition, with an
increasing reliance on farm machinery. This shift implies that farmers will have diminishing
residual income from their agricultural activities, making it increasingly difficult for them to
sustain their livelihoods.

As a result of this gradual erosion of income from farming, there is a negative incentive for male
workers to remain in the agricultural sector. Consequently, we are witnessing a marked increase
in female workers within farming communities, often at lower wages compared to their male
counterparts. This gender transformation in the agricultural workforce has become an inevitable
trend in Bangladesh, as economic pressures force changes in labour dynamics. The shift may
ultimately reshape the agricultural landscape, with women increasingly assuming roles in
farming, despite the prevailing wage disparities. Low profitability in agriculture also led to a
shortage of agricultural workers during peak seasons.

White Paper on State of the Bangladesh Economy 119

8.7 Mechanisation in Agriculture: Promises, Subsidies, and Corruption

To promote mechanisation in the agriculture sector, the Government of Bangladesh has launched
several subsidy programs, providing discounts of up to 50% (or 70% in coastal regions) on the
purchase of specific machinery. This initiative includes equipment such as power tillers, reapers,
rice transplanters, and combine harvesters. The government has allocated Tk 30.2 billion for a
project titled 'Mechanisation of Agriculture Work through Integrated Management,' which aims
to distribute 51,300 units of agro-machinery across
12 categories between 2020 and 2025. In FY21, the
government successfully distributed 2,300 units of
agricultural machinery, including 1,762 combine
harvesters. However, many of these incentives have
fallen into the hands of corrupt businesses through
Scan QR to see the video on corruption
corrupt officials, leading to a major scandal
scandals on this.
surrounding the distribution of agricultural
machinery.

In December 2023, the Anti-Corruption Commission (ACC) launched an investigation into

allegations of irregularities associated with a 3,000 crore taka project on farm mechanisation,
following a report from the Implementation Monitoring and Evaluation Division (IMED). The
inquiry includes allegations against Premier Bank for the embezzlement of funds related to this
project (Ali, 2023).

Furthermore, in FY 2021-22, the government implemented a monetary policy to reduce the

interest rate cap on agricultural loans from 9% to 8%, offering loans at a lowered 4% interest rate
for crops and the harvest sector. There is also a target for banks to allocate 50% of SME loans to
cottage, micro, and small enterprises by 2024, which aims to enhance agricultural production and
boost rural incomes. Unfortunately, it has been noted that political leaders and corrupt
bureaucracies have exploited agriculture as a means to legalise their illegal wealth. A notable
example includes allegations against a former Inspector General of Police, who reportedly
amassed significant wealth but ‘legalised’ part of it through investments in fisheries and received
the ‘Integrity Award’ of the Government in 2020-21.

8.8 Corruption, Extortion, and Impact on Productivity

Despite being one of the most impoverished sectors of the Bangladeshi economy and having the
lowest profitability, agriculture plays a crucial role in feeding the country's 173 million people.
This sector is vital for the livelihoods of the poorest and least educated individuals, who rely on it
for their survival. However, it is plagued by widespread bribery and extortion, undermining its
potential and further complicating the challenges faced by those dependent on agriculture.

Fertilizer distribution

Several studies have underscored the impact of corruption on agriculture and its profitability.
Anik & Bauer (2017) found that corruption in the distribution of fertilizer by government dealers
leads to a 59% reduction in the marginal productivity of fertilizer during the Amon season, while
this decline is 18% in the Boro season. The study also revealed that marginal farmers are
disproportionately affected by fertilizer-related corruption compared to larger farmers,
highlighting the detrimental effects of corruption on those who are already vulnerable in the
agricultural sector.

White Paper on State of the Bangladesh Economy 120

Agricultural Credit and Rice Procurement

A key strategy of the government for incentivizing production of rice in crop fields was to ensure
that farmers get the fair price for their produce during the harvest season for both Amon and Boro
rice. A second strategy was to provide credit facilities to the farmers at subsidised rate to promote
them to use better inputs.

Rahaman et al. (2020) analysed the credit and rice procurement policies of Bangladesh. In 2016-
17, Government distributed nearly 176 billion taka as agricultural credit to farmers in Bangladesh.
The study revealed that nearly 6.82% of the money were payment to bank officials as bribe. This
means nearly 12 billion taka were paid as bribe. They also found that nearly 54% of the credits
were actually used in agriculture.

In 2009, Bangladesh Bank (BB) launched a special fund called the "Sharecroppers Refinance
Scheme," which was extended until June 2018. The credit programme has helped sharecroppers
lessen their dependence on non-institutional credit sources. The overall impression of the
evaluation report of the Research Department of Bangladesh Bank on this programme was
positive. However, the report suggested combining the credit facility with insurance to deal with
uncertainty in agricultural production (Bangladesh Bank, 2017).

On the procurement policy, several studies indicated that there are positive gain for farmers
participating in the rice procurement programme of the government and yet only 25.8% of the
rice were sold to the DG Food in 2019 (Ahmed et al., 2021). The main reason is that farmers were
not fully aware of the public procurement policy of rice. While research-based studies are very
scanty on this area, a report published by the daily New Age shows that the Anti-Corruption
Commission has smelled presence of bribes and extortions in the rice procurement schemes in
Bangladesh in 2020 (Daily Star, 2020; New Age, 2020).

8.9 Impact on Soil Quality

Despite numerous successes in agriculture, Bangladesh has faced challenges in diversifying its
crop production. The prevalent practice of mono-cropping rice in its fields has significantly
impacted soil health and nutrition. Two issues are highlighted here: Soil Organic Matter and Zinc
in Soil.

Soil Organic Matter

Soil organic matter is an important indicator of soil health, and it is key to soil fertility
management. Over exploitation of soil or removal of crop-residue either for fuel or for animal feed
or for any other use leads to depletion of soil organic matter. As a result, farmers need to
supplement soil organic matter with balanced use of fertilizer and so their cost of production will
rise (Bot & Benites, 2005). Figure 8.6 demonstrates the changes in soil organic matter in
Bangladesh from 2010 to 2020, clearly indicating a sharp decline, particularly in the northeastern
districts.

White Paper on State of the Bangladesh Economy 121

Figure 8.6: Soil Organic Matter Status Map of Bangladesh 2010 and 2020

Source: Soil Resources Development Institute, Bangladesh (website)

Zinc Deficiency in Soil

Zinc is an essential micronutrient for plant growth. In a review article, Rudani et al. (2018) stated,
“Zinc deficiency can lead to smaller leaves, delayed maturity, and necrotic leaf tissue, making
plants more susceptible to disease and pests. This can result in a significant loss in production
and grain nutrient content.” Additionally, zinc deficiency can cause stunted plant growth, delayed
maturation, and reduced yields for rice crops.

Figure 8.7 illustrates the rise in zinc deficiency in Bangladesh from 2010 to 2020. The data clearly
show that zinc deficiency has become acute in the country, which is alarming, as it poses a
significant threat to food supply in Bangladesh.

White Paper on State of the Bangladesh Economy 122

Figure 8.7: Zinc Status Map of Bangladesh, 2010 and 2020

Source: Soil Resources Development Institute, Bangladesh (website)

8.10 Concluding Observations and Recommendations

Agriculture has been the foundation for the survival and livelihood of millions in Bangladesh.
Successive governments have allocated funds for research, irrigation, and the distribution of
seeds and fertilizers to achieve self-sufficiency in rice, the country's staple food. This has included
financial support for agricultural subsidies, technical assistance through agricultural extension
offices, and the provision of subsidised fertilizers and seeds to farmers via BADC officers.

Despite these efforts, the agricultural sector faces significant challenges, including: a)
marginalised farmers and an uncertain land tenure system, b) low labour productivity resulting
in lower wages, c) an overreliance on rice production with limited diversity leading to soil quality
loss, d) stagnating growth in agricultural production, e) limited access to finance for most landless
farmers, f) inadequate or selective agricultural extension services, g) corruption in farm
mechanisation, and h) shortages or unavailability of fertilizers.

These challenges indicate that largely illiterate farmers, who lack access to the government's
power structure, are often deprived of the benefits intended for them. In contrast, government
officials, politicians, and others appear to benefit significantly from various government support
and subsidy programs.

Strategies for Sustainable Growth and Food Security

Following is the list of various steps that government can take in order to ensure transparency
and fairness into the agricultural sector interventions.

Mitigating Price Fluctuations: Strategies for Stabilizing Essential Goods

• Fluctuations in the prices of essential goods pose a significant challenge for governments,
often causing unrest among low and middle-income households reliant on fixed salaries.
To address this issue, it is crucial to control price volatility. One effective strategy is to
eliminate entry barriers for middlemen – the locally called ‘syndicate’- who hold excessive
market power.

White Paper on State of the Bangladesh Economy 123

 • The government should consider removing all taxes (such as VAT or import duties) on
these products well in advance—at least 45 days—before a potential crisis. Additionally,
the tariff commission should conduct research to develop an automatic tax exemption
mechanism, allowing imports when domestic prices reach a predetermined threshold
level.to maintain reasonable price levels, protecting low-income consumers while
providing incentives for farmers to sustain production growth.

Strengthening Farmer Integration in the Rice Value Chain

• Integrating farmers more closely into the rice value chain improves their access to
markets, reduces reliance on intermediaries, and aligns production with consumer
demands, leading to more stable incomes and better pricing for their products.
• Direct involvement in the value chain provides farmers with training in best practices and
quality control, enabling them to enhance product quality and engage in value-added
activities like processing and branding, which can result in higher profit margins.
• Encouraging collaborative models, such as cooperatives, increases farmers' bargaining
power, facilitates resource sharing, and enhances access to financing, ultimately
promoting sustainable practices and improving overall productivity.

Fostering Collaboration in the Agricultural Value Chain for Equitable Growth

• The government must encourage participants to develop both horizontal and vertical
collaborations throughout the agricultural value chain. One strategy is to use agricultural
extension groups and/or the NGOs for supporting the formation of farmer groups or
cooperatives enhances resource sharing and bargaining power, reducing costs and
improving outcomes.
• Encouraging alliances between farmers and agri-businesses—such as processors and
retailers—creates a more integrated value chain, improving product quality and
alignment with market demands.
• The government should ensure that the Bangladesh Competition Commission takes
measures that prevent monopolistic practices and promote fair competition and to ensure
equitable value distribution among all participants.

Combating Corruption in Agricultural Mechanisation Programs

• Given the scandals of corruption that have plagued agricultural mechanisation programs,
it is imperative for the government to take decisive action to hold corrupt officials
accountable.
• The government should implement strict accountability measures to ensure that all
officials involved in agricultural programs are held responsible for their actions. This may
include transparent investigation processes and the establishment of independent
oversight bodies to monitor programme execution.
• Enhancing existing anti-corruption frameworks can help identify and prevent corrupt
practices. This could involve developing clear guidelines and policies that define
acceptable conduct and the consequences of corrupt behaviour.
• Increasing transparency in procurement and funding processes related to agricultural
mechanisation is essential. Publishing detailed information on contracts, expenditures,
and programme outcomes can discourage corrupt activities and build public trust.
• Introducing a strong protections for whistleblowers can empower individuals to report
corrupt practices without fear of retaliation. This can lead to increased reporting and
ultimately reduce corruption within the sector.

Promoting Crop Diversification and Value Addition for increasing farm income
• Supporting initiatives that encourage crop diversification beyond rice is essential for
improving agricultural sustainability and increasing farmer income. The focus should be

White Paper on State of the Bangladesh Economy 124

 on high-value crops such as fruits, vegetables, and spices, which offer greater economic
returns and contribute to food security.
• The government and agricultural organisations should promote the cultivation of high-
value crops by providing training, resources, and financial incentives to farmers. This
diversification reduces dependence on rice, mitigates risks from price fluctuations, and
enhances nutritional diversity.
• Implementing better post-harvest practices is crucial for maximizing the quality and value
of diverse crops. This includes investing in storage solutions, transportation, and handling
techniques to minimise losses and maintain product quality from farm to market.
• Establishing processing facilities for fruits, vegetables, and spices or linking industries to
establish plants for processing at the local level can significantly increase the value added
to these crops. By providing opportunities for local processing, farmers can capture more
of the profit margin and create job opportunities within their communities.

Investing in Rural Infrastructure for Agricultural Development

• Investing in rural infrastructure is vital for enhancing the productivity and economic
viability of smallholder farmers, particularly those in remote areas. Key areas of
investment include:
• Developing robust irrigation systems can significantly improve crop yields and reduce the
reliance on rainfall, ensuring consistent production throughout the year. This investment
helps to mitigate the impacts of droughts and enhances food security.
• Constructing and upgrading rural roads facilitates better access to markets for farmers.
Improved transportation reduces post-harvest losses by allowing for timely delivery of
products to markets and increases farmers' ability to obtain fair prices for their goods.
• Building adequate storage facilities is essential to minimise post-harvest losses. Proper
storage solutions can preserve the quality of perishable produce, allowing farmers to sell
their products at appropriate times for maximum profit.
• Implementing effective disease management strategies is crucial to maintaining healthy
livestock and fish populations. Providing training and resources for farmers on preventive
measures and treatments can reduce losses and improve yields.
• Promoting environmentally sustainable aquaculture techniques ensures that fish farming
practices do not harm local ecosystems. Educating farmers on sustainable practices
contributes to the long-term viability of the fisheries sector.

Enhancing Early Warning Systems and Disaster Response

• Improving early warning systems and disaster response mechanisms is crucial for
mitigating the impacts of natural disasters such as floods, droughts, cyclones, and salinity
on agriculture. Investing in advanced technology for early warning systems that are
relevant to their cropping practices is important for enabling farmers to prepare and take
preventive measures.
• Strengthening disaster response protocols ensures a coordinated approach to support
affected communities, including training local response teams and establishing
communication networks for swift information dissemination.
• Moreover, promoting sustainable land use practices, such as agroforestry and
conservation agriculture, can enhance ecosystem resilience to climatic stresses. By
prioritizing these initiatives, stakeholders can significantly enhance the resilience of
agricultural systems, safeguarding livelihoods and ensuring food security in the face of
increasing climate variability.

Supporting Agricultural Adaptation to Climate Change

• To strengthen the resilience of farmers against climate change, it is essential to provide
financial support, training, and resources that enable them to adopt adaptive practices.
This support can include distribution of climate-resilient seeds as well as climate-based

White Paper on State of the Bangladesh Economy 125

 insurance schemes that protect farmers from crop losses due to extreme weather events.
In addition, extension services focused on knowledge dissemination will equip farmers
with the necessary skills and techniques to implement these adaptive strategies
effectively.
• Promoting evidence-based policymaking and facilitate the development of targeted
adaptation strategies that address the specific needs of the agricultural sector. Integrating
climate change considerations into national agricultural policies and development plans
will ensure a cohesive and comprehensive approach to mitigating climate impacts.
• Increasing public awareness and education around climate change effects empowers
communities with the knowledge and tools needed for local adaptation strategies. By
prioritizing these recommendations, Bangladesh can foster a more inclusive, sustainable,
and resilient agricultural sector that supports rural livelihoods and contributes
significantly to overall economic growth and food security.

White Paper on State of the Bangladesh Economy 126

References
Ahmed, A. U., Bakhtiar, M. M., Anowar, S., & Rahman, M. M. (2021). Public Procurement of Paddy
in Bangladesh. The Bangladesh Development Studies, 44(1/2), 1–30.
Ahmed, A. U., Bakhtiar, M. M., & Mahzab, M. M. (2024). Food Security and Nutrition in Bangladesh:
Evidence-Based Strategies for Advancement. International Food Policy Research Institute.
Ali, S. (2023, December 15). Tk3,000cr agri project in Bangladesh under ACC scanner | The
Business Standard. The Business Standard. https://www.tbsnews.net/agriculture/tk3000cr-
agri-project-bangladesh-under-acc-scanner-757914
Anik, A. R., & Bauer, S. (2017). Corruption in the agriculture sector–micro level evidence from
Bangladesh. In The handbook of business and corruption: Cross-sectoral experiences (pp. 363–
389). Emerald Publishing Limited.
Bangladesh Bank. (2017). Impact Assessment of Agricultural Credit Program for the
Sharecroppers in FY16 Implemented by BRAC under Refinancing Scheme of Bangladesh Bank
[Special Research Report]. Research Department, Bangladesh Bank.
https://www.bb.org.bd/pub/research/sp_research_work/srw1603.pdf
Bot, A., & Benites, J. (2005). The Importance of Soil Organic Matter—Key to drought-resistant soil
and sustained food production (FAO Soils Bulletin 80). Food and Agriculture Organization.
https://www.fao.org/4/a0100e/a0100e.pdf
Bryan, E., Bell, A. R., Ringler, C., & Ahmed, A. U. (Eds.). (2018). Increasing Crop Production
Benefits to Small Producers in Bangladesh. Asian Journal of Agriculture and Development.
https://doi.org/10.22004/ag.econ.275686
Daily Star. (2020, May 17). Some influential people, govt officials involved in rice graft: ACC. The
Daily Star. https://www.thedailystar.net/country/some-influential-people-bangladesh-govt-
officials-involved-rice-procurement-corruption-1903393
Jahan, F. (2013). Bangladesh Food Price Report 2012: Eating in a Time of Food Price Volatility.
Miah, M. A., & Haque, A. K. E. (2013). Policy Options for Supporting Agricultural Diversification in
Bangladesh (#6/11). National Food Policy Capacity Strengthening Program.
https://doi.org/10.13140/RG.2.2.13932.77446
Ministry of Agriculture. (2024). Agricultural Service Portal. http://service.moa.gov.bd/market-
directory/price-graphical-report
Mujeri, M. K., Ahemd, N., & Hussain, M. I. (2021). Food Security Implications of Rice Value Chain
Management in Bangladesh. Universal Press Limited.
Murshid, K., Yunus, M., Ali, S. M. Z., & Ahemd, N. (2013). Bangladesh Food Market Performance:
Instability, Integration, and Institutions. Bangladesh Institute of Developmetn Studies.
New Age. (2020, May 18). ACC detects corruption in paddy, rice procurement, says chief. The
New Age. https://www.newagebd.net/article/106687/acc-detects-corruption-in-paddy-
rice-procurement-says-chief
Rahaman, M., Sarkar, M., Kabir, M., Deb, L., Rahman, M., Islam, M., & Siddique, M. (2020).
Assessing the Effectiveness of Rice Procurement Programme and Farmers’ Profitability in
some Selected Areas of Bangladesh. Bangladesh Rice Journal. 2020b, 24(1), 31–46.
Rahman, M. H., Rahman, S. S., & Akter, S. (2024). Enhancing Nutritional Security in Bangladesh:
Innovations and Challenges. Bangladesh Journal of Food and Nutrition, 1(1), Article 1.
Rezvi, M. R. (2018). The Factors of Declining Agricultural Growth in Bangladesh and Its Impact
on Food Security. South Asian Journal of Social Studies and Economics, 1–9.
https://doi.org/10.9734/sajsse/2018/v1i425810
Rudani, K., Prajapati, K., & Patel, V. (2018). The Importance of Zinc in Plant Growth—A Review. 5,
2349–4077.

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Chapter IX. Whither Private Investment*

9.1 Introduction

Over the past 15 years, private sector investment in Bangladesh has stagnated at around 23-24%
of GDP (Figure 9.1). Despite the ambitious targets set for domestic and foreign private
investments in successive Five-Year Plans (6th, 7th, and 8th), notable achievements remained
scarce. In addition to underwhelming domestic private investment, the country struggled to
attract substantial foreign direct investment (FDI). FDI as a share of GDP has remained below 1%.
For comparison, Vietnam—one of Bangladesh’s key competitors—attracts more than US$ 15
billion in FDI annually, whereas Bangladesh secures only around USD 3 billion (Figure 9.2), much
of which is reinvested earnings. This has been contributed to by several critical factors, which
have been identified to include the unconducive business environment, policy unpredictability, a
lack of transparent mechanisms for resolving disputes, bureaucratic inefficiencies, and
institutional weaknesses within the main agencies involved in promoting investments. These
have similarly hindered the creation of employment opportunities, worsening the economic
conditions significantly. This chapter analyses these factors and presents some
recommendations.162

Figure 9.1: Investment as a percentage of GDP

31.82 32.21
30.95 31.31 31.02 32.05 30.95 30.98

24.94 25.25 24.02 24.52 24.18

23.66 23.7 23.51
Percentage (%)

7.29 6.88 6.96 7.29 7.32 7.53 7.47

6.77

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

Fiscal Year

Public Private Total

Source: Bangladesh Bank.

*The chapter has been prepared by Ms Ferdaus Ara Begum, CEO, Business Initiative Leading
Development (BUILD), and Dr Selim Raihan, Professor, Department of Economics, University of
Dhaka and Executive Director, South Asian Network on Economic Modeling (SANEM), with contribution
from and Professor Mustafizur Rahman, Distinguished Fellow, Centre for Policy Dialogue (CPD).
162 The analysis in this chapter benefitted from a number of consultations which were conducted as part

of the preparation of the White Paper Committee Report.

White Paper on State of the Bangladesh Economy 128

Figure 9.2: FDI Inflow Trend

4.83
4.55
3.99 3.88 3.97
Billion USD

3.38
2.7 2.83 2.68 3.61 3.48
3
2.06 2.87 2.9
2.56
2.24 2.33 2.15
1.53

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Gross FDI Net FDI

Source: Bangladesh Bank.

9.2. The Business Environment Remained Unfavourable

Despite the high rhetoric on economic growth and development during the previous Awami
League regime, the business environment was not quite conducive for private investors in
Bangladesh. For that, global indices indicate differences and reflect deep-seated structural and
institutional barriers. As would be expected, in the World Bank's Ease of Doing Business Index
2020, Bangladesh stood at 168 out of 190 countries, lagging far behind its regional competitors,
India ranked 63, and Vietnam ranked 70.163 This poor ranking reflects barriers such as lengthy
bureaucratic procedures, weak enforcement of contracts, and inadequate property rights
protections. While the government attempted significant investments in infrastructure and
power generation to support industrial growth, these were not matched by comprehensive
reforms to enhance the regulatory and institutional environment for businesses.

The same fact is reflected in the Global Competitiveness Index 2019 of the World Economic
Forum, ranking Bangladesh 105th out of 141 countries. Inefficient government bureaucracy,
corruption, and policy unpredictability have been identified as major deterrents to the growth of
the private sector. Vietnam ranked 67th, benefiting from streamlined government policies and a
robust investment climate that attracts substantial foreign direct investment.164

In the World Bank's B-Ready Report 2024, Bangladesh ranks 34th out of 50 countries, with a
score of 41.64 out of 100 in the public services pillar, which is far behind some of its competitors.
While the country performed relatively well on operational efficiency, ranking 16th with a score
of 70.49, it performed notably poorly within the regulatory framework pillar at 43rd place, with
a score of 56.99. Both these rankings show that improvements in the regulatory environment,
coupled with transparency and ease of doing business, are urgently required.165

Again, Bangladesh's performance on the Transparency International Corruption Perceptions

Index 2023 highlights another critical challenge, ranking 149th out of 180 countries.166 Graft at
higher and lower levels of administration increased the cost of doing business and eroded
investor confidence in the legal and regulatory frameworks. Contrasting with this, countries such

163 https://archive.doingbusiness.org/en/rankings
164 https://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf
165 https://openknowledge.worldbank.org/server/api/core/bitstreams/08942fab-9080-4f37-b7be-

ef61c9f9aed9/content
166https://www.transparency.org/en/cpi/2023?gad_source=1&gclid=CjwKCAiA6aW6BhBqEiwA6KzDc9f

9T4hiVIorDcvIAAtZzDwRIa6pbCfav5SUujbjYh8rRYngplu4aBoCP38QAvD_BwE

White Paper on State of the Bangladesh Economy 129

as Vietnam and Malaysia steadily pursued an upward trajectory with regard to better governance
and anti-corruption policies, thus infusing dynamism into their private sectors. While the past
government took huge initiatives for public sector-led development, it failed to provide a
favourable business environment so that the potential of private investment could be
transformed into leading, sustainable economic growth.

9.3 Domination of Crony Capitalism Deprived the Genuine Investors

In the last decade, business entities with political links too often enjoyed prior access to
government contracts and resources at much-subsidized costs, lax regulation, exemptions, and
undue concessions in the banking sector in Bangladesh. Massive loans granted through violations
of banking procedures benefited powerful conglomerates and thus restricted the small
entrepreneur and enterprise group by ensuring a playing field which is not level at all. Despite a
series of incentives announced by the government itself for businesses, most such measures
remained ineffective or elusive to the majority. In addition, while foreign investors eyed
Bangladesh's growing sectors with interest, several issues prevented them from committing
themselves to long-term investments in these areas.

One of the most salient features of the prevailing crony capitalism in Bangladesh was that
influential businesses were able to shape policymaking - a phenomenon often referred to as "state
capture by the powerful."167 This was very much evident in sectors like telecommunications,
RMG, banking, real estate, and energy, where major policy decisions were disproportionately in
favour of a few dominant players. These entities exerted a strong influence on policy frameworks,
often at the expense of competition and innovation. Their influence undermined equitable
development by diverting public policy away from national interests and toward narrow,
politically motivated objectives.

Critically important institutions tasked with promoting investment and ensuring a level playing
field were often co-opted by narrow interest groups. This institutional capture eroded
transparency and accountability, discouraging foreign and domestic investment alike. This,
therefore, meant that only a few amassed enormous benefits at the cost of better economic and
social benefits for the majority. This, among other misalignments between public policy and
interest, remained the impediment to inclusive economic growth.

9.4 Tax System Remained Friendly to Cronies but Unfriendly to Most of the Businesses

Meanwhile, Bangladesh's tax regime remained inordinately favourable to the politically

connected business concerns at the expense of the broader private sector. Large conglomerates
usually enjoyed holidays, exemptions, and other forms of selective enforcement of tax laws that
distorted the competitive environment and deterred ethical business practices. For the majority
of Small and Medium Enterprises (SMEs) and new entrants into the market, however, the tax
regime remained over-complex, non-transparent, and onerous. High compliance costs, coupled
with the incoherent implementation of policy, gave rise to uncertainty that made long-term
planning and investment hard to undertake confidently. This lack of a level playing field
consequently stifled domestic entrepreneurship and discouraged FDI, as international investors
were deterred by the nonexistence of a playing field and the perceived risks from engaging in
such a system.

The tax policy and complicated customs procedures remained a big hindrance to businesses and
entrepreneurship in Bangladesh.168 The heavy tax burden, including Advance Income Tax (AIT),

167 See White Paper Chapter 21: Institutional Decline Stalling National Development.
168 See White Paper Chapter 6: The Illusive Goal of Domestic Revenue Mobilisation.

White Paper on State of the Bangladesh Economy 130

Tax Deducted at Source (TDS), and Corporate Income Tax (CIT), may reach 40-45%, which many
view as discouraging a conducive business environment. While large and powerful entities did
well in a system of preferred treatment, smaller ones suffered in competing, which led to
generally lower investment in strategic sectors. A very high reliance on indirect taxes, such as
VAT, further burdened businesses and consumers, thereby further lowering disposable incomes
and domestic demand. It created a perception of an unlevel tax regime, together with a lack of
institutional accountability, adding to apprehensions about the ease of doing business in
Bangladesh. In fact, these represented systemic issues that retarded private sector growth and its
potential role in bringing innovation, job creation, and economic diversification. Fairness,
transparency, and predictability in taxation across all private sector segments should be the key
features in the tax reforms the Government of Bangladesh could introduce to facilitate an
investment-friendly environment.

Most of the costly projects, from foreign vendors, such as the VAT Online Project, Income Tax
Automation Projects, and Integrated Digitalized Land Management Projects, failed to achieve the
desired objectives. Consequently, these initiatives of automation remained incomplete to further
burden the businesses. Most of the companies usually had to pursue duplicative processes. This
included filing digital and physical documents to get necessary approvals, certifications, and
registrations. This inefficiency defeated the very purpose of automation and hampers efforts to
streamline regulatory compliance.

Customs procedures add more complexity to the process; frequent mismatches in HS code in the
Import General Manifest (IGM) lead to a delay in the process. Operational efficiency is further
obstructed by the non-availability of essential service status for customs clearance and the non-
availability of Key Performance Indicators (KPIs) for key ports such as Chattogram and Dhaka
airports. There are no streamlined guidelines related to foreign companies seeking loans from
parent companies, thus slowing down access to financial support. Investors also face congestion
at Chattogram Port, limited storage in Export Processing Zones (EPZs), and unnecessary costs
due to the non-reuse of import containers. Moreover, the rigid categorisation between export-
oriented and domestic enterprises restricts FDI that targets both markets. In this regard, the
introduction of bonded storage facilities, the permission for container round use in Economic
Zones (EZs), and the expansion of the practice in Inland Container Depots (ICDs) are very
important to improve supply chain efficiency and attract more FDI.

9.5. Weak Capital Market Didn’t Promote Private Investment

As is known, in the past the capital market in Bangladesh has experienced many anomalies,
constraining its ability to raise equity from this market. Consequently, the private sector remains
highly reliant on bank lending. Foreign participation in the capital market is also insignificant,
primarily due to concerns over corrupt practices and a lack of transparency, especially regarding
the availability of company information. This has resulted in the market being largely dominated
by domestic investors. The current market has a mix of securities, such as 677 listed securities,
360 companies, 37 mutual funds, 20 SMEs, and 236 government securities. However, it is difficult
to determine how many of these are truly profitable due to the lack of a transparent and reliable
valuation process. This lack of clarity undermines investor confidence and restricts market
growth.

The Bangladesh Securities and Exchange Commission, tasked with the job of regulating the capital
market, has failed in the job of accountability before vested group pressure. Decisions pertaining
to the Initial Public Offering and secondary market management, as taken by the commission, fall
short of regulatory best practices. This has resulted in the erosion of investor confidence in the
system.

White Paper on State of the Bangladesh Economy 131

9.6. Investment Promotion Agencies were Made Dysfunctional

The investment promotion ecosystem is fragmented, and the IPAs in Bangladesh work in a silo
and not as a unit. Figure 9.3 presents the list of IPAs. Although the Bangladesh Investment
Development Authority (BIDA) is positioned as the central investment support body, its
effectiveness is hampered because of inadequate coordination with other IPAs, regulatory bodies,
and service providers. Moreover, these regional offices of BIDA equally face infrastructural
inhibitions from fully using the One Stop Services (OSS) platform to smoothly and in the shortest
lengthily process issues related to investments. A similar support integrated system one-stop
investment for transparency, reduction of tape, and helping the system build investor confidence
exists in Malaysia, Singapore, and Dubai. However, such initiatives have yet to be prioritised in
Bangladesh, which made the OSS of BIDA dysfunctional.

Figure 9.3: Investment Promotion Agencies (IPAs) in Bangladesh

Policy inconsistencies and procedural inefficiencies further deter investment. For instance,
discrepancies between BIDA’s work permit guidelines and the residency definition in the Income
Tax Act 2023 create confusion, while the prolonged work permit process—taking up to 12
months—adds to investor frustrations. Integrating visa and work permit procedures, as practised
in India and Thailand, could enhance efficiency and attract foreign investment. Automation efforts
have also fallen short, with incomplete initiatives such as the VAT Online and Income Tax
Automation Projects imposing dual submission requirements for approvals and registrations.
Monitoring and evaluation remain weak; for example, BIDA relies on estimated data from the
Investor Relationship Management System (IRMS), which is not systematically utilised.

Outdated legislative frameworks, including the Foreign Private Investment Promotion &
Protection Act 1989 and the Transfer of Property Act 1882, further complicate the investment
landscape. The Bangladesh Flag Vessels (Protection) Act 2019 mandates that 50% of goods be
transported via Bangladeshi vessels, yet a shortage of national shipping lines creates logistical
bottlenecks. Similarly, the issuance of No Objection Certificates (NOCs) remains cumbersome,
slowing trade and investment activities. In the pharmaceutical sector, reliance on imported Active
Pharmaceutical Ingredients (APIs) and new regulatory requirements under the Drugs and
Cosmetics Act 2023 add operational hurdles, while weak Intellectual Property Rights (IPRs)
enforcement leaves investors vulnerable. Strengthening IPR protection and training enforcement
agencies like Customs and the police are critical to improving investor confidence.

These challenges are partly attributed to inefficient institutions. For instance, the Registrar of
Joint Stock Companies (RJSC) has incomplete and outdated records of companies, while the DIFE
registers factories using disparate processes. Investors are often hampered in having to move

White Paper on State of the Bangladesh Economy 132

around various agencies to get various licenses and permits. As many as 150 different types of
regulatory approvals are needed from 23 government agencies to start an enterprise. While some
licensing processes have shifted online, automation remains incomplete, and excessive
documentation persists. Countries like Singapore streamline investment management through a
smaller number of ministries, contrasting with Bangladesh’s 44 ministries and authorities
overseeing business matters, creating coordination challenges and regulatory bottlenecks.

Data inconsistencies are evident in the records maintained by different IPAs. An analysis of 3,111
industries registered with BIDA (2019–2024) reveals that many have investments below BDT 15
crore, raising questions about the necessity of BIDA registration for such small-scale projects,
which could operate with a trade license. According to the Standard Operating Procedure (SOP),
investments under Tk 100 million do not require a project profile. Moreover, discussions indicate
that many industries registered through BIDA’s OSS are non-operational. The absence of a
centralised Master OSS, initially planned to integrate services from agencies like Bangladesh
Export Processing Zone (BEPZA), Bangladesh Economic Zone Authority (BEZA), and Hi-Tech Park
Authority (HTPA), hampers data accuracy and coordination. Additionally, the lack of officials
authorized to provide critical services such as fire safety, taxation, and environmental compliance
across all IPAs further complicates the process. Duplication in registrations across agencies could
be resolved by introducing a unique investor identification system to improve transparency and
efficiency.

9.7 FDI is Still Mostly based on Retained Investment

FDI in Bangladesh is basically driven by retained or reinvested earnings, rather than equity
capital inflow, reflecting the limited attraction of new investments. The data from Bangladesh
Bank show that a large part of FDI consists of the profits retained by the existing foreign firms
operating in sectors such as telecommunications, power, and financial services. This means
existing investors are finding the market gainful enough to reinvest, underlining the incapability
of the country in attracting new investors. The main causes include unclear regulations,
inefficient bureaucracy, and poor infrastructure all these discouraging fresh FDI, making
Bangladesh take a bet on reinvestments made by companies acquainted with getting by in this
tough climate.

Moreover, the legal environment regarding IPR protection and enforcement of contracts has
remained undeveloped, thereby greatly hampering the confidence of both domestic and
international investors. This, therefore, creates a barrier to innovative investments in
technologically intensive sectors because investors always look out for the protection of their IP.
Bangladesh has yet to develop effective mechanisms for the protection of IP rights of both local
and foreign investors. This has discouraged FDI and retarded technology transfer.

This reliance on reinvested earnings speaks to deeper structural challenges in the investment
climate. With an uncompetitive regulatory environment and insufficient investment promotion,
Bangladesh has not emerged as a favoured destination for greenfield investments, unlike its
regional peers, Vietnam and Indonesia. For example, complex procedures for obtaining licenses,
poor contract enforcement, and policy unpredictability deter new entrants. These challenges
need to be addressed by rationalising processes, facilitating investors, and upgrading
infrastructure to attract new FDI for the diversification and expansion of the investment base
beyond retained earnings.

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9.8 SMEs Faced Disproportionately More Challenges than Larger Firms in Business
Operation and Expansion

Over the past decade, SMEs in Bangladesh have been facing much more significant challenges
compared to large firms with regard to business operations and expansion. The major ones
include limited access to finance as SMEs are mostly unable to fulfil the collateral requirements
of banks, which generally favour larger and well-established companies. SMEs find it difficult to
conduct their operations in the intricate regulatory environment characterized by cumbersome
and bureaucratic licensing procedures, inconsistent application of rules, and lack of supporting
government agencies that make the scaling up of the smaller businesses quite difficult. In most
cases, SMEs lack the resources to invest in technologies and innovations that are key to remaining
competitive in the globalised market.

Moreover, SMEs are relatively vulnerable to infrastructural weaknesses, such as non-availability

and erratic power supply, poor transport networks, and inaccessibility of modern logistics and
communication systems. These factors raise operational costs and also restrain their capacity for
expansion. Where large firms may be able to afford the investment in alternatives or receive
favourable treatment, SMEs are often bearing the brunt of this, further extending the gulf between
them and larger enterprises. To make the business environment more inclusive, therefore,
policymakers have to take up the particular needs of the SMEs, especially with regard to access
to finance, infrastructure, and simplification of regulatory procedures, to enable them to become
more contributory to economic growth.

9.9 Trade Facilitation Measures are not Adequate to Encourage Investment

For trade facilitation, the National Board of Revenue (NBR) introduced the National Single
Window (NSW) project, which was launched in 2023 and is supposed to facilitate easier access
to online solutions with regard to trade processes. This will involve increased transparency and
smoothing of trade procedures in international trade, lessening the time and expenses attributed
to such trade. It is supposed to be complete by 2026, yet NSW operationalisation remains so
uncertain and, despite the launch of ASYCUDA, also called the Automated System for Customs
Data, Bangladesh still faces long documentary compliance requirements; procedures over twice
that in Vietnam and three times longer than in India. This indicates an urgent requirement to
continue with more improvements to the trade facilitation area that raises barriers to business.
The core reforms under the National Trade Facilitation Committee of the Ministry of Commerce
are moving forward at only a slow pace. Major measures of particularly crucial importance - like
the establishment of the Risk Management Unit, Pre-Arrival Processing, and Non-Intrusive
Inspection, respectively provided under Article 7.4, Article 7.1, and Article 7.4-will, no doubt,
guarantee smooth customs and reduce delays. Key customs ports, including Chattogram, Mongla,
Benapole, and Dhaka International Airport, have complex, cumbersome procedures in place and
regulations that are not transparent. The infrastructure is also not adequate. These issues hinder
trade efficiency and create opportunities for corruption. Often these lacunae result in payment
underhand payments. All these further exacerbate trade barriers.

9.10 Lack of Preparation to Face New Challenges

SDG-9 (Industry, Innovation, and Infrastructure) and SDG-12 (Responsible Consumption and
Production), both stress that the private sector is very important in contributing toward the
achievement of sustainable development goals. The government identified National Priority
Indicators (NPTs) at the national level to guide progress on SDGs in Bangladesh. However, the
strategic engagement of the private sector in advancing these SDGs is not yet adequate.

White Paper on State of the Bangladesh Economy 134

Textile and clothing exports to the EU account for approximately 45-50% of Bangladesh’s total
textile exports. The EU’s circular textile policies, which focus on efficiency and technological
innovation to promote sustainable consumption and production (SDG-12), will significantly
impact the sector. For Bangladesh to remain competitive, a National Strategy for Circularity needs
to be adopted. The EU will invest in, and finance textile production upgrading together with local
banks, providing credit lines for circular economy initiatives. Bangladesh needs to prepare
accordingly to sustain the sector through these changes. While different ministries carry out skill
development programs, many are duplicative and mainly focus on low-skill development. These
emerging challenges do, however, require a system that can provide institutional coordination,
with the private sector closely involved in the process.

One major concern is the lack of adequate preparation in promoting private investment to assist
the country in overcoming post-LDC graduation challenges. For Bangladesh, graduating to a
developing economy means it needs to improve the investment climate through the resolution of
various issues like outdated regulations, gaps in infrastructure, and the absence of streamlined
processes. A fully developed strategy for attracting and retaining private sector investment, in
particular, FDI, also means that the country runs the risk of being confronted by slower economic
growth, less competitiveness, and an inability to adapt to the changing market dynamics
worldwide. Such challenges will need effective policies and robust institutional support.

9.11 Governance in the Private Sector

In essence, chambers of commerce and trade associations are vital agents that can effectively
foster greater investment in Bangladesh, essentially by acting as catalysts, promoters, and
facilitators of business interest representation. Their major mandate, for instance, encompasses
the task of policy advocacy through the betterment of trade and investment opportunities by
means of improved international linkage and facilitation with regard to dialogue between
enterprise and government. Operational constraints include bureaucratic delays and
uncertainties in the legal system; these organizations can, therefore, aim at a transparent and
rules-based regulatory environment, which would be crucial for FDI inflows and economic
growth, especially in sectors such as manufacturing, agro-processing, and IT-enabled services.

Private sector entities in Bangladesh are engaged in policy advocacy- namely, tax relief, access to
easier finance, and streamlining of licensing- that also constitute regulatory support. They have
worked closely in conjunction with government bodies, financial institutions, and ministries to
ensure these issues were addressed. However, most of the challenges are not yet over, especially
concerning crony capitalism, whereby the interest of a few has taken centre stage at the
disadvantage of the rest of the businesses. On the same point, despite the government's urge to
make contributions from the private sector, especially the budget proposals, most of such
recommendations are not found in the final policy decisions. To address these governance
challenges and ensure shared prosperity, a robust public-private partnership is required. This
partnership must ensure information sharing transparently and involve joint decision-making,
which has been visibly lacking late. Non-competitive elections to business chambers, generally
dominated by cronies, have further undermined the potential for these chambers to serve the
broader business community effectively.

9.12 Conclusion

Private investment in Bangladesh has stagnated over the last decade, largely due to an
unfavourable business environment characterized by systemic challenges that discourage both
domestic and foreign investment. To address this issue and reignite the economy’s growth
potential, a multifaceted policy approach is required. Below are key policy recommendations to
stimulate private investment and enhance the country's economic prospects.

White Paper on State of the Bangladesh Economy 135

Encouraging a competitive business environment: Crony capitalism, which distorts the
competitive environment and restricts genuine investors from entering the economy, is one of
the biggest impediments to investment. The government needs to put in place stricter anti-
corruption measures and clearly spell out transparent policies with regard to the operation of
businesses. A competitive environment can be encouraged by strict application of antitrust laws,
improvement in the regulatory framework, and reduction of political interference in business
decisions.

Tax reforms for all-inclusive business support: The present tax regime has favoured a few, but
for the rest, especially the SMEs, it has remained oppressive. Reforming the tax system to make it
fair and business-friendly should be a priority. This would include revisiting the corporate tax
rates, introducing tax incentives for new businesses, and offering tax relief to SMEs. Additionally,
ease of doing business can be facilitated by simplifying the process of tax compliance through
digitization.

Developing the capital market: One of the major impediments to private investment is the
underdeveloped capital market, which limits the access of enterprises to capital. The government
should adopt a mechanism that promotes the capital market by enhancing transparency in the
markets, increasing investor protection, and promoting institutional investment. This will also
develop a bond market for firms, especially SMEs, to source funds for expansion.

Reforming Investment Promotion Agencies: Despite the fact that IPAs play a very critical role
in attracting and facilitating investment, they have been dysfunctional in Bangladesh. These
agencies need to be made functional through restructuring mandates to offer specific support for
respective sectors, coupled with capacity building for operational efficiency. A dedicated task
force could identify the bottlenecks and provide clear guidance on the incentives provided to
businesses.

Addressing SME challenges: SMEs disproportionately bear operational challenges and

constraints to growth. This enabling environment of SMEs needs to be facilitated by policymakers
in respect of access to finance, technical support, and access to markets at both national and
international levels. Special programs for reducing regulatory burden will go a long way toward
empowering SMEs.

Enhancing trade facilitation: In general, trade facilitation measures are wanting, which
negatively impacts investment and international trade. Rationalisation of customs procedures
should be undertaken, modernisation of port infrastructure, and development of logistic
networks will provide an enabling environment for trade and investment. Special attention would
also have to be paid to digitizing customs procedures, reducing obstacles in trade, and enhancing
efficiency in export-import operations.

Building capacity to face new challenges: Bangladesh urgently needs to be prepared for such
new challenges as climate change, disruption of technology, and shifts in global trade dynamics.
Innovation, research, development and technological adoption are fittingly equipping business
competitiveness in the fast-growing changing world economy. The need to invest more in
developing human capital for modern and technologically-based demands has been mentioned
to the government as well.

The role of the chambers of commerce and trade associations: Their role in Bangladesh is
that of investment promotion, improvement of policies, international linkages, and dialogue
between business and the government. However, a number of issues challenge their
effectiveness: crony capitalism, bureaucratic delays, and uncertain legal environments. Among

White Paper on State of the Bangladesh Economy 136

the pre-conditions are the proper strengthening of public-private partnerships and fairness in
representation within the chambers in order to attract FDI for inclusive growth.

The way to break this stagnation in private investment is for Bangladesh to develop a more
transparent, competitive, and inclusive business environment. These policy reforms will enable
the government to create an enabling investment climate that will promote economic growth,
innovation, and job creation. In doing so, the country will realise its full potential and attract the
national and foreign investors it urgently needs to drive development processes.

White Paper on State of the Bangladesh Economy 137

Chapter X. The Banking System - Deep into a Blackhole*

The interim government has inherited a heavily distressed financial sector, especially banks and
stock markets, that are fundamentally undercapitalised in the balance sheet of trust. The financial
sector used to shine in Bangladesh’s development story. The shine could not be sustained. Loan
defaults, frauds, scams and unethical banking practices proliferated with policy reversals and
regulatory capture. The safeguards lost guard. Financial repression came back. Cronyism as a
business model gained currency.

This chapter focuses on the banking system.169 Its macro-criticality can hardly be underestimated.
The chapter describes the solvency and liquidity of banks, digging beneath their balance sheet to
assess the depth of insolvency, liquidity shortfall and distressed assets. The ailments of the
sectors have been diagnosed hard by many stakeholders on a continuing basis. It has produced
an unwritten Dhaka Consensus on how the banking system got into and what needs to happen to
get out of this deep blackhole.

10.1 Macro Criticality of Banking

Scheduled banks in Bangladesh are the core financial intermediaries. Their assets reached
Tk 25,462.60 billion at end-June 2024, equivalent to 47 per cent of GDP. Their loans and advances
accounted for 66 per cent of total assets. The rest are invested in government securities and cash.
Total deposits in the banking sector, excluding inter-bank deposits, amounted to Tk 18,412.38
billion at end June 2024, equivalent to 34 per cent of GDP. A vibrant privately owned set of
financial institutions emerged from broad based financial liberalisation in the early 1990s.170 The
restructured and corporatised State-owned Banks (SOB) functioned better for a while until taken
for a ride by predators.

Growth model based studies indicate private credit growth became more important over time.
The coefficient linking private credit growth to GDP growth nearly doubled from 2001 to 2019.171
Measures of financial deepening such as broad money to GDP and private credit to GDP surged,
supporting the growth of private investment, foreign trade, and GDP per capita. A flexible market
based interest rate regime since the early 1990s served Bangladesh well.

Progress faltered prematurely in the past decade. The correlation between the credit impulse,
defined as change in the private credit to GDP ratio, and real activity has diminished lately at a
time of rising credit intensity of growth, signalling growing resource misallocation. Abrupt and
ad hoc changes in the forms of financial repression since the mid-2010s increased regulatory
uncertainties. Directed credit expanded coverage from early 2010s followed by generously
targeted regulatory easing in the mid-2010s. A 9 per cent lending rate cap at retail level came into
effect in April 2020. Moratoriums on loan repayments introduced in response to the pandemic
gained a life of their own.

BB switched back to a de jure market determined system in May 2024 after briefly experimenting
with a crawling interest rate regime labelled as SMART.172 Moral suasion by BB subjected retail
rates to an invisible 14 per cent ceiling as part of their policy gaming under the IMF program. The
IMF pushed for removing SMART. BB complied on paper. The Fund had no way of proving
invisible ceilings even though it was public knowledge. The new leadership in BB moved swiftly

*The chapter has been prepared by Dr Zahid Hussain, Former Lead Economist, World Bank Bangladesh.
169 The balancing of the choice between selectivity and comprehensiveness is not particularly tough in a
bank dominated financial system such as in Bangladesh. Annex-II assesses the state of the share market.
170 World Bank, Bangladesh Financial Sector Assessment Program, April 2019.
171Robert C. M. Beyer and Zahid Hussain, Validating GDP Growth Estimates in Bangladesh, 2021.
172 Six Month Average Rate on Treasury.

White Paper on State of the Bangladesh Economy 138

in July-August to credibly signal change in their regulatory conduct. Retail lending rates are now
presumably left to the play of the market based on bank-customer relationships.

Retail real lending and policy rates have been negative too long. Retail rates have tended to
increase with increase in the policy rate and liquidity stresses in the system. In September, they
varied between 11 to 16 per cent depending on banks and sectors.173 The policy rate has
increased cumulatively by 525 basis points since May 2022. It is expected to stay stable at the
current 10 per cent until a decisive change in inflation data signals the need for adjustment either
way. The real policy rate and the real weighted average lending and deposit rates have remained
negative despite increases in the nominal rates. However, rates on government treasury bills
moved ahead of inflation over the past 12 months.

Aggregate indicators hide more than they reveal. The advance-to-deposit ratio (ADR) stood
at 80.2 per cent at the end of FY24, below the regulatory limit of 87 per cent set for conventional
banks. Deposit growth was hit by negative real deposit rates, dented confidence from a series of
large-scale fraud allegations and the growth of Non-Performing Loans (NPL). The quality of loans
deteriorated to an extent that the banking industry, at the aggregate level, is close to breaching
solvency standards. Increased cash holding by the public and government borrowing from
commercial banks tightened liquidity deeper than manifest in the formal financial disclosures by
the private and state-owned banks.

10.2 Solvency and Liquidity

Capital too low for comfort. The capital adequacy ratio, at 10.64 per cent in June 2024, is barely
above the minimum 10 per cent regulatory requirement, and down from 11.64 per cent in
December 2023.174 State-Owned Banks (SOBs), Specialized Development Banks (SDBs), and
several Private Commercial Banks (PCBs) share the neighbourhood of insolvency. The aggregate
CRAR was short of meeting the 2.5% extra amount of money banks must keep as a safety net to
face adversities (known as capital conservation buffer). Banks are expected to limit dividend and
bonus payments when the CCB falls below the prudential limit.175

The buffer is less than apparent from data. Underlying the reported increase in CRAR in recent
years was the increase in net profit after taxes of the banking sector at a time when the growth
and quality of assets deteriorated. 176 The reported net profits were overstated by lax regulatory
standards and gaming of the standards. Under provisioning against non-performing loans was
77.3% of the reported profits in 2022. The provisioning shortfall spiked in the previous two years
without looking back subsequently.177

173 In July 2024, the weighted average interest rate was 11.57 percent, the weighted average deposit rate
was 5.68 percent, and the interest rate spread was 5.89 percent, according to the BB note prepared for the
White Paper.
174 CRAR is a measure of how much money banks have relative to their loans and other assets adjusted for

the likelihood of some going sour. Data source: BB, Financial Stability Report, 2023.
175 The information here is from Bangladesh Bank note, September 26, 2024.
176 In 2022 relative to 2021.

177 BB acknowledged over two years ago that “the current level of CRAR…..may not sustain if the central
bank withdraws the accommodative provisioning stance…” (FSR 2022, p.59).

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Figure 10.1: Recognised NPLs 2008-24 (Tk in crores)

250000

200000

150000

100000

50000

0
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Source: BB data.

Solvency undermined by loan defaults. Recognised NPLs have increased exponentially in

recent years, soaring above 12% in June 2024 from 7.9% in June 2021 (Figure 10.1), reaching a
record-high of over Tk 2.11 trillion.178 These represent the loans recognised under BB’s existing
lenient nonperforming loan recognition policy. The NPL is dominated (over 88%) by the worst
category called Bad Loans (BL).179 SOBs are a common denominator in all types of classified loan
clusters with a significant share of assets and an even more significant share of NPLs. But they no
longer have a monopoly in nontransparent disclosure.

The industry overall on the edge of illiquidity. There is large variation across banks with
Islamic PCBs having the severest liquidity shortfall. FCBs are most liquid followed by SOBs and a
few conventional PCBs. The industry was able to maintain the minimum required Cash Reserve
Ratio (CRR) and Statutory Liquidity Ratio (SLR) until end-December 2023. Liquidity has been
sloping downwards, driven by SOBs and Islamic PCBs since then. Local currency reserve shortfall
of the banking system has recently been running consistently between Tk 15,000 to 20,000 crores
on a daily basis.

Several private banks are zombies. They vastly window dress their net worth and liquidity.
The Annex illustrates the cases of 10 weak private banks. These 10 banks represent 33 per cent
of the market share in terms of loans and 32 per cent in terms of deposit. A few corrections for
the recoverability and liquidity of their assets turn positive net worth into large negatives for all
ten and somewhat comfortable liquidity into illiquidity in eight out of ten. It is ironic that many
of these banks use Shariah based banking models that attract a large number of people who prefer
Shariah consistent financial ethics. Scams, fraud and misappropriations of funds to related parties
in these banks is public knowledge. Their owners profited unethically from the gullible religious
sentiments of their depositors.

10.3 The Depth of Distress

The unseen is over three times the seen. The window dressed part of the NPLs are the loans
rescheduled or restructured, because they turned bad in the past, and the amounts written off

178 Part of the sharpness of the increase in the last quarter of FY24 may have come from unedited
disclosures of unrecovered loans that used to be shown as regular by offering various concessions. More
such spikes are likely in the near term as default recognition criteria are tightened.
179 Loans overdue for 36 months or more.

White Paper on State of the Bangladesh Economy 140

because they have been on the balance sheet as Bad Loans for too long. 180 All these categories
have grown over time (Figure 10.2). Adding the stock of written off (net of recovered) and the
non-classified part of the rescheduled loans to the recognised NPLs, the incidence of “distressed”
assets was 31.7% of total bank loans at end-June 2024.

Figure 10.2: Distressed assets in banks

600000

500000

400000
Taka in crores

300000

200000

100000

0
2019 2020 2021 2022 2023 2024

NPL Rescheduled Written off

Figure 10.2 does not include the loans stuck in courts which, according to BB data, escalated to
Tk 2,07,361 crore in March 2023 from Tk 1,66,688 crore at the close of December 2022.181 Also,
loans in Special Mention Accounts will most likely be distressed.182 These are the demand and
terms loans overdue for 60 days or more. SOBs and a few PCBs have a disproportionate share of
loans in this category. These are included in the calculation of total distressed assets in Table 10.1.

Table 10.1: Depth of banking blackhole

(End-June 2024)

Source of distress Tk in crores

Recognised NPL 2,11,391
Rescheduled and restructured 2,72,856
Outstanding written off 75,389
Special Mention Accounts 39,209
Under court stay order 76,185
Total stress 6,75,030
Equivalencies
Nos. of Dhaka Metro 13.5
Nos. of Padma Bridge 22.5
Source: Based on BB data.

The depth of the banking blackhole exceeded Tk 6,75,000 crores at the end of FY24. This
amount is equivalent to 13.5 Dhaka Metro systems and 22.5 Padma bridges. Banks did not get

180 The wait period for write offs used to be more than three years. This changed to 2 years in May 2024.
181 The New Age, August 19, 2023. The Dhaka Tribute reported exactly the same numbers quoting BB data
on August 20, 2023.
182 BB, Classified Loan and Provisioning (Consolidate CL-1) (DBU+OBU), June 30, 2024.

White Paper on State of the Bangladesh Economy 141

into such a deep hole due to idiosyncratic factors or a few bad apples. The fragmented regulatory
system provided multiple avenues for wrongdoing. The banking system is inadequately
provisioned to withstand such excruciating stress. Recognised provisioning shortfall amounted
to a paltry Tk 19,261 crores at end-June 2024. The size of actual provisioning is puzzling. The BLs,
which require 100 per cent provisioning, at end-June 2024 was Tk 1,67,889 crores. The actual
provision was Tk 89,355.8 crores, well below even the BLs183 Generous and allegedly nepotistic
provisioning deferral facility to banks of certain genre explain such a gigantic mismatch.

The distress is even larger when the bad loans of the non-bank financial institutions
(NBFIs) are accounted for. Bangladesh’s 35 NBFIs had Tk 21,658 crore at end-September 2023,
constituting 29.8 per cent of their disbursed loans, with 10 institutions accounting for 67.5 per
cent. The incidence of their NPLs was 25 per cent in September 2022. The notorious People’s
Leasing and Financial Services and International Leasing and Financial Services faced high profile
scams and irregularities. The NBFIs were Tk 2,020 crore short on provisioning. The regulator was
largely unmoved, going after a few small fries once in a while.

10.4 The Deep Determinant of Stress

The culprits within the banking system are all heavy weights. The big ones coincide with the
bad ones. NPL concentration mirrors loans concentration and more. The fastest growing
manufacturing sector accounted for 49% of the loans extended and 55% of NPLs. 184 Such
disproportionalities are particularly notable in cases of RMG, textiles, ship building and ship
breaking. There is a significant overlap between the concentration of loans, the propensity to
default, and the bank types (ownership, generation). Capture by dominant business interests
disabled the safeguards in the system leading to the dire state it is currently in. Operational and
allocational inefficiencies have hurt growth and inclusion by excluding innovations and startups
by entrepreneurs without tradable collaterals. The use of forbearance and directives in diverse
forms created rents for lawyers, accountants, auditors, and regulatory supervisors.

The same heavyweights demolished confidence In the share market. Market rigging is
endemic. Several powerful investors and institutions artificially inflate the share prices through
a series of trades violating securities laws.185 The book-building process is manipulated to the
extent that it no longer effectively determines the true valuation of a company’s shares. Anomalies
in IPO valuations (mostly underpricing) give the sponsors an upper hand over the general
investors in the secondary market. Trillions of takas were embezzled from the stock market
through fraud, manipulation, placement shares, and deceit in the IPO process. A major
manipulation network involving influential entrepreneurs, issue managers, auditors, and a
certain class of investors emerged. Stock market intermediaries suffered bankruptcy with
negative equity of Tk 13,000 crores. Of this, the merchant bankers accounted for Tk 7,000 crores
and the brokerage houses accounted for Tk 6,000 crores.186 Annex – II provides a more detailed
account of the stock market and regulatory failures.

Safeguards don’t guard

Regulatory safeguards subjugated to malpractices. The collusion between BB insiders at the

top and influential outsiders was never as open as it was during 2015-2024. 187 The equation

183 BB, ibid.

184 BB, Financial Stability Report 2023.
185 According to a report in The Business Standard on September 2024, a DSE identified several

beneficiary investors in scams perpetrated in January-March 2022. The report never saw the light of day.
186 Bangladesh Securities and Exchange Commission data.

187 There are many stories. A typical one reported in The Business Standard on September 8, 2024, is
the following: Many shell companies were created for under-invoicing exports and over-invoicing for

White Paper on State of the Bangladesh Economy 142

between BB and the leadership in the cabinet was recalibrated when fiscal and political
dominance found a friendly reception in the leadership of BB. How this coalition of interests tilted
the rules of the game is best illustrated by the Bank Company (Amendment) Act 2023 passed on
21 June 2023. The amendment extended tenure of bank sponsor directors to 12 years. Earlier in
2018, the Bank Company Act 2013 was amended, allowing a director to hold bank directorship
for nine years in 2018. For optical reasons perhaps, the number of members of the same family
in a private bank’s board was reduced from 4 to 3, still higher than the 2 allowed under the 1991
act until amended to 4 in 2018. The 2023 amendments undermined the Bangladesh Corporate
Governance Code requiring listed banks, non-banks, insurance companies and statutory bodies
to have no less than five and no more than 20 directors at a time, of which at least one in five must
be independent or non-executive directors. The 2023 amendment enabled having as few as 2
independent directors.

The amendments introduced the distinction between willful and unwilful defaulters with the
former ambiguously defined as those who “do not repay though they have the capacity to do so”,
leaving the clarification open to judicial interference. It exempted the sister concerns of defaulting
companies from ineligibility to get new loans subject to BB discretion. The penalties for willful
included travel restrictions, denial of trade license or new company registration in capital
markets, and few other slaps in the wrist. Board members or their relatives were allowed to
borrow with collateral or bond or security. These together constituted a giant leap of the banking
system from rule of law to law of the rulers.

Enforcement was unevenly lax. Insufficient number of independent directors in overpopulated

boards served the purposes of complying and rubber stamping the will of the sponsors.188
Weighing of relevant skills and experience is not evident from the actual composition of boards
in several banks, both state and private. Internal and external auditors do not necessarily get
chosen for their technical skills and impact. Biased enforcement by the BB enabled serious
misconduct both in domestic and state-owned banks. It failed to monitor on an ongoing and
forward looking basis the changing risk profile. The level of concern and stringency of
supervisory constraint appear unrelated to movements in capital ratios. BB does not have full
discretion in supervisory actions against SOBs noncompliant with prudential requirements for
years without sanctions. The Ministry of Finance holds a broad regulatory mandate for the SOBs.

Licensing was transactional. Predators surmounted licensing bars all too easily. The current
system does not require establishing a proper corporate governance framework, determining the
suitability of major shareholders in the context of “fit and proper” criteria and disclosure of the
ultimate beneficial owner.189 The licensing of the PCBs largely became a tool for political
patronage. Ownership predominantly went to individuals with incumbent political identities
despite questions based on an economic rationale from outsider stakeholders. The Finance
Ministry’s politically motivated overreach in licensing private banks was yet another
manifestation of policy and regulatory capture.190

imports. Those who did this used to open LCs for imports in sourcing countries. Using shells, LCs were
opened in Singapore and Dubai to hide their identities. BB gave preferential treatment to these parties.
188 World Bank, Change of Fabric, 2022.
189 The Bank Company Act 2023 include some improvements to the licensing procedures. Bangladesh Bank

had drafted a new licensing guide in 2022, but those were not operationalized.
190 Mirza M. Hassan, Sayema Haque Bidisha, Towhid I. Mahmud and Selim Raihan, Political Economy of

Private Bank Governance in Bangladesh from Part II - Six Challenging Institutional Areas, Published online
by Cambridge University Press, 10 January 2024.

White Paper on State of the Bangladesh Economy 143

Capture by dominant groups

Big players siphoned big money. Embezzlement of big chunks of money from different banks
by a number of groups through fake companies or without proper documentation became a
privilege of large borrowers.191 CPD documented 24 cases of malfeasance involving forgery,
embezzlement, fraud, theft, money laundering, misappropriations and irregularities from
compilations of published reports during 2008-23.192 The perpetrators include the Hallmark
Group, Bismillah Group, AnnonTex, Regent Hospital, NRB Global Bank and so on, all big players.
All the 24 cases together added up to Tk 922.6 billion or Tk 3.86 billion or $32 million per case.
Average per capita income in Bangladesh is about $2600. If the average person earns this income
for 50 years with an annual growth of 10 per cent, she makes $0.31 million in her lifetime. The
stolen amount per case is nearly 105 times this estimate of the lifetime income of the average
Bangladeshi.

Related parties capitalised relations. Related-party lending, a correlate of regulatory capture,

is widespread among banks controlled by individuals or entities with a substantial interest in
nonfinancial firms.193 Restrictions on related-party transactions do not bite. Directors can borrow
from banks other than the one for which they are directors. Not surprisingly, related party lending
soared. For instance, reciprocal loans of directors of eight banks amounted to Tk 45,000 crore at
the end of 2023.194 These banks bent rules and norms under the regulator’s watch. The
contribution of the eight bank directors to lending banks’ paid-up capital was a paltry 5 per cent
of the loans they took from each other.195 The definitions of “controlling interest” and “ultimate
beneficial ownership” as well as “related parties” exclude complex interfamilial relationships that
mask the real size of related-party lending. Regulatory enforcement on related-party lending was
blind to breaches.

Technocratic explanations have no clothes. Explanations centering on organisational capacity

deficits and the deviations from international best practices merely scratch the symptoms. A story
centering around the symbiosis of interests of bank owners, regulators, politicians and
bureaucrats holds better promise. Patronage through regulatory and policy capture caused
collapse in regulatory and corporate governance aided and abetted by influential members in
government and association of bank owners. A single conglomerate gained control over seven
private commercial banks in 2017. Imprudent credit underwriting practices led to a rapid
increase in NPLs of several third-generation conventional PCBs. Their owners and boards
survived with impunity. Prominent politically exposed persons and owners of large business
groups were on the boards of many banks, with independent directors who did not function as
intended. Business tycoons maintained unbridled lobbying power with powerful politicians and
bureaucrats to ensure policy inaction against irregular and corrupt practices.

10.5 A Dhaka Consensus

There is hardly any controversy on the predicaments of the financial system. The interim
government has inherited a Dhaka Consensus on the plight of the financial system in general,
banking in particular.

191 The S Alam Group alone allegedly took about Tk 2 lakh crore from the banks. Bank plunderers to be
tracked down: Bangladesh Bank governor, The New Age, August 25, 2024.
192 CPD, State of the Bangladesh Economy in FY2023-24 First Reading, IRBD, December 23, 2023.
193 The banking businesses do not clearly disclose related parties’ information and ignore international

standards. See Md. Mirajur Rahman, Compliance with Ias-24, Related Party Disclosure in Listed
Commercial Banks: Evidence from Bangladesh, Journal of Banking and Finance Management, Volume 1,
Issue 3, 2018, P. 19-27.
194 Exim Bank, Islami Bank, Social Islami Bank, National Bank, IFIC Bank, First Security Islami Bank, Union

Bank and Global Islami Bank.

195 The Daily Star, August 17, 2024.

White Paper on State of the Bangladesh Economy 144

The system is undercapitalised, illiquid and malfeasant. The extent of undercapitalisation
and illiquidity is anybody’s guess anchored on hugely exaggerated capital adequacy and liquidity.
Distressed assets in the banking system multiplied in the past decade and half in both state and
private domains encompassing conventional and most shariah banks. The rest of the financial
system such as non-bank financial institutions and insurance are similarly on the precipice of
bankruptcy. The share markets have turned into a den of financial foul play. Company
fundamentals are irrelevant to market valuations in ways very different from the bull and bear
runs observed in developed stock markets.

It’s not the economy, stupid. Bangladesh's financial sector distress did not emerge from
economic disruptions or financial crises or even political instability. Economic factors such as
trade, remittances, investments, inflation, commodity prices, exchange rates, and interest rates
cannot explain the sustained drain in balance sheets and trust in market makers and regulators.
An organised network of business conglomerates, bureaucrats and politicians coalesced explicitly
and implicitly to use the financial system to mine public money by capturing corporate and
regulatory governance. Laws and regulations were tailored and retrofitted to serve the interests
of this troika in the spot and forward markets for local and foreign currencies. De jure
accountability systems were de facto deposited in deep fridge. The web of institutions to
adjudicate disputes, regulate markets, and allocate resources largely exhausted the trust of the
public.

A few islands of sound banking and bailout expectations prevented runs. The troika needed
financial business growth to sustain depositor and investor faith in the system, so their Ponzi
game remains viable. They had to give space to professionals to do business playing by the rules.
The professionals were able to survive on their own merit deftly navigating many adversities.
These islands of excellence in conventional banking, micro finance and mobile financial services
combined with a shared belief that no incumbent leadership in government will take the
existential risk of allowing the system to fail. This kept depositor angst below run inducing
thresholds. The disease may not yet be terminal, but it is painfully disabling. Financial stability
and the capacity of the financial sector in general, banking especially, to support inclusive and
sustainable growth are in jeopardy.

An opportunity to contest oligarchic power in banking. Views on how to reset the system to
mitigate risks and deliver services in keeping with changing times do not obviously converge.
Differences in understanding the fine details on the ground and how best to manage the political
economy of change account for differences in views on how to change. However, there is general
recognition of the opportunity opened by recent political changes to credibly contest the
oligarchy in banking. Oligarchic powers who made SOBs and several PCBs a nagging threat to
financial stability are currently on backfoot. But they are yet to be bowled out. The reforms that
should have happened yesterday, so to say, must make sure new oligarchs do not entrench
themselves and replay the game of their predecessors.

Mitigating systemic risk is currently the overarching priority. The recent shock therapies
need well considered follow up to produce durable results by changing the game. The prior
actions under the IMF programme and the World Bank’s budget supports are putting in place a
few reforms that correct the deviations from international norms and standards. By themselves,
these won’t change the culture of impunity. BB has taken some necessary measures to
reconstitute bank board’s following the flight of their owners and directors from the seats of
power. The path going forward is long and arduous. It will test the power of political will to
steadfastly transform the state of play in the banking system from foul to fair.

White Paper on State of the Bangladesh Economy 145

 Annex-I
How bad are the balance sheets?

A banking system can only be protected by its capital and liquidity in a distressed situation. We
chose 10 distressed banks to dig into their solvency and liquidity. Of the 10 banks, 2 are state
owned banks that were mostly hit by scams in the last decade. The other 8 are extremely weak
shariya based banks and conventional private commercial banks. The names of these banks are
not disclosed for confidentiality. All the 10 banks are termed ‘distressed’ by the regulators, media
and public. Combined loans and deposits of these 10 banks constitute 33% of the total loans and
32% of the total deposit of the banking sector. In fact, some of these banks are domestically
systemically important bank (D-SIB) in Bangladesh.

Most of these banks did not disclose the fair value of their assets in their financial reporting. We
had to identify the hidden toxic assets based on expert judgement backed by information gleaned
from indirect disclosures in the bank’s annual report, regulators and various news published in
the media in the last couple of years (the specific references are listed at the end).

The assessment covers their audited balance sheets at end-December 2023 digging into each and
every asset: Cash & Balance with BB, Balance with Other Banks, Money Market Placement,
Investment, Loan & Advances, Fixed & Other Assets etc. When the approximate valuation of these
was completed, we adjusted the reported value of assets less for those that differ derive at the
adjusted capital of the bank as the difference between the adjusted values of assets and liabilities.
Similarly, we assessed the quality of liquid assets of each bank to derive the adjusted liquid assets
to total assets ratio of the bank. This ratio indicates the amount of intrinsic liquid resources these
banks have to meet their depositors’ demand.196

Beneath the balance sheets

Analysis of each bank’s balance held with other banks considered the credit profile of the
counterparty (other banks and financial institutions) to determine the magnitude of needed
adjustment. The adjusted total assets is 37 per cent of the reported value. One large bank, for
instance, had balance with other banks and FIs worth Tk 6,652 crore as of December 31, 2023.
Detail breakdown of their balance held with the counterparty revealed around Tk 2,000 crore
cannot be recovered. It also had Tk 584 crore with Non-Bank Financial Institutions, 80% of which
are not recoverable. Similarly, another big bank has Tk 10,158 crore of which, as various media
reported, around Tk 8,000 crore is stuck with 5 distressed banks.197

The story is fundamentally not very different in cases of other financial placements such as Money
at Call and investment in government securities. Several banks placed large amounts with
another bank who placed the money with a related party from whom money is not recoverable.
Investment in Government Securities, Shares (quoted and unquoted) and Bonds of these 10 banks
are adjusted by only 10 per cent. Government securities could not be valued on a mark-to-market
basis. There is no publicly available data on the amount, tenor and yield of each investment.
Unquoted shares were adjusted considering the credit profile of the investee, particularly their
holdings in sub bonds (mostly invested in distressed banks).

Actual valuation of loan portfolio requires on site in depth due diligence reviewing each credit file,
loan statement and loan documentation. Getting to this ideal is limited by data.198 Data mirroring

196 This exercise primarily was conducted on the valuation of assets. Hence, liabilities were not valued.
197 পচাঁ প্রতিষ্ঠ নে আটক ইসল মী ব্ াংনকর ৮ হ জ র কক টট ট ক ; Prothom Alo, September 6, 2024.
198 Relevant notes on financial statement, auditor’s special comment (if any), approval from Bangladesh

Bank on deferral of loan loss provisions (if any), list of large borrowers and their credit profile (where

White Paper on State of the Bangladesh Economy 146

the portfolio quality is indicative. For instance, a bank reporting 5% NPL should not have negative
balance with Bangladesh Bank. Considering available information on such correlates suggest
reducing their combined Loans and Advances by 64 per cent.199

All the 10 banks are technically bankrupt and illiquid. Their combined adjusted value of the
assets is 52 per cent of the reported value. As a result, net worth is negative. Liquidity measured
by the ratio of liquid assets to total tangible assets indicates 8 out of ten are illiquid.200

All banks are rated Very Weak. Fundamentally, a bank’s financial profile depends on
Profitability, NPL and Capital as part of solvency and funding structure and liquid assets to meet
depositors’ demands. Solvency and liquidity are interrelated. Each of the 10 banks are rated in 3
classes: Assets, Capital and Liquidity after all the adjustments on the following ordinal scale:
VS=Very Strong; S=Strong; M=Moderate; W=Weak; VW=Very Weak, + a notch up, - a notch down.
All get VW-, the worst rating. They are all extremely weak in assets and capital. Two banks have
moderate liquid assets. The remaining 8 are nearly illiquid. Most of these banks have apparently
defaulted in their obligations. They have been denied support from the market and their support
from the central bank is exhausted. Currently they are taking cover under the BB’s Guarantee
Scheme to stay afloat.

The precarities of these banks are public knowledge. The public know their reported finance
and the stories day in day out on how much and how these banks invested in delinquent non-
financial corporates, insolvent financial corporates, and a significant amount into entities that
don’t exist. Hence, the story of the massive difference between reality and the reported financials
is no surprise.

available), information on restructuring/rescheduling of loans (where available), loans under writ petition
(where available), news report etc.
199 Based on following sources: “S Alam Group took more than half of total loans from Islami Bank:

Chairman”; Prothom Alo, September 5, 2024; “Tk 500b of Islami Bank in S Alam’s pocket”; Prothom Alo,
August 14, 2024; “Islami Bank's loan discrepancies: Khatunganj branch alone granted S Alam Group Tk
670bn”; BD News 24, August 18, 2024.
200 We do not count balance held with distressed banks. Even balance held with Bangladesh Bank can be

illiquid if they are special drawings. One bank reported that their required reserve under SLR was Tk 2,513
crore and they maintained reserve (including CRR) for Tk 2,777 crore. They reported a surplus of Tk 264
crore as on December 31, 2023. As of January 18, the negative balance in the current account of Bangladesh
Bank of the same bank was Tk 7,400 crore.
Source: “Nine banks face over Tk18,000cr in liquidity crisis”; The Business Standard, September 24, 2024;
“িীব্র অর্ সাংকট
থ : েিু ে কনর সহ য়ি চ য় কল ব ল ইসল মী ও পদ্ম ব্ াংক”; BD News 24 Bangla, September 11,
2024
“Bangladesh Bank prints money to feed S Alam’s banks”, New Age BD, January 22, 2024

White Paper on State of the Bangladesh Economy 147

News Sources:

S Alam Group took more than half of total loans from Islami Bank: Chairman; Prothom Alo, September 5,
2024. .https://en.prothomalo.com/business/local/5iswzevdes.

Tk 500b of Islami Bank in S Alam’s pocket; Prothom Alo, August 14, 2024,.
https://en.prothomalo.com/business/local/uenzvu48l8

Islami Bank's loan discrepancies: Khatunganj branch alone granted S Alam Group Tk 670bn; BD News 24,
August 18, 2024. https://bdnews24.com/business/a07dcdaa2877

পচ াঁ প্রতিষ্ঠ নে আটক ইসল মী ব্ াংনকর ৮ হ জ র কক টট ট ক ; Prothom Alo, September 6, 2024

https://www.prothomalo.com/business/bank/oeqfdo54bd

এস আলনমর তেয়ন্ত্রনে র্ ক আরও ৫ ব্ াংক ঝাঁ তকনি, ব্ াংক দখনলর পতরেতি; Prothom Alo, September 5, 2024
https://www.prothomalo.com/business/bank/jjscx6qglc

িীব্র অর্ সাংকট:

থ েিু ে কনর সহ য়ি চ য় কল ব ল ইসল মী ও পদ্ম ব্ াংক; BD News 24 Bangla, September 11,
2024
https://bangla.bdnews24.com/business/ca8453d77710

Diagnosis of Global Islami Bank: Signs condoned as it raises public money; BD News 24 Bangla, September
11, 2024. https://today.thefinancialexpress.com.bd/print/diagnosis-of-global-islami-bank-signs-
condoned-as-it-raises-public-money-1725985387

Social Islami Bank hid Tk 7,924 crore in bad loans; The Daily Star, August 13, 2024
https://www.thedailystar.net/business/economy/news/social-islami-bank-hid-tk-7924-crore-bad-
loans-3676001

54pc of Tk 2.11 lakh crore NPL only in five banks; New Age BD, September 7, 2024
https://www.newagebd.net/post/banking/244646/54pc-of-tk-211-lakh-crore-npl-only-in-five-banks

Nine banks face over Tk18,000cr in liquidity crisis; The Business Standard, September 24, 2024
https://www.tbsnews.net/economy/banking/nine-banks-face-over-tk18000cr-liquidity-crisis-948876

Bangladesh Bank prints money to feed S Alam’s banks,

https://www.newagebd.net/article/223548/bangladesh-bank-prints-money-to-feed-s-alams-banks

White Paper on State of the Bangladesh Economy 148

 Annex-II
The Stock market
Forever shallow and vulnerable

The depth of capital markets has remained low in Bangladesh. The financing available
through capital market instruments is limited and declining relative to the size of the economy.
The number of enlisted issues has stagnated at around 650. Market capitalisation is lowest
compared with peers, except Cambodia (Figure A-II.1).201 It has declined over time. The corporate
debt securities segment of the capital market is almost nonexistent. The liquidity into the capital
markets comes from routing of bank funds. Banks with sister concern merchant banks and
brokerage wings invest through margin loans and direct portfolio investment. The legal
architecture came together with the amendment of the Securities and Exchanges Commission Act
1990 and Securities and Exchange Ordinance 1969. The Demutualisation Act was passed in 2012,
and the demutualisation of Dhaka and Chittagong Stock Exchanges were completed. The Financial
Reporting Act for setting up an independent Financial Reporting Council was passed in 2015.

Figure A-II.1: Stock market capitalization to GDP, 2019

120

100

80

60

40

20

0
Thailand India UMI China Vietnam Indonesia Bangladesh Cambodia

The brazen impunity of manipulators unraveled the worst of markets. After the Awami
League government assumed power in 2009, the stock market surged within a year and a half
before crashing suddenly in January 2011. The main Dhaka index fell by about half from its
December 2010 all-time high. The loss as of October 2012 was equivalent to 22% of GDP. It wiped
out $27 billion in market capitalisation triggering a wave of social discontent.202 Some investors
even committed suicide. The ensuing liquidity crunch heightened solvency risks. Back in 1996, as
in 2010, the index’s rise and decline resulted from collusive behaviour between institutional
investors, high-net worth investors and brokerage firms, which together, drove the majority of
the volume of shares traded. Retail investors suffered.

The government formed an investigation committee. Their probe flagged limited enforcement of
regulation by the Bangladesh Securities and Exchange Commission (BSEC) and commercial
banks’ excessive investment in stock markets. The committee, led by a veteran banker Mr.
Ibrahim Khaled, highlighted issues such as placement trading, irregularities in the IPO process,
suspicious transactions under omnibus accounts, and the roles of influential businessmen,
brokers, and market players. The report named companies whose share prices surged
abnormally (300 to 900 per cent) in 2009 and 2010.

201Figure A-II.1 is from World Bank, Change of Fabrics, 2022.

202Syed Ali-Mumtaz H. Shah, Capital Market Development in Bangladesh, ADB South Asia Working Paper
Series, October 2016.

White Paper on State of the Bangladesh Economy 149

The government had earlier ignored the findings of the 1996 stock market crash investigation
report. This time it chose to play a little differently by initiating reforms to restructure the
Bangladesh Securities and Exchange Commission (BSEC). Subsequent BSEC leadership flouted
these reforms bringing markets close to the brink of disasters.

Market rigging is endemic. Several powerful investors and institutions artificially inflate the
share prices through a series of trades, mostly among themselves, violating securities laws.203
They execute circular trades in targeted company shares, where some investors sell shares and
others, related to them, buy shares in a series of trades to create the appearance of active trading.
The book-building process is manipulated to the extent that it no longer effectively determines
the true valuation of a company's shares. Anomalies in IPO valuations (mostly underpricing) give
the sponsors an upper hand over the general investors in the secondary market.

Some big-ticket mutual funds were taken over by vested interests. Specifically, allegations of
embezzlement of unit holders' funds were made against the top two institutions in the closed-
end mutual fund sector. BSEC looked the other way. The Khairul Commission extended the
duration of all closed-end mutual funds by an additional ten years. Investor confidence
plummeted.

With the increase in the index came regulations to raise the ratio of margin loans. This fueled the
surge in the stock market. BSEC tended to maintain the index often ignoring increases in stock
prices. Regulatory activity would kick in only when prices began to fall. The most controversial
floor price system tarnished the market's reputation internationally. It effectively halted trading
in good companies while encouraging market manipulation already incentive by the
disproportionately low fines relative to the expected profits from manipulation.

The Dhaka Stock Exchange Index (DSEX) is the most followed. According to media reports, the
Dhaka Stock Exchange (DSE) excluded 83 listed companies when the floor price was withdrawn
in the third week of January 2024 for allegedly failing to meet minimum turnover criteria in the
previous month. The companies were unfairly excluded ignoring the fact that the low turnover
was due to the floor price. The 83 companies include known names across 10 different sectors
such as Walton, Ifad Autos, Quasem Industries, IDLC, IPDC, ICB, Lanka Bangla, Titas Gas, United
Power, Desco, Summit Power, ACI, Ibn Sina, Acme Lab, RAK Ceramics, Shinepukur Ceramics, NCC,
Dutch-Bangla, Mutual Trust, Dhaka Bank, Envoy Textile, Matin Spinning, Square Textile, Shasha
Denims, and Esquire Knit. Together, these companies accounted for over 19% of the total market
capitalisation of all firms listed on the DSE. The index is rebalanced each year with the objective
of keeping it inflated. According to an analyst DSEX, which closed at 5,114 on October 24, 2024,
could have fallen to 4,338 if those 83 declining stocks had remained part of the index.204

Low-performing or junk stocks show up in the top gainers or top turnover lists. People rush to
buy them despite the high risk. The BSEC looks into manipulations but gives light punishment to
wrongdoers. As a result, those with ulterior motives are encouraged to game the system. Most of
the listed firms are family-run businesses. Investors do not trust the companies' financials.

On again, off again floor prices killed trading. To stop the free fall of market indices, the BSEC
set the floor price of every stock in March 2020. The BSEC lifted the floor price for 169 companies
in December 2022. But in March 2023, it brought the floor back. It was on and off in subsequent
years providing the market with yet another feed for speculation. Stock prices could not fall below
the floor. The restriction severely hurt the liquidity of the market as trading could not be done

203 According to a report in The Business Standard on September 2024, a DSE identified several
beneficiary investors in scams perpetrated in January-March 2022. The report never saw the light of day.
204 Based on Why DSEX still looks fine while most stocks are falling free, The Business Standard, October

25, 2024.

White Paper on State of the Bangladesh Economy 150

below the floor. Market suffocated holding worthless stocks for months as investors could not
exit. The basic principle of market liquidity—buying and selling at agreed prices—was
undermined. Leveraged investors had to incur interest costs on margin loans because they could
not trade their holdings. Meanwhile, price manipulation involving junk stocks and weak
companies remained alive and well. Foreign portfolio investors shied away as asset managers are
mandated not to invest in countries where price floors or such other restriction on trading are
imposed.

Adverse selection of players. Trillions of takas were embezzled from the stock market through
fraud, manipulation, placement shares, and deceit in the IPO process. Excessive government
tutelage held back market development and constrained responsible institutions from carrying
out their mandates. This, combined with strong vested interest, resulted in an entrenched status
quo of gambling and swindling. Laws, rules, and regulations were deliberately deficient in their
implementation. Weak and substandard companies came into the market through IPOs.205 A
major manipulation network involving influential entrepreneurs, issue managers, auditors, and
a certain class of investors emerged. In many cases, officials of the regulatory body themselves
played a role as accomplices by exploiting legal loopholes or providing concessions.

Equity market growth is dragged by poor market infrastructure and unwieldy processing cycle
for initial public offerings (IPOs). Current market systems are not supportive of well-functioning
market. IPO valuations give the sponsors an upper hand over the general investors in the
secondary market. Settlement delays raise the investors’ interest rate and price fluctuation risks.
Liquidity is affected by the lengthy IPO cycle. Absence of central counterparty clearing,
interoperable information technology infrastructure and adequate trading platforms constrain
brokers and clearing houses from transparent market making and trading.

Stunted investor confidence. Public perception of the stock market is impaired by the memories
of manipulators facing no legal action based on the reports produced by the investigating
committees. The Centre for Policy Dialogue (CPD) a study 206of 71 businessmen in 2023 found 50
per cent of businessmen believe the prevalence of suspicious trading in the secondary market,
53.1 per cent thought BSEC’s regulatory enforcement is weak, 50 per cent found financial
reporting anomalous, and 56.3 per cent believed poor companies enter the capital market
through initial public offerings (IPOs). The same issues topped the list in 2022.

205 According to a Bonik Barta report, over the past fifteen years, 149 companies have reportedly raised
more than BDT 110 billion from the stock market through IPOs. Many of these companies are now
financially weak and several have gone out of business.
206 CPD, Bangladesh Business Environment Study 2023: Findings from the Executive Opinion Survey,

January 2024.

White Paper on State of the Bangladesh Economy 151

Chapter XI. Power and Energy Sector – A System Designed for Corruption*

11.1 Analysing Policy Missteps and Corruption

Bangladesh is a Low-Emitting Energy Poor (LEEP) country, with a per capita energy consumption
of just 465 kWh (Kilowatt hour) 207 per year, compared to the global average of 3,000 kWh. The
Awami League government has often claimed significant achievements in the power sector
during its tenure from 2009 to 2024, citing an increase in generation capacity to 32,000 MW from
5719 MW. However, the country continues to experience frequent load shedding and severe gas
shortages. This reliance on imports, coupled with economic challenges, has resulted in a critical
fuel deficiency. Additionally, tariffs for gas and electricity have been significantly raised,
exacerbating the hardships faced by citizens. While electricity access has reached 99% of the
population, the supply remains intermittent, costly, and unreliable, obstructing the realisation of
Sustainable Development Goals (SDGs). The industrial sector has been particularly affected by
the inadequate quality of power supply and the lack of sufficient gas. These problems can be
attributed to ill-conceived policies and widespread corruption within the sector. Moving forward
necessitates a comprehensive analysis of both past processes and the current state of affairs.

The dependence on a single fuel source—gas—for electricity generation, along with its shortages
and inadequate capacity in 2007, resulted in a severe power crisis. This situation compelled the
government to seek quick solutions, leading to an initial rush to construct oil-based rental
generation units in 2010. Consequently, this resulted in the rise of oil-based Independent Power
Producers (IPP) causing increased oil dependency208. Unfortunately, during this period, no
significant efforts were made to enhance local supplies of gas, coal, or renewable energy.
Expanding coal-based power production was particularly challenging, as the government had
previously opposed the establishment of a coal-based power station in Fulbari during its time in
opposition. Additionally, there were considerable delays in the development of new baseload
power plants, which relied on Liquefied Natural Gas (LNG) and imported coal. As a result, the
entire power sector became vulnerable to fluctuations in international energy supply and prices.

Furthermore, despite the forecasts in the 2010 and 2016 Power System Master Plans (PSMP),
which projected peak power demand to be 33,700 MW and 27,100 MW respectively, the
government inflated the targets for 2030 and 2040 to 40,000 MW and 79,000 MW (later revised
to 60,000 MW) under the "Revisiting PSMP 2016" plan (Figure 11.1). The government justified
this revision by citing ambitious economic growth and lofty expectations for the future.209 This
approach resulted in a tailored plan by the Power Division that permitted uncontrolled expansion
of generation units, facilitating corruption and improper allocation processes through the Quick
Enhancement of Electricity and Energy Supply (Special Provisions) Act 2010.

In the power sector, there has been a significant mismatch between demand and supply.
Additionally, the government opted for an artificially ambitious forecast, disregarding the

* The chapter has been prepared by Dr M Tamim, Professor, Bangladesh University of Engineering and
Technology (BUET), with inputs from Professor A K Enamul Haque, Deputy Vice Chancellor, UCSI
University, Bangladesh Branch and Director, Economic Research Group, Dhaka and Dr Zahid Hussain,
Former Lead Economist, World Bank Bangladesh.
The chapter benefitted from discussions with Professor Dr Ijaz Hossain, Former Dean of Engineering,
Bangladesh University of Engineering and Technology (BUET); Ministry of Power, Energy and Mineral
Resources; Bangladesh Power Development Board; IPP cell, Petrobangla, Bangladesh Petroleum
Corporation and Rupantarita Prakritik Gas Company Limited (RPGCL).
207 https://www.newagebd.net/article/225415/power-consumption-drops-further-in-2023
208 Tamim, M. 2012. ‘The Cost of Inefficient Planning’, in Energy & Power. Vol 12, Issue 1 (June 16, 2012)

http://ep-bd.com/online/details.php?cid=32&id=17550
209https://powerdivision.portal.gov.bd/sites/default/files/files/powerdivision.portal.gov.bd/page/4f81b

f4d_1180_4c53_b27c_8fa0eb11e2c1/Revisiting%20PSMP2016%20%28full%20report%29_signed.pdf

White Paper on State of the Bangladesh Economy 152

professional projections of previous master plans. As a result, installed capacity exceeds actual
demand. At the same time, this strategy significantly exposed the power sector to the global
energy market due to the import of LNG and coal for electricity generation. Critics have suggested
that the revision of demand forecasts to justify this increased capacity was driven by
unscrupulous motivations, leading to allegations of corruption within the sector.

Figure 11.1 - Peak Load Forecast (Base case, GW)

80
PSMP16 RPSMP16
70

60

50

40

30

20

10

0
2020 2025 2030 2035 2040

11.2 Current and Projected Power Generation Capacity

As of now, Bangladesh has an effective generation capacity of 26,700 MW (Table 1210)), with just
893 MW derived from renewable sources, including a dated 230 MW hydroelectric plant. This
figure excludes the 3,700 MW from mainly oil-based rental and Independent Power Producer
(IPP) plants that have been phased out after their contracts ended. Furthermore, an additional
6,000 MW of generation capacity, which includes 2,400 MW from nuclear energy, is expected to
be added by 2030. The agreements for all Combined Cycle Gas Turbine (CCGT) plants span 22
years, while coal plants have 25-year contracts. If some older plants owned by the Bangladesh
Power Development Board (BPDB) are decommissioned and certain IPP contracts come to an
end, the country is anticipated to reach around 30,000 MW of power generation capacity,
predominantly from fossil fuels, by 2030. Additionally, over 25,000 MW of contractual obligations
for power plants extend into 2040 and beyond.

Table –11.1 List of Power Plants Currently in Operation (23/10/2014)

Sl No Number of Plants Capacity (MW)
1 Category: Dual Fuel (Gas/HSD) Power Plants (10)
BPDB 1 336.00
Government Companies 5 1,294.00
IPP Power Plants 4 1,551.79
Total Capacity 10 3,181.79
2 Category: Gas-Based Power Plants (53)
BPDB 18 3,403.00
Rural Electrification Board (REB) 12 236.00
Government Companies 9 2,560.70
IPP Power Plants 7 1,892.00
Commercial Power Plants 2 72.00
Rental & No Electricity No Payment Basis 5 282.00
Total Capacity 53 8,445.70
3 Category: HSD-Based Power Plants (03)
BPDB 3 60.00

210 BPDB

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 Sl No Number of Plants Capacity (MW)
Government Companies -
IPP Power Plants -
Rental & No Electricity No Payment Basis
Total Capacity 3 60.00
4 Category: HFO-Based Power Plants (59)
BPDB 10 742.00
Government Companies 6 599.36
IPP Power Plants 41 4,411.34
Rental & No Electricity No Payment Basis 2 150.00
Total Capacity 59 5,902.69
5 Category: Coal-Based Power Plants (07)
BPDB 2 399.00
Government Companies 3 3,628.40
IPP Power Plants 2 1,531.00
Total Capacity 7 5,558.40
6 Category: Renewable Energy-Based Power Plants (15)
BPDB 3 238.00
Government Companies 3 149.00
IPP Power Plants 9 506.00
Total Capacity 15 893.00
7 Power Import 6 2,656.00
Total Capacity 153 26,697.58

Excess Capacity and Economic Strain

Until the recent retirement of all rental and some Independent Power Producer (IPP) plants,
along with non-operational state-owned facilities, an installed capacity of nearly 32,000 MW was
claimed. However, due to aging infrastructure, this capacity was derated to approximately 30,000
MW. During peak summer demand in 2024, the highest recorded electricity demand reached
17,000 MW (Figure 11.2), while production peaked at 16,477211 MW. If 10% of capacity is
reserved for standby power and another 10% allocated for maintenance, the total required
generation capacity for supplying the remaining 80% is 25,500 MW. Consequently, the country
has maintained nearly 5,000 MW of excess capacity, which is 20% more than necessary, leading
to significant capacity charges that burden consumers.

With installed capacity far exceeding actual needs and the sector's heavy reliance on imported
primary fuels, the entire economy is at risk, particularly as Bangladesh struggles with foreign
exchange shortages necessary to finance essential imports. The Energy Regulatory Commission,
which is supposed to oversee the producers and protect consumer interests, has not only failed
to monitor this situation but has also justified successive increases in power tariffs. This has
imposed a significant fiscal burden on the economy and created a comparative disadvantage by
raising the cost of living for the general population and increasing production costs for all
producers, putting the competitiveness of the ready-made garment (RMG) sector in jeopardy.

Simultaneously, this misalignment led to an excess investment of approximately $4.48 billion in

the sector. Since nearly all private sector Independent Power Producers (IPPs) are owned by
Bangladeshi entrepreneurs, this over-investment has heightened Bangladesh's exposure to the
global credit market. Furthermore, many of these investments were secured by sovereign
guarantees, which further increased the country's economic vulnerability to global credit risks.

211 Provided by BPDB to the committee

White Paper on State of the Bangladesh Economy 154

Figure 11.2 Evening Peak in MW
20000
2024 2023 2022 2021 2020 2019
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Operational Challenges and Political Influence

To address the operational challenges of maintaining a stable power supply during both peak and
off-peak periods, coal and nuclear plants typically function as baseload power sources, while the
majority of gas and dual-fuel plants are combined cycle power plants (CCGTs) that serve
primarily for baseload generation. The availability of peaking and intermediate gas turbine power
plants is limited. Due to fuel shortages and grid constraints, oil-fired power plants have been
relied upon to satisfy both baseload and peak demands. With a sufficient gas supply, CCGTs can
modulate their output to accommodate intermediate and peak loads, thereby effectively
replacing oil plants and resulting in cost savings. Furthermore, solar energy can offset the use of
oil plants during peak daylight hours, reducing oil dependency and lowering production costs.
However, the emphasis on meeting peak demand, combined with the rushed installation of only
baseload power plants, signifies a failure in planning. Many contend that this is indicative of
political interference, where non-professional groups influenced the types and locations of the
power plants. This misalignment has led to operational strain and increased production costs.
Such allegations appear credible, given the political ties between power plant owners and the
ruling government.

2.3 Fuel Requirement and its burden

The evolving fuel mix in the power sector has also affected the country's foreign exchange
reserves. The gas-based capacity, including dual-fuel plants, stands at 11,300 MW, which requires
1.8 billion cubic feet per day (Bcfd) of gas to operate at full capacity—over 650 billion cubic feet
annually. Approximately 70% of this gas is procured from International Oil Companies (IOCs)
under production sharing contracts (PSCs), with payments made in foreign currency based on the
equivalent price of crude oil in the Singapore spot market, within a specified minimum and
maximum range stipulated by the PSC.

Excluding the Adani power plant, the annual coal requirement for operating 5,670 MW is around
18 million tons. For oil-based power plants, the private sector imported 2.84 million tons and
1.09 million tons of heavy fuel oil (HFO) for the years 2022-2023 and 2023-2024, respectively.
During the same period, the Bangladesh Petroleum Corporation (BPC) procured 0.43 million tons
and 0.66 million tons of HFO. BPC plans to import 0.55 million tons of HFO and 0.1 million tons of
diesel for power plants from October 2024 to June 2025, with an estimated cost of 3,000 crore

White Paper on State of the Bangladesh Economy 155

taka212. Since 2018, Bangladesh has purchased a total of 1,360 million MMBTU of LNG from Qatar,
Oman, and the spot market, amounting to 164,000 crore taka, including 17% VAT and advance
income tax (AIT213.). Imported LNG has supplied about 25% of the total gas needs.

As a result, in addition to the strain of over-investment, the power sector also bears the additional
burden of operating these plants and paying annual capacity charges associated with them.

Transmission and Distribution (T&D) Limitations

All large baseload coal power plants in the south, along with three new Combined Cycle Gas
Turbine (CCGT) plants in the Meghnaghat area, cannot operate at full capacity due to limitations
in transmission and distribution capacity, as well as fuel shortages. Additionally, the transmission
lines needed to evacuate power from the nuclear plant are still incomplete, which could delay the
commissioning of the Rooppur power plant. This is yet another instance of a mega plant built
without paying attention to the infrastructure needed for the plant to feed the national grid.
Bangladesh will have to pay $500 million annually from 2026 onwards as amortisation of the loan
against this project. In several areas, many 400/132 kV and 230/132 kV transformers are
overloaded, requiring local oil generation to maintain stability and balance on the 132 kV line. If
these oil plants, critical for stability, and other power plants receive a full fuel supply, they could
meet the country’s energy demands.

In the 2023-24 period, transmission and distribution (T&D) system losses were recorded at
10.06%. However, by addressing the remaining instances of pilferage and upgrading the grid, it
is feasible to reduce these losses to single digits. This highlights the connection between mis-
planning and the increasing financial burden on the economy.

Renewable Energy (RE)

Various plans and agencies state different objectives for renewable energy. 8th five-year plan
states the addition of 3700 MW renewable by 2025, Delta Plan 2100 talks about a minimum of
adding 30% renewable by 2041, Mujib Climate Prosperity Plan 2022-2041, which is the newest
plan, states to achieve 30% renewable energy by 2030 and 40% by 2041. On the other hand,
PSMP 2016 and Perspective Plan 2021 did not have any scope of renewable by 2041 although
they provided a 10% and 20% alternate renewable scenario. The new Integrated Energy and
Power Master Plan (IEPMP) 2023 is cautiously optimistic on both onshore and offshore wind
although their projection or plan for 2041 is not very favourable to solar power. As a result,
researchers, investors, and policymakers get confused and pick up the numbers they like. Climate
and environmental activists also set lofty goals further puzzling the general people.

According to the BPDB and Power Grid Company of Bangladesh (PGCB) engineers, the existing
infrastructure of the Power Grid can accommodate 4000 MW RE across different zones of
Bangladesh. For smooth operation, especially with the introduction of Nuclear, a lot of spinning
and non-spinning reserve (including battery) will be required to maintain stable frequency and
voltage. With system upgradation, the Grid can integrate another 6000 MW RE214. It is interesting
to note that there is only 600 MW of RE connected to the grid now emphasizing the level of neglect
of RE in the last decade by the previous government.

Nuclear Power
In May 2016, a deal was finalised with Russia for $12.65 billion to construct two 1,200 MWe VVER
nuclear power plants at Rooppur. Russia is providing $11.385 billion as credit, with the funds
offered at an interest rate of LIBOR plus 1.75 per cent, capped at 4%. Bangladesh will have to

212 Provided by BPC to the committee

213 Provided by RPGCL to the committee
214 Provided by PGCB to the committee

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repay the loan over 28 years with a 10-year grace period. With an initial expense of $550 million,
the total cost amounts to $13.2 billion. However, some argue that this is an overpriced deal,
making this plant one of the costliest. For example, the 4th and 5th units of the Kudankulam
Nuclear Plant in Tamil Nadu, India, built by Rosatom, cost $6.7215 billion for 2,000 MWe. Even
when adjusted for capacity, the cost exceeds that of Rooppur by $5.2 billion. The same Russian
state-owned nuclear corporation, Rosatom, is also constructing a 4,800 MWe plant in Egypt at an
estimated cost of $30 billion216. Factors such as the engineering, procurement and construction
(EPC) contract, availability of local expert manpower, logistics, geological surveys, and other
considerations can significantly impact the cost of a nuclear power plant. Typically, countries with
a domestic nuclear industry and trained personnel have a cost advantage. In comparison, India's
unit cost is $3,350/kWe, while the unit cost for Rooppur stands at $5,500/kWe, which appears to
be higher217. Apart from the high cost, the readiness of our grid to operate a nuclear power plant
seems inadequate, especially without an independent National Load Dispatch Center (NLDC) and
its automation. It would create major operational challenge and the power plant commissioning
would be delayed. In the name of fuel diversification, the choice of nuclear was a misadventure.
With the same kind of investment, 6000 to 8000 MW of renewable, gas or coal power plants could
be installed.

11.3 Gas Shortages and Mismanagement

The gas shortage that started in 2007 with a 300 MMcfd (million cubic feet per day) shortfall
could never be alleviated. Today the gas deficit is estimated at 1000-1500 MMcfd. In 2009-10,
Petrobangla knew about the looming gas shortage and had a plan to explore new reserves and
enhance existing production although it hinted at a 500 MMcfd LNG import in its annual report.
By 2010, the first LNG regasification plant proposal was made that was supposed to deliver in
2012. In 2009, Petrobangla and International Oil Company (IOC) combined production was
approximately 2000 MMcfd which peaked at about 2650 MMcfd between 2015 and 2019 (Figure
11.3). Since then, the Petrobangla production started declining whereas IOC kept producing
1200-1500 MMcfd gas with a lower gas reserve at their disposal.

Figure 11.3 Gas Supply in MMCFD

3500
National IOC LNG Total
3000

2500

2000

1500

1000

500

215 https://pib.gov.in/PressReleasePage.aspx?PRID=1605939
216 https://www.enerdata.net/publications/daily-energy-news/russias-rosatom-starts-building-egypts-
first-nuclear- power-reactor.html
217 https://www.thedailystar.net/op-ed/economics/the-economics-the-rooppur-nuclear-power-plant-

1369345

White Paper on State of the Bangladesh Economy 157

At the same time, despite its falling production level, Petrobangla more or less abandoned its plan
of exploration and development of domestic gas resources and since 2018, Petrobangla started
importing LNG to plug the gas supply deficit gap. Today, along with IOC, Petrobangla supplies
about 2000 MMcfd of gas from our reserve and another 500 to 700 MMcfd from imported LNG.
The LNG supply has been sporadic either for high price or for technical problems of the Floating
Storage and Regasification Units (FSRU). The current demand for natural gas is at least 4,000
MMcfd. Interestingly, of the remaining producible 2P (Proven + Probable) gas reserves totaling
8.66 Tcf (trillion cubic feet), International Oil Companies (IOCs) hold 2.62 Tcf, while the
remaining 6.04 Tcf is managed by Petrobangla. Ironically, Petrobangla's decision to continue
importing LNG under the controversial QEEES (Quick Enhancement of Electricity and Energy
Supply) Act 2010 has led to LNG being overpriced compared to global prices218, contributing to
Bangladesh's debt issues. The deal signed with the Summit Group involves supplying LNG at
prices 15% higher than global long-term rates. Critics argue that utilizing the QEEES Act 2010 to
purchase LNG at a premium while natural gas reserves are available with Petrobangla constitutes
a misuse of public funds.

If production enhancement from existing reserves is not achieved or new fields are not discovered,
indigenous gas supply will decline rapidly in the next five years necessitating higher import of LNG.
The economy is heavily dependent on natural gas. Switching to any other fuel will be expensive and
time consuming.

Gas Demand Supply Plan

Petrobangla gas demand projection varies between 3000 MMcfd to 6600 MMcfd for 2029-30
under three different scenarios (Table 11.2). The most likely demand would be about 5000
MMcfd which meets the entire demand of the power sector. The supply projection is a deficit plan
heavily dependent on imported LNG. The gas development fund which was meant for enhancing
local gas production was utilised to import LNG preventing any gas exploration effort. The new
production enhancement plan provided by BAPEX expects about 300 MMcfd from workover and
another possible 810 MMcfd from new discovery. A total of 54 exploration, 15 development and
31 workover wells totaling 100 wells are planned to be drilled by 2028 – a very ambitious
program. It must be mentioned that a total of 93 exploratory wells have been drilled in
Bangladesh from the beginning of exploration in early fifties. Nine shallow and fifteen deep sea
blocks have been put under the 2024 offshore bidding process and seven IOCs have purchased
the bid documents.

Table 11.2 Gas Demand-Supply Forecast (Petrobangla, July 2023)

Demand (MMcfd) Supply (MMcfd)

Fiscal Year Scenario1 Scenario2 Scenario3 Onshore Offshore LNG Total Supply
2023-24 4734 3883 2788 2179 0 850 3029
2024-25 4956 3965 2498 2427 0 980 3407
2029-30 6655 5092 3091 2122 100 2130 4352
2034-35 7399 6072 3785 1238 880 3555 5673
2039-40 7758 6986 4890 874 820 3555 5249
Note: Scenario 1 Gas distribution co demand, Scenario 2 includes Power division demand, Scenario 3 is
IEPMP 2023 demand.

The locally produced gas and LNG are transmitted throughout the country by Gas Transmission
Company Ltd (GTCL). They have a total capacity to handle 4000 MMcfd of gas but now transfers
only 2100 MMcfd219. This leaves almost 50% of their capacity unused making it a losing concern.

218 https://thefinancialexpress.com.bd/economy/lng-import-cost-set-to-skyrocket-in-two-years
219 Provided by GTCL to the committee

White Paper on State of the Bangladesh Economy 158

Few distribution companies and Petrobangla itself operate some transmission lines handling
30% of the gas.

Expansion of gas transmission line without proper analysis of demand and supply is a cause of
concern since many of the decisions are connected to political propaganda. For example, Gas
transmission lines were extended to Rajshahi, Khulna and Saidpur for purely political reasons on the
promise of LNG import. These pipelines are sitting almost empty right now causing financial loss to
the company and increasing fiscal burden for the government.

Oil Import for Power

Both BPC and private-sector power producers import HFO for oil-fired power plants. The
government allowed private HFO import in 2011 for a few operators. Later, most of the private
HFO power plant operators were permitted to import HFO with an additional 9% as service
charge. This additional payment was lucrative as the total transport cost, tax and losses were not
more than 5%. Since 2021, private imports have had to pay 34% tax which was previously
waived. Imposition of this tax increased HFO based power production cost. The average cost of
HFO imported by BPC during 2021 and 2024 was $500 to $600 per metric ton. Table 11.3 shows
the HFO import by BPC and private sector that correlates with oil-based power production. The
discontinuation of all oil based rental plants and some IPPs have reduced HFO and diesel import
considerably.

Table 11.3 HFO imported by BPC and the private sector in the last five years (FY) and cost
incurred
Importer BPC Private Power Plant
Financial Year
Products HSFO HSFO
Imported Quantity (Ton) 175693.95 data is not available
2019-20 Cost (million USD) 81.31 -
Cost (Crore Taka) 687.04 -
Imported Quantity (Ton) 47923.72 3797717.00
2020-21 Cost (million USD) 17.69 -
Cost (Crore Taka) 151.41 -
Imported Quantity (Ton) 316086.19 4037940.00
2021-22 Cost (million USD) 192.73 -
Cost (Crore Taka) 1710.86 -
Imported Quantity (Ton) 435592.39 2847282.00
2022-23 Cost (million USD) 204.47 -
Cost (Crore Taka) 2146.07 -
Imported Quantity (Ton) 660856.76 1089103.30
2023-24 Cost (million USD) 370.89 -
Cost (Crore Taka) 4102.61 -
N.B: HFO is imported only for power generation as required by PDB.

11.4 Cost and Pricing

Power

The continuous use of liquid fuel with low capacity usage (diesel plant factor less than 10%) and
increasing production from imported fuel (currently approximately 65%) caused the generation
cost to shoot up from Tk. 6.61/kWh in 2020-21 to Tk. 11.51/kWh in 2023-24 (Figure 11.4). Due
to increasing LNG import, Petrobangla increased its gas price for power sector from Tk. 4.5/m3
to Tk. 15.5/m3 which had a big impact on the cost of generation. The devaluation of Taka against
the dollar from 85 to 120 also had a negative impact on the cost of production. The use of dollar
invoicing in contracts that involved no foreign direct investment is puzzling. The average bulk
selling price to the distributors was raised to Tk. 7.04/kWh which still incurs a loss of Tk.
4.47/kWh. Since 2008-9, BPDB has been given cumulative subsidy of 144.450 thousand crore

White Paper on State of the Bangladesh Economy 159

taka. The yearly subsidy jumped to approximately 30 thousand crore taka in the last two years
making it unsustainable.

Figure 11.4 Power Production Cost (Tk/kWh)

14
12
10
8
6
4
2
0

Currently the outstanding dues to IPPs and public companies and for power import is 39,752
crore taka. Despite BPDB receiving 33,000 crore subsidy in cash and bond in 2023-24, it has a
cumulative loss of Tk. 25,420 crore beyond the outstanding dues. The subsidy must be reduced by
a combination of reduced import dependency, increased operational efficiency and increased tariff
over a declared time period.

Energy

The LNG import is facilitated by two FSRUs each with capacity of 3.6 million tons per year which
were set up under the Special Provision Act of 2010. The first shipment of LNG arrived in 2018.
Since 2019-20, about 550 to 675 MMcfd of LNG has been supplied to the national grid. As a result,
the average gas selling price had to be raised from Tk. 9.7/m3 in 2019-20 to Tk. 22.87/m3, thus
more than doubling the rate. The current average purchase cost of gas (own gas, IOC gas and LNG)
is Tk. 24.38/m3 causing an estimated loss of 3000 crore annually220. As an aggregator,
Petrobangla buys its own gas at Tk. 1.0/m3 (Tk. 4/m3, BAPEX), IOC gas at Tk. 8.612/m3 and LNG
at about Tk. 55/m3. With increased share of LNG in the gas mix, the cost of gas will keep
increasing.

The cumulative outstanding dues for purchase of LNG and IOC gas are $ 223.14 million and $
182.6 million respectively. The domestic VAT/SD dues to NBR is Tk. 19,700 crore for IOC gas
purchase and LNG import. Petrobangla also owes Tk. 15,136 crore to NBR for VAT and Tax for
other operations.

As of October 2024 the total dues in energy and power sector is approximately Taka 50000 crore
($ 4.16 billion)221. This does not include dues to the National Board of Revenue. In 2023, the then
government claimed an investment of $ 30 billion between 2009 and 2022 in power sector
alone222.

220 Provided by Petrobangla to the committee

221 https://www.tbsnews.net/bangladesh/energy/govt-faces-tk50000cr-power-and-energy-dues-plans-
special-bond-payment-relief
222 https://www.tbsnews.net/bangladesh/energy/power-sector-fetches-30b-foreign-investment-last-13-

yrs-nasrul-649318

White Paper on State of the Bangladesh Economy 160

11.5 Contracts and Policy

Reforming Power and Energy Sectors: Addressing Monopoly and Enhancing

Competitiveness

Both the power and energy sectors require administrative and structural changes. The current
organisational framework has been vulnerable to political manipulation and the influence of
interest groups. Centralizing all power within the BPDB and Petrobangla as aggregators and
policymakers creates a monopolistic environment in each case. Energy is a crucial input for
production and is therefore linked to enhancing competitiveness in industries. Consequently, the
Boards of Directors of these organisations must include independent directors who represent the
interests of consumers, including representatives from the Ministry of Commerce and the
Ministry of Industries, who are capable of analysing the technical and economics of energy
production and use. Additionally, the pricing of petroleum products and electricity should be kept
outside the control of these boards, necessitating the strengthening of the Bangladesh Energy
Regulatory Commission (BERC) with the authority to make independent decisions, similar to a
standard monopolistic regulatory authority. The principal motive behind appointing civil
bureaucrats and cronies is to exercise political control over decisions regarding energy and
power sector.

Bangladesh Power Development Board

BPDB does the planning and execution of the power sector and they are also the single buyer in
the market fixing the tariff and contracts. Using fictitious and unrealistic data, the previous
government inflated the demand forecast and kept on adding generation plants. The types and
location of the power plants were frequently not in accordance with the requirement of the
existing system, rather politically determined. The driving force was to reward contracts to the
political cronies and create opportunities for corruption. BPDB and Power Division approved a
number of power plants without firmly securing fuel supply, especially LNG, indicating lack of
coordination with the energy division. Many power plants were commissioned without
completing transmission lines on time that inflicted large capacity payment (i.e. Payra, SS power,
Matarbari). The supply and price risk of import dependency was exposed in post Covid recovery
and the Ukraine war. The transmission and distribution system; the daily and seasonal load
management; primary energy supply; physical infrastructure of fuel import, storage and
transport – all aspects of an integrated system were neglected. Such monopoly by a single entity
gives any government the power to manipulate the system. A national level (not utility level)
independent body should be formed to project and plan the demand/supply scenario, T&D
requirement, renewable energy integration, resource allocation, need assessment of a distributed
energy system and other aspects of Integrated Resource Planning. PBDB will only be governed by
the directive of this body.

Petrobangla
All the companies under Petrobangla, especially BAPEX must be run autonomously and
independently without ministry interference. For BAPEX to focus on exploration and
development only, its production wing should be taken over by the two production companies.

Petrobangla on the basis of future LNG regasification projects which were in the planning stage
and uncertain, gave permission for at least five LNG based CCGTs. All these power plants (3000
MW) are now sitting almost idle due to lack of LNG and costing capacity payment in thousands of
crores taka. Petrobangla should be held accountable for this irresponsible act. No power plant
should be given license without a firm fuel supply contract.

It has been observed that Petrobangla, a highly technical organisation, has been led by
bureaucrats for years who has been revolving frequently. The lack of continued technical
leadership with long term planning has turned a once glorious corporation to a mere caretaker. A

White Paper on State of the Bangladesh Economy 161

competent professional leadership at the top of Petrobangla is required for the energy sector to
thrive.

Furthermore, production, transmission and distribution of power and energy are not solely
independent. Actions in any one of them affect the others. As such, there is need to form an
overarching national level (not utility level) independent body that is responsible for formulation
of overall policies and plans including investment, allocation of resources and analysis of demand
for the country. The Petrobangla and the BPDB should work within the guidelines of such a board.
Finally, both the Petrobangla and BPDB should have technical ability to ensure that the choice of
technology is appropriate for maintaining a healthy economic environment for the country.

REB
REB is the largest recipient of grid power and has fulfilled the principal task of 100%
electrification of the country. Despite such success in taking electricity to every corner of the
country, only 13 of the 80 Palli Bidyut Shamitis (PBSs) make surpluses. There is also a duality of
authority between REB and the PBS and a greater cooperation and trust between them must be
developed. While it is not expected that every PBS must generate surplus a mechanism to allow
them to cross-subsidise shall be developed through an effective reform.

BERC
Strong and independent regulation can protect both businesses and consumers. Energy pricing
has always been a contentious issue in Bangladesh. Every time oil, gas, and electricity prices
increased, people heard about international price increases. Even then, there is no transparency
in the rationale behind the increase. When the power of determining gas and electricity tariffs
was taken away from BERC223, the last hope of consumer justice was taken away. This single act
exposed the weakness of energy governance avoiding accountability. The arbitrary oil price
increase on August 5, 2022, triggered the highest inflation in recent time in Bangladesh. BERC
must be allowed to fully function independently according to the BERC Act 2003. It may even be
strengthened further.

The QEEES (Special Provisions) Act 2010 and Corruption

The Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010 is one of
the most contentious laws ever enacted in the energy and power sector. Initially established for
a four-year period to address an emergency supply situation, it has been extended multiple times,
resulting in widespread corruption and arbitrary decision-making. Despite numerous protests
against this Act, it was never legally challenged in court. Currently, this Act is on hold and should
be scrapped.

Even before the enactment of the Special Provisions Act, seventeen rental plants were awarded
contracts through 'negotiation' in 2010, circumventing the Public Procurement Rules (PPR). The
reference capacity payments for these plants were as high as $30.69 per kW-month for gas
(Aggreco, Ashuganj, 80 MW) and $21.14 per kW-month for heavy fuel oil (HFO) (DPA Power,
Pagla, 50 MW), while the lowest tendered offer was just $8.70 per kW-month for HFO (RZ Power,
Thakurgaon, 50 MW). These contracts were in violation of the law, resulting in substantial
capacity payments for the government and allowing the companies to reap excessive profits. The
contracts were renewed several times despite the fact that, after the initial contract period, they
should have operated on a 'no electricity, no payment' basis, as the companies had already
recouped their full investment during the initial period. Many argued that these violations
fostered a group of crony capitalists in the country who benefited from government patronage
and were also involved in the transfer of wealth out of Bangladesh.

223https://www.thedailystar.net/environment/natural-resources/energy/news/berc-amendment-bill-
passed-parliament-3233741

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Gazprom, despite being a government agency, was also engaged under the Special Provisions Act
2010 to drill 20 wells for BAPEX, Bangladesh Gas Field Company Ltd (BGFCL), and Sylhet Gas
Field Ltd (SGFL) instead of a government-to-government (G2G) deal. The average drilling cost for
Gazprom was about $22 million per well, excluding VAT and taxes224, while BAPEX completes
similar drilling for approximately $10 million. A competitive bidding process could have
potentially secured a much lower drilling costs, saving Bangladesh millions.

In total, 41 Independent Power Producer (IPP) contracts were awarded under the Special
Provision Act of 2010, with a combined capacity of 6,308 MW225. All contracts signed under this
Act require thorough scrutiny. The capacity payments varied significantly among these contracts,
with some being benchmarked against the highest rates found through the Open Tender Method
(OTM), allowing for substantial profits on unsolicited offers.

Capacity and Energy Contracts

Capacity contracts are sometimes compared with monthly data packages as opposed to pay as
you use option in an energy contract. Irrespective of total usage, a certain payment is assured in
a capacity contract through a Power Purchase Agreement (PPA). The capacity payment is done
so that the full capacity is always available. Taking advantage of such guaranteed payment the
capacity market was flooded with over supply through unprecedented corruption. The average
annual plant factor or capacity utilisation for oil based rental plants have been below 50%.
Typically these are meant for peaking power supply but their widespread use as underutilised
baseload plants was an expensive operation that increased the cost of generation. Capacity
payment became a burden for the exchequer.

Six HSD-based IPP plants with a total capacity of 1000 MW were awarded for 5 year period in
2018. The reference capacity payments were close to $20/kW-month. None of these ran more
than 10% on average of their capacity for the entire contract period. This means 90% capacity
payment was made for 1000 MW without taking any electricity. These were only used in some
extreme situations that could easily have been handled by HFO plants. These power plants were
awarded purely on a political consideration and through underhand dealing promoting crony
capitalism.

The estimate of excess capacity payment is a difficult task. The total capacity/rental payment to
private sector from 2010-11 to 2023-24 was approximately 115 thousand crore taka226. The
overall plant factor (percentage of utilizing full capacity) of the total system varied between 42%
and 46% in the last five years. This is an indication of a very inefficient system. A 65% plant factor
is achievable by minimizing maintenance, reducing standby capacity and full supply of fuel. Since
2014-15, HSD and HFO power plants awarded under Special Provision Act was paid Tk. 15,551
crore and 9,100 crores capacity payment respectively227. The average plant factors of HSD and
HFO in the last five years were only 32% and 9.22% respectively228. Assuming at least 65% plant
factor the oil based power plants under Special Provision were paid 10000 crore additional
capacity payment. The rental plants that were awarded in 2010-11 made as high as 35% profit
against a standard 15%. The windfall would not be less than 10000 crore. Assuming the
underutilisation of other power plants (gas, coal), the total excess capacity payment would not be
less than 36,000 crore taka in the last 15 years.

224 Provided by BAPEX to the committee

225 Provided by BPDB, IPP division to the committee
226 Provided by BPDB to the committee
227 ibid
228 ibid

White Paper on State of the Bangladesh Economy 163

Tariff Setting

The tariff setting process is not well defined and varies depending on the ownership and
awarding process. For public companies and Joint Ventures, a tariff is calculated on the basis of
cost. The non-escalable component of the capacity payment is made of two components – the loan
part at actual and the equity part with a return of 12% (govt investment) to 16% (JV). Rampal
project return on equity was 18%. The higher the capital cost, the higher the Reference Non-
Escalable Capacity Price and consequently the higher the capacity payment. The contracts built
in incentives for over invoicing imported equipment and overvaluing land development. The
escalable part are divided into fixed and variable Operation and Maintenance (O&M) cost. Both
of these are split into dollar and taka components. Escalable Capacity payment varies with
Inflation Indexation factor.

For IPP and rentals the tariff is ‘negotiated’ unless awarded through OTM. Irrespective of
investment, the tariff negotiation is done by benchmarking previously tendered tariff or other
negotiated deals. This allowed favourable rates, terms and conditions to political and business
cronies of PMO, Adviser, State Minister, Secretaries and other key officials. Apart from excess
profit, it is suspected that many of these projects were used for money laundering by overvaluing
project cost. The tariff fixing process must be properly benchmarked following a standard
procedure applicable for all projects.

Other Common Malpractices

The paramount allegation of corruption was in awarding power plants in the form of commission.
Obviously there is no documentation of such transaction but 10% of the project cost is a
conservative estimate. With an investment of $30 billion in generation since 2010, at least $3
billion changed hands as kick back.

The corruption and nepotism practiced at the top level have trickled down to every project.
Some of these dishonest practices are widespread across the board:
• Employing people without advertisement and through illegal financial transactions.
• Giving contracts to the same group of people under different company names, with or
without tenders, for ease of corruption.
• Favouring individuals related to high-ranking ministry officials, agency decision-makers,
company board members, or other key influencers (politicians) in awarding jobs or sub-
contracts.
• Selling items at much lower than market rates (e.g., ash from coal plants) directly or
through sham tenders.
• Purchasing items at higher than market rates (e.g., prepaid meters229) through collusive
tenders involving limited suppliers under different company names.
• Changing contract conditions after awarding (e.g., the Summit Meghnaghat 335 dual fuel
power plant switched from HFO to HSD without changing capacity payment or heat rate).
• Special terms given to favoured groups (e.g., 1. United Power receives gas at the IPP rate
(Tk. 15.75/m3) instead of the captive rate (Tk. 30.75/m3), selling power at the
commercial rate to the Dhaka and Chittagong EPZ, thus raking in abnormal profit230; 2.
The 200 MW unsolicited Teesta solar plant of Beximco, awarded in 2016, was granted a
tariff of $0.015/kWh231 in 2023, whereas all other plants were offering $0.010/kWh due
to reduced panel costs and much higher efficiency).

229 Consumers Association of Bangladesh (CAB)

230 https://unb.com.bd/category/Special/united-group-power-plants-getting-gas-at-concessional-rate-
but-selling-electricity-at-commercial-rate-to-epzs/142201#google_vignette
231 https://www.beximco.com/news/beximco-groups-teesta-solar-limited-has-commenced-power-

generation-and-transmission-national-grid

White Paper on State of the Bangladesh Economy 164

The level and extent of corruption in the power sector needs forensic scrutiny to understand its
penetration in the system.

LNG

Since September 2020, Rupantorito Prakritik Gas Company Limited (RPGCL) bought 74 LNG
cargos through 100 tenders232. It enlisted 23 companies that fulfilled PPR requirements but only
12 companies got orders. Out of these twelve, three companies received 59 cargo orders
indicating preferential treatment or collusion. Even a few cents overpricing in the unit gas price
would net millions of dollars for the unscrupulous parties. Until August 2024, 69 cargos of 225.4
million MMBTU LNG was imported from the spot market at an average cost of $16/MMBTU
totaling $3.6 billion233. A fifty cent kickback would net more than 100 million. The zest for
importing LNG instead of enhancing local gas supply has always been seen as a corrupt interest.

For the two FSRUs, Bangladesh signed a long-term LNG contract for only 4 million tons/year
import leaving another 3.2 million tons/year capacity for spot purchase. In a deficit supply
scenario, more oil-indexed long-term contracts would have reduced any price shock.

11.6 Way Forward

The power and energy sector in Bangladesh has become a hub of corruption, largely due to a lack
of accountability stemming from the Special Provision Act of 2010. The immunity granted to both
government officials and political leaders has exacerbated greed, causing many major players to
fear potential repercussions in the absence of their political connections. As a result, it is not only
the pricing of power and energy in Bangladesh that has been inflated; this situation has also
placed our export industries at a competitive disadvantage. Additionally, these individuals were
fully aware of the implications of their actions and chose to relocate abroad, adopting citizenship
in other countries. In fact, several of these players renounced their Bangladeshi citizenship well
before the government fell on August 5, 2024. This situation has led to significant fiscal burdens
and a transfer of wealth, creating a double jeopardy for the Bangladeshi economy.

Furthermore, the economic meltdown of the country, the depreciation of the taka, and the high
cost of energy in the international market have added more pressure to the system, resulting in
fuel shortages, high generation costs, and load shedding. Consequently, preparation for the next
five years is crucial for the government.

Power Production Needs

The projected evening peak demand for 2030 is approximately 26,000 MW, based on an assumed
growth rate of 7%234. This demand can be satisfied with the existing fossil fuel-based power
generation capacity. Additionally, with the inclusion of renewable energy production capacity,
the system will be able to meet daytime peak demands. However, the current and anticipated
generation capacity will not suffice to fulfill the summer evening peak demand from 2029
onward. This situation provides the government with a five-year window to develop an effective
plan. The expected shortfall is estimated to range from 1,500 MW to 2,500 MW. If nuclear power
is properly integrated into the grid and if new single-cycle gas-based power plants or renewable
energy systems with batteries are not developed, it will be necessary to install 4,500 MW of HFO
plants to meet the evening peak demand. The daily requirements for coal and gas will be 40,000
tons and 1.8 Bcf/d, respectively. Therefore, there is an urgent need to boost the local gas supply;

232 Provided by RPGCL to the committee

233 ibid
234 Provided by the BPDB IPP cell

White Paper on State of the Bangladesh Economy 165

without this, the current LNG import infrastructure will need to be upgraded to satisfy the power
sector's demands.

Cost Reduction

A significant challenge lies in reducing production costs, considering the various energy and
power contracts the government signed between 2010 and 2024. However, if it becomes feasible
to replace imported LNG with local gas supplies and if BAPEX is motivated to engage in increased
drilling activities to enhance gas availability, costs can be lowered. At the same time, more
offshore exploration drilling is essential to ensure a long-term energy supply for the economy.
Additionally, by incorporating more single-cycle gas-based plants or renewable energy systems
with battery storage, the reliance on HFO can be reduced to 5% of the total energy mix. Reducing
technical losses, upgrading infrastructure, and promoting combined heat and power generation
will also contribute to cost reductions.

Gas system Loss

Total gas sector T&D loss reaches 10-12% during high supply periods indicating at least 7-8%
pilferage. That is more than 200 MMcfd unaccounted for gas costing almost $1 billion in LNG
import terms. Just cutting illegal connections will not resolve the problem, a policy reform in
allocation and pricing will be required. Metered domestic gas connection at import parity price
may eliminate illegal connection.

Cross Border Trading

The import of electricity from the Indian exchange has been beneficial for Bangladesh. The newly
signed hydropower import agreement with Nepal is also advantageous. More power can be
sourced from these two countries, thereby reducing costs. In the future, additional renewable
energy from Nepal, Bhutan, and India can be imported. The power purchase agreement with
Adani was a cross-border government-to-business (G2B) deal. Such an unusual deal would not
have been possible without political intervention. Given the Adani Group's conviction on
corruption charges in the U.S., it is important to scrutinise this contract, as it was negotiated
hastily. Measures should be implemented to avoid repeating such contracts in the future.

Political Nexus in Power and Energy Sector

Prime Minister’s Office (PMO) is the most powerful political institution in the country.
Throughout the period of the past government, Ministry of Power, Energy and Mineral Resources
(MPEMR) had no full-time minister. Instead, the Prime Minister held additional responsibility as
Minister for MPEMR since 2009. Under her leadership, ruling political party members, lobbyists,
private business, and independent power producers became major stakeholders in this sector
bypassing due processes. The Energy Adviser, the State Minister, the Power Division were the
conduit of corruption. Every single deal from a small solar plant to a mega project like Adani was
approved by the PMO.

The private owners are a powerful stakeholder group. The owners of smaller plants, many of
whom had no prior experience, had an interest in continued use of rental plants by the Govt.
whereas deeper pocketed private investors preferred that the Govt. awarded larger privately
owned IPP projects235. Although the initial projects were smaller oil based power plants (less than
100 MW), the later ones were large coal and gas based IPP plants. While groups like Summit,
Reliance and United group were selected for 350+ MW gas plants, a complete newcomer like S.
Alam group got 1320 MW coal plant contract. Several of these power plants did not have any firm

Tamim, M., August 2016, ‘A Study on the Political Economy of the Electricity Sector in Bangladesh’, The
235

World Bank, Restricted distribution available with permission from the Bank

White Paper on State of the Bangladesh Economy 166

commitment of gas supply and now are stuck with stranded capacity increasing cost, debt, and
subsidy; prolonging public suffering.

Like Forex reserve figure, the last government politicised power generation figures through
misinforming people. The 24000 MW target set for 2021 was claimed by wrongfully including
non-grid captive power of 3000 MW and 450 MW of Solar Home System. Later they were
discarded from Grid capacity. Data manipulation and misinformation was also prevalent in this
sector.

The previous government portrayed a rosy economic future with hyped up growth figures
promising energy security based on imported fuel. Now 65% primary energy needs to be
imported at an annual cost of 10 billion dollars and by 2030 this will rise to 20 billion236. This will
put pressure on the reserve with huge demand for forex.

Transition Planning

The arbitrary nature of power sector growth has been challenged in articles, seminars,
workshops, and conferences, but rarely on the streets. Issues such as the peril of oil dependency,
the misuse of the Special Provision Act, a preference for LNG imports over local exploration,
capacity payments, and overcapacity have all been raised by various stakeholders who were not
beneficiaries. Without a serious challenge from the public, the autocratic government paid little
attention and continued on its own path. The only exception was the Rampal coal-fired power
plant, where sustained street protests aimed at protecting the Sundarbans drew international
attention. However, the mainstream local political opposition did not capitalise on this
opportunity. Eventually, the protests diminished, aided by a strong government campaign and
the support of crony journalists. Even protests against electricity, oil, or gas tariff hikes were tepid
under the repressive regime.

A system must be established where the aspirations of the general public are reflected in the
planning, implementation, and operation of energy services. The world is moving towards
renewable energy, and reducing fossil fuel dependency is essential not only for the environment
but also for sustainability. The power sector master plan and the new Integrated Energy and
Power Master Plan (IEPMP) were drafted using foreign consultants who based the growth targets
on the Five-Year Plans, which were never fully executed, leading to substantially inflated
production targets. This approach facilitated an unrealistic acceleration in production growth
compared to the historical growth rate.

Additionally, the government set ambitious economic growth targets to showcase their
achievements, prompting the power division to initiate investment plans. All of these factors
resulted in substantial excess capacity in both production and transmission and distribution. The
outcome has been an over-ambitious investment strategy leading to higher costs for power and
energy. Finally, the immunity provided under the Special Provision Act of 2010 served as a boon
for distributing favours to political allies and financiers of the ruling party and its leadership.
Consequently, there is a need to involve local experts in projections and planning to prevent
future misallocation of public funds.

236 https://thefinancialexpress.com.bd/trade/bds-energy-import-bill-to-double-to-20b-by-2030

White Paper on State of the Bangladesh Economy 167

Chapter XII. The Trapped External Trade*

12.1 Introduction

Bangladesh's external trade faces critical challenges, including a gradual decline in trade
orientation, limited export diversification, capital flight concerns, RMG sector issues, tariff
liberalisation hurdles, and weak participation in FTAs. With LDC graduation set for November
2026, these pressures will intensify. Addressing them requires comprehensive policy reforms,
strategic investments, and stronger international engagement. Unfortunately, the previous
government failed to address these issues effectively, leaving Bangladesh's external trade sector
vulnerable and hindering its path toward sustained, diversified growth.

12.2 Seven Structural Concerns

Gradual decline in trade orientation

Figure 12.1 highlights Bangladesh's poor performance in trade openness, with a consistently low
and declining trade-to-GDP ratio compared to Vietnam and India. While Vietnam’s ratio surpasses
150%, indicating a strong integration with global markets driven by its export-oriented industrial
strategy and substantial foreign direct investment (FDI), in contrast, Bangladesh exhibited much
lower ratios, averaging around 30%, reflecting limited trade integration. Bangladesh’s modest
trade-to-GDP ratio suggests barriers to trade diversification and reliance on a narrow export
base, particularly in the garment sector. More alarmingly, Bangladesh’s trade-to-GDP ratio
declined quite significantly from 48.1% in 2012 to 33.8% in 2022.

Figure 12.1: Bangladesh’s trade to GDP ratio in a comparative perspective

200.0
180.0
Trade to GDP ratio (%)

160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
2001

2009
2002
2003
2004
2005
2006
2007
2008

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

Bangladesh India Viet Nam

Note: The dotted red line shows the declining trend of trade to GDP ratio of Bangladesh between 2012
and 2022
Data source: World Bank, World Development Indicators.

Export basket remains highly concentrated

Bangladesh's economy is heavily reliant on the Ready-Made Garment (RMG) sector, which
accounts for over 85% of export earnings. While this sector has driven growth, dependence on a
single industry poses significant risks, especially with external shocks like the COVID-19

*The chapter has been prepared by Dr Selim Raihan, Professor, Department of Economics, University of
Dhaka and Executive Director, South Asian Network on Economic Modeling (SANEM).

White Paper on State of the Bangladesh Economy 168

pandemic or geopolitical disruptions affecting trade. Since the early 2010s, the share of RMG in
total exports has grown from 77% to 86% by 2023, highlighting very limited success in
diversification efforts (Figure 12.2).

Figure 12.2: Concentration of Bangladesh’s export basket: Percentage share of RMG

exports in total exports
90
86 85 86 86 85 85 86
Percentage share of the RMG exports in

84 84
85 82
79 80
79 79 79
80 77 77
75
total exports

75 75
75 73
71 71
70

65

60

2020

2023
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

2021
2022
Data source: ITC TradeMap.

Figure 12.3 presents a comparative picture of Bangladesh’s export product concentration index
vis-à-vis its comparator countries. For most of the years between 2005 and 2023, Bangladesh’s
export concertation index remained more than twice that of India, Indonesia, Vietnam and LDC
average indices. While all these countries, in general, successfully brought the index down in the
last decade, the index of Bangladesh remained high and rising.

Figure 12.3: Bangladesh’s export concentration index in a comparative perspective

0.6
Export product concentration index

0.5

0.4

0.3

0.2

0.1

0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Bangladesh India Indonesia Viet Nam LDC average

Note: Export product concentration index is derived from UNTADSTAT. The higher the index value the higher the
concentration.
Source: https://unctadstat.unctad.org/datacentre/

White Paper on State of the Bangladesh Economy 169

Despite initiatives to promote sectors like leather, agro-processing, and light engineering, these
industries faced challenges and remained underdeveloped. The leather industry, contributing 3-
4% of exports, struggled with environmental compliance and skilled labour shortages. Similarly,
the agro-processing sector was hindered by supply chain inefficiencies, insufficient technology
adoption, and high tariffs on capital machinery, restricting growth.

Key barriers to diversification included high tariffs, complex customs procedures, anti-export and
anti-FDI biases, and an overvalued exchange rate regime. These issues were often linked to
political and economic elites' interests, while the government’s focus on large infrastructure
projects overlooked sector-specific needs. Additionally, high business costs, outdated customs
practices, and inadequate trade facilitation disproportionately impacted non-RMG sectors.
Addressing these structural and policy-induced challenges required substantial investment and
strong political commitment, which was lacking, further delaying diversification progress
(Raihan, 2024). Table 12.1 summarises the challenges faced by most of the non-RMG sectors in
Bangladesh.

Table 12.1: Summary of the challenges faced by non-RMG exporters in Bangladesh

Challenges Description
Poor transportation, inadequate port facilities, and power
Infrastructure issues
shortages increase logistics costs and delays.
Limited options for shipping and high transportation costs reduce
High logistics costs
competitiveness in the global market.
Difficulty in securing loans, high interest rates, and limited access
Access to finance
to financial instruments.
Heavy reliance on a few sectors, making them vulnerable to market
Lack of product diversification
fluctuations and limiting growth potential.
Lengthy administrative processes, excessive paperwork, and
Bureaucratic red tape
delays in obtaining necessary permits.
Small and medium enterprises struggle with limited resources, lack
Inadequate support for SMEs
of incentives, and insufficient government support.
Shortage of skilled labour in certain industries affects production
Skilled labour shortage
quality and efficiency.
Compliance with international standards and regulations is
Regulatory compliance
challenging and costly.
Exchange rate Exchange rate mismanagement impacts export earnings, making it
mismanagement difficult to plan and price products competitively.
Limited use of advanced technology and innovation hinders
Lack of technology adoption
productivity and efficiency.
Marketing and branding Difficulty in establishing a strong international presence due to
challenges limited branding and marketing capabilities.

More critically, the dominance of crony capitalism over the past decade has hindered the growth
of non-RMG sectors. Access to credit, tax benefits, subsidies, and various incentives often were
determined by deals favouring cronies rather than a rule-based system, creating an uneven
playing field that disproportionately impacted non-RMG industries (Raihan, 2024).237
Consequently, despite numerous diversification projects undertaken in the past decade (Table
12.2), the outcomes remained largely unsatisfactory.

237See White Paper Chapter 21 on “Institutions” in this White Paper Committee Report for an elaborated
discussion on how crony capitalism dominated in Bangladesh in the past decade.

White Paper on State of the Bangladesh Economy 170

Table 12.2: Examples of diversification projects
Name Duration Partners Focus Status of the project
Export 2017– World Bank Enhance the Slow progress. The
Competitiveness 2024 competitiveness of key non- Daily Star in April
for Jobs (EC4J) RMG (Ready-Made 2023 that the project
Project Garments) sectors, such as failed to meet its
leather, footwear, plastics, deadline and became
and light engineering. The costlier due to slow
project aimed at skill implementation.238
development, infrastructure
improvements, and market
access.
Bangladesh 2016– World Bank, Establishment of special Only a few SEZs have
Economic Zones ongoing Japan economic zones (SEZs) to become operational at
Development International attract foreign direct varying scales. They
Project Cooperation investment (FDI) in diverse haven’t been able to
Agency (JICA) sectors like ICT, attract substantial FDI
pharmaceuticals, food yet.239
processing, and electronics.
The aim is to create export-
oriented clusters beyond
traditional sectors.
National 2010– Various UN Policy reforms to encourage Challenges remained
Industrial Policy 2023 Agencies the growth of non- in implementing
Implementation (UNIDO, traditional export sectors, industrial policies due
with a Focus on UNDP) particularly ICT, to a lack of ownership
Export pharmaceuticals, and light and coordination
Diversification engineering. Supported the among line ministries
development of SMEs with and various
export potential. stakeholders.240
Skills for 2014– Asian Development of a skilled The Finance Division,
Employment ongoing Development workforce for emerging Ministry of Finance,
Investment Bank (ADB), sectors like ICT, light has been
Program (SEIP) Swiss Agency engineering, and agro- implementing this
for processing to support project and it doesn’t
Development export diversification. fall into the mandate
and of this ministry.
Cooperation
(SDC)
Bangladesh 2007– International Improve the business The country lacks
Investment 2018 Finance environment to encourage significant challenges
Climate Fund Corporation investments in sectors in improving its
(BICF) (IFC), UK Aid beyond garments. Focused investment climate
on regulatory reforms and and business
infrastructure development. environment. The
World Bank’s
‘Bangladesh
Development Update’

238 Export competitiveness project still in slow lane after 6 years:

https://www.thedailystar.net/business/economy/news/export-competitiveness-project-still-slow-lane-
after-6-years-3293066
239 Only 10% of planned economic zones get off the ground in a decade:

https://www.thedailystar.net/business/news/only-10-planned-economic-zones-get-the-ground-decade-
3622336
240 Industrial Policy 2022: Coordination key to achieving implementation target:

https://www.thedailystar.net/business/economy/news/coordination-key-achieving-implementation-
target-3136196

White Paper on State of the Bangladesh Economy 171

 Name Duration Partners Focus Status of the project
in October 2023
highlights relevant
challenges.241
Export 2011– Bangladesh The EDF initially focused on There have been
Development ongoing Bank the RMG sector and was allegations of
Fund (EDF) expanded to provide mismanagement of
Expansion and financing options for non- EDF. According to the
Upgradation traditional export sectors, report by the Daily
including leather, IT Star on 1 November
services, and jute products. 2024, a large chunk of
a Tk 10,000 crore
central bank fund,
meant for financing
raw material imports
for export orders,
remains stuck with
four crisis-hit
banks.242
PFM II: Feed the 2019– USAID The Feed the Future Complex customs
Future 2024 Bangladesh Trade Activity processes, lack of
Bangladesh is working to improve trade cooperation among
Improving Trade facilitation through the customs agencies,
and Business implementation of the absence of
Enabling World Trade Organization automation, and
Environment (WTO) Trade Facilitation unavailability of
Activity Agreement (TFA), building resources and
the trade facilitation information are the
capacity of government major challenges for
officials, and improving Bangladesh to achieve
food safety procedures. the World Trade
Organisation-Trade
Facilitation
Agreement.243

Bangladesh has faced challenges in attracting foreign direct investment (FDI), which is essential
for diversifying its export portfolio and enhancing economic resilience. Despite its potential,
Bangladesh’s FDI-to-GDP ratio has persistently remained below 1%, lagging significantly behind
regional competitors like Vietnam and India, where FDI ratios are around 4.5% and 1.5%,
respectively. This limited FDI inflow restricted opportunities for technology transfer, industrial
upgrading, and the expansion of high-value exports, all of which were vital for economic growth,
export growth and export diversification.

Concerns over capital flight through over and under-invoicing

Bangladesh has faced allegations of large-scale capital flight over the past decade. Between 2009
and 2018, an average of $8.27 billion was lost annually through trade mis-invoicing, a common
method of illegal capital flight, according to the Global Financial Integrity Report. The IMF also

241 World Bank (2023)

242Tk 3,000cr export fund held up in four troubled banks:
https://www.thedailystar.net/business/news/tk-3000cr-export-fund-held-four-troubled-banks-
3741981
243 Many challenges prevent Bangladesh from achieving WTO-TFA: report:

https://www.newagebd.net/article/195083/many-challenges-prevent-bangladesh-fromachieving-wto-
tfa-report

White Paper on State of the Bangladesh Economy 172

noted significant outflows from the financial account in FY 2022-23, amounting to 0.5% of GDP,
alongside increased unrealised export proceeds, suggesting potential capital flight.244

To address these issues, it is crucial to strengthen the capacity of institutions such as the NBR, the
Export Promotion Bureau (EPB), and the Bangladesh Bank in terms of data collection, validation,
and reporting. Currently, inconsistencies in data collection methods between the EPB and
Bangladesh Bank contribute to these discrepancies. For instance, the EPB primarily relies on self-
reported figures from exporters, which can sometimes be inflated for a variety of reasons,
including obtaining favourable credit terms or maintaining client confidence. In contrast,
Bangladesh Bank bases its data on foreign exchange earnings from exports, which provides a
more reliable but delayed account of actual export performance.

Improving the technological infrastructure and coordination between these institutions is crucial
for ensuring accurate and timely export data. For example, integrating digital tools for real-time
tracking of exports and payments, along with cross-verification mechanisms between the EPB
and Bangladesh Bank, could significantly reduce reporting errors. Furthermore, enhancing the
human capacity of these institutions—by investing in training for data collection, analysis, and
reporting—is necessary to ensure that data management systems can handle the growing
complexity of global trade.

Equally important is ensuring that these institutions remain independent from political and
business pressures, which can sometimes incentivise the inflation of economic indicators to
project a more favourable image of the economy. Transparency in data collection processes and
regular audits by independent bodies can help mitigate these risks and provide a more accurate
picture of the state of the export sector.

Export data mismatch

In 2022-23, the gap between export figures reported by Bangladesh's Export Promotion Bureau
(EPB) and Bangladesh Bank surged to $12 billion, up from $4.73 billion in 2020-21 (Figure 12.4).
In July 2024, Bangladesh Bank released corrected data showing actual exports from July 2023 to
April 2024 at $33.67 billion, significantly lower than the $47.47 billion reported by the EPB,
revealing a $13.8 billion discrepancy. Such mismatches pose serious challenges for policymakers
and investors, complicating economic planning and obscuring the true state of the export sector.
This raises concerns about the robustness of Bangladesh’s economic recovery and resilience to
external shocks.

244See the White Paper Chapter 20 on “Illicit Financial Outflows” in this White Paper Committee Report
for an elaborated discussion on the magnitude and processes of capital flight from Bangladesh in the past
decade.

White Paper on State of the Bangladesh Economy 173

Figure 12.4: Export data mismatch

Source: https://www.thedailystar.net/business/economy/news/14b-export-data-puzzle-unnerving-3649186

The discrepancy suggests deeper systemic issues in export reporting accuracy. Observers have
noted that export figures are often inflated, and exporters have struggled with rising production
costs due to higher energy prices, wage increases, and global supply chain disruptions.
Additionally, the demand for labour-intensive products, particularly apparel, has shifted toward
more sustainable and ethically sourced goods, leading to difficulties in retaining global clients.
Reports245 indicate that many RMG factories have reduced production due to insufficient orders
and rising compliance costs. This disconnect between reported figures and on-the-ground
challenges can result in misguided policies, masking the need for support in critical areas like
financing, technology upgrades, and workforce development.

Inflated export data can also lead to misinformed decisions regarding foreign exchange reserves.
Accurate export figures are essential for estimating foreign exchange inflows, which impact
monetary policy and currency valuation. Over-reporting exports creates unrealistic expectations
about the country's ability to manage its balance of payments, complicating fiscal and monetary
planning.

To address these issues, it is vital to strengthen the capacity of institutions such as the NBR, EPB,
and Bangladesh Bank in data collection, validation, and reporting. Currently, discrepancies arise
from differing data collection methods; the EPB relies on self-reported figures from exporters,
which can be inflated, while Bangladesh Bank uses foreign exchange earnings data, providing a
more reliable but delayed account of actual performance.

Improving technological infrastructure and coordination between these institutions is crucial for
accurate and timely export data. Integrating digital tools for real-time tracking of exports and
payments, along with cross-verification mechanisms, could significantly reduce reporting errors.
Investing in training for data collection and analysis would also help institutions manage the
growing complexity of global trade.

Status of RMG export and associated challenges

The “RMG model” of export success in Bangladesh has failed to establish a sustainable path for
export growth and diversification (Raihan, 2024). While it is often assumed that the RMG sector

245 https://thefinancialexpress.com.bd/economy/numerous-rmg-factories-go-bust-amid-adversities

White Paper on State of the Bangladesh Economy 174

thrived solely due to favourable domestic and international trade policies, a range of additional
factors were crucial to its growth. Key factors include the prioritisation of the RMG sector as the
main beneficiary of export incentives and industry and trade policies, favourable political
settlements among the elites related to this sector so that political conflicts at the national level
do not affect this sector, and the rise of subcontracting firms which could bypass many formal
regulatory issues. The RMG sector also benefited from a "political settlement" among elites in
labour management, which involved suppressing minimum wages, limiting workers' rights, and
restricting trade unions. This was compounded by weak oversight of factory compliance, a lack
of regulatory enforcement, and the extraction of rents through RMG by-products. The Bangladesh
Garment Manufacturers and Exporters Association (BGMEA) emerged as a powerful lobby group
with significant bargaining power, securing policies that favoured the sector. The influence of this
sector extended to politics, with several garment owners becoming ministers and members of
parliament, indicating a form of state capture by the RMG industry.

The RMG sector in Bangladesh also faces significant domestic and international challenges that
threaten its growth and competitiveness. Domestically, labour rights remain a critical issue.
Despite employing over four million workers, around 60% women, the sector has been criticised
for poor working conditions, highlighted by the 2013 Rana Plaza tragedy. Although some
progress has been made in factory safety through initiatives such as the Bangladesh Accord and
Alliance, labour rights violations, including low wages, long working hours, and inadequate union
representation, continue to be a concern (ILO, 2022).

Environmental compliance is another pressing issue. As global buyers prioritise sustainability,

RMG factories face pressure to adopt greener practices. However, many small and medium
enterprises struggle with the high costs of eco-friendly technologies and limited access to green
financing. The lack of a robust regulatory framework further complicates the shift toward
sustainable production (Light Castle, 2024).

Internationally, Bangladesh's RMG sector competes with low-cost producers like Vietnam, and
Cambodia. Vietnam, with favourable trade agreements, has become a strong competitor by
offering competitive prices and market access (Textile Today, 2020). Additionally, global supply
chain disruptions and the shift towards nearshoring or friend-shoring, with a focus on sourcing
from countries closer to their home markets, have changed sourcing patterns, challenging
Bangladesh's position (McKinsey, 2022).

Evolving consumer preferences for sustainable apparel, especially in Europe and North America,
add pressure. The upcoming EU Corporate Sustainability Due Diligence Directive will require
supply chain compliance with stringent standards, risking the loss of buyers if not met (European
Commission, 2023).

Bangladesh’s RMG exports also suffer from limited diversification within the sector. At the six-
digit HS code level, just 10 RMG products account for 70% of the total RMG exports from
Bangladesh (Raihan, 2024). As the RMG industry becomes increasingly saturated with cotton-
based apparel production, it is crucial for manufacturers to diversify into non-cotton-based
apparel, particularly man-made fibre (MMF), to retain Bangladesh's position as the second-
largest RMG exporter in the global market246.

Global trade tensions, particularly U.S.-China disputes, disrupt raw material supplies. Meanwhile,
international trade agreements emphasise labour and environmental standards, requiring
Bangladeshi manufacturers to upgrade compliance practices. A looming challenge is Bangladesh's

246https://lightcastlepartners.com/insights/2024/09/rmg-man-made-fiber-
sustainability/#:~:text=As%20the%20RMG%20industry%20becomes,exporter%20in%20the%20global
%20market.

White Paper on State of the Bangladesh Economy 175

LDC graduation in 2026, which will end preferential trade benefits, raising export costs and
reducing competitiveness (Raihan et al., 2022).

Tariff liberalisation challenges

Bangladesh faces significant challenges in tariff liberalisation, a crucial aspect of trade policy
aimed at boosting global competitiveness. While reducing tariffs can lower the cost of imported
raw materials, helping export-oriented industries, it also makes local industries vulnerable to
cheaper imports. This creates a policy dilemma between protecting domestic industries and
encouraging exports and foreign investment. Historically, Bangladesh’s tariff policies have been
criticised for being inconsistent and reactive, failing to align with long-term economic goals
(Sattar, 2024a).

Bangladesh's current average tariff rate of 27% is significantly higher than the averages of other
income groups: 9.79% for low-income countries, 7.2% for lower-middle-income countries, 2.02%
for high-income countries, and the global average of 6%. Over the past decade, the increase in
para-tariffs, combined with customs duties, has led to a rise in the overall nominal protection rate
(Table 12.3).

Table 12.3: Trend in Nominal Protection in Bangladesh

Fiscal year Un-weighted Average Average
average custom duties para-tariff nominal protection rate
FY 01 21.10 7.13 28.54
FY 10 13.67 10.21 23.88
FY 15 13.16 13.53 26.69
FY 20 13.45 13.30 26.75
FY 21 13.58 13.50 27.08
Source: Sattar (2024b).

Bangladesh also has a very high share of tariff lines with international peaks (Figure 12.5).
Between 2010 and 2020, the share of tariff lines with international peaks in Bangladesh increased
from 39.7% to 40.1%.

Figure 12.5: Bangladesh also has a very high share of tariff lines with international peaks

120.0
98.2

97.6

92.4
% share of tariff lines with

90.0

100.0
international peaks

80.0
56.5

47.8

46.9

60.0
40.1
39.7

28.0

40.0
23.8

22.9

19.6
19.6
18.6

16.7
15.7
14.4
10.6

20.0
7.0

0.0
Bangladesh India Viet Nam Malaysia Thailand

1990 2000 2010 2020

Note: The share of tariff lines with international peaks is the share of lines in the tariff schedule with tariff rates that
exceed 15%.
Data source: World Bank, WDI.

The country’s high average tariff rate is also because of the government's high reliance on revenue
generated from customs duties amid poor performance in domestic revenue mobilisation. Also,
over the last decade, with the past government’s heavy focus on the development of physical

White Paper on State of the Bangladesh Economy 176

infrastructure, import-substituting sectors like steel, cement, and construction materials always
advocated for protection through high tariff rates. Some other import-substituting sectors like
edible oil, sugar, biscuits, leather and leather goods, and poultry have also been in favour of high
tariff protection.

This high level of protection has led to an "anti-export bias," where firms prioritise the more
profitable domestic market over exports. For example, the RMG sector benefits from tariff
reductions on imported inputs, but small and medium enterprises (SMEs) struggle to compete
against imported goods, especially in sectors like light engineering and electronics.

The tariff structure’s high protection levels create disincentives for firms to innovate and seek
new export markets, limiting export diversification beyond the RMG sector. Although periodic
tariff reductions have been implemented to comply with international guidelines, these are often
offset by non-tariff barriers such as high supplementary duties and value-added taxes. Such
measures provide short-term protection to local industries but hinder the broader goal of
creating a competitive, export-oriented economy (Sattar, 2024a).

Bangladesh’s tariff regime is further complicated by bureaucratic customs procedures, increasing

the cost and time of trade. Despite efforts to streamline these processes, barriers persist, driving
firms to focus on the domestic market, where administrative hurdles are lower (Raihan et al,
2023).

To address these issues, the National Tariff Policy 2023 aims to rationalise the tariff structure,
reduce protection for final goods, and lower tariffs on raw materials and intermediate goods. This
policy seeks to reduce production costs for exporters, enhance competitiveness, and attract
foreign direct investment (FDI) by creating a transparent tariff environment (Khatun, 2024).
However, the policy’s success will depend on effective implementation, which has often been
undermined by vested interests benefiting from high protection levels.

Strong political will and collaboration among government agencies, industries, and trade
associations are essential for gradual reduction and adjustment, encouraging competitiveness in
domestic industries. Additionally, complementary reforms, such as reducing business costs,
improving logistics, and strengthening institutions like the National Board of Revenue and
Bangladesh Bank, are crucial to ensure the success of tariff liberalisation and overcome the anti-
export bias. Also, it is important to note that a more strategic rather than wholesale tariff
liberalisation policy should be promoted.

Limited participation in Free Trade Agreements (FTAs)

Bangladesh's trade policy faces a critical challenge due to its limited participation in Free Trade
Agreements (FTAs). FTAs are essential in the global trading environment as they offer enhanced
market access, reduce trade barriers, and improve competitiveness by securing preferential
treatment for exports. Despite these advantages, Bangladesh has been slow in signing and
negotiating FTAs compared to regional counterparts like India and Vietnam, limiting its ability to
secure favourable market access globally (The Daily Star, 2024). There are six major reasons
behind the low participation: (1) Preference for GSP benefits: Bangladesh benefits significantly
from the GSP provided by major markets like the EU which reduces the immediate need for FTAs.
(2) Fear of revenue loss: Since tariffs provide a large portion of revenue, policymakers in
Bangladesh fear that the FTAs, which normally involve tariff reductions likely to have an impact
on government income, will be economically unfavourable. (3) Trade negotiation capacity: The
institutional capacity and negotiating skills in complex trade agreements haven’t been improved.
(4) Concern for domestic industries: Many domestic import-substituting industries, fearing
escalated competition, are not in favour of FTAs. (5) Concentrated export basket: Exports of
Bangladesh are fairly concentrated, given that the RMG sector is dominant, and thus there is little

White Paper on State of the Bangladesh Economy 177

incentive for opening up to other markets or sectors when such a diversified industrial base does
not exist. (6) Political and strategic factors: Regional dynamics and alliances also influence
Bangladesh’s cautious approach to FTAs, especially in balancing relationships with neighbours
and trading partners in Asia.

Table 12.4: Bangladesh’s limited FTA participation

FTA Description
Asia-Pacific Trade Agreement (APTA) Formerly known as the Bangkok Agreement, APTA is a preferential
trade agreement involving Bangladesh, China, India, South Korea, Laos,
and Sri Lanka. It offers tariff concessions among member countries.

South Asian Free Trade Area (SAFTA) A regional trade agreement among SAARC countries, including
Bangladesh, India, Pakistan, Sri Lanka, Nepal, Bhutan, Maldives, and
Afghanistan. It aims to promote trade by reducing tariffs among
member nations.

Preferential Trade Agreement (PTA) Bangladesh signed a PTA with Bhutan, marking its first bilateral trade
with Bhutan agreement. The agreement provides duty-free access to numerous
products between the two countries.

Bangladesh’s participation in regional trade agreements has been underwhelming (Table 13.4),
with limited progress on agreements like the South Asian Free Trade Area (SAFTA) and the Bay
of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) FTA.
SAFTA, signed in 2004, aimed to reduce tariffs and promote intra-regional trade, but progress has
been hindered by non-tariff barriers and political tensions between member states (Raihan,
2020). BIMSTEC has similarly struggled, with delays in finalizing the agreement due to divergent
national interests.

Bangladesh’s only notable bilateral trade achievement has been a Preferential Trade Agreement
(PTA) with Bhutan in 2020, providing duty-free access for selected products. However, the
agreement's scope is narrow, covering a small trade volume, and Bhutan's market size limits the
economic benefits. Bangladesh has yet to sign comprehensive FTAs with major trading partners
like the EU, the US, or China, critical for its long-term economic strategy.

The absence of FTAs has significant implications for Bangladesh’s export sector. Without them,
Bangladeshi exports often face higher tariffs compared to competitors, such as Vietnam, which
benefits from numerous FTAs, including the CPTPP and EU-Vietnam FTA. This has given Vietnam
a competitive edge in sectors like textiles, electronics, and agriculture. As Bangladesh prepares to
graduate from LDC status in 2026, the loss of trade privileges under the Generalised System of
Preferences (GSP) will exacerbate this challenge.

To address these issues, Bangladesh must prioritise strategic engagement in FTAs, focusing on
sectors with comparative advantages, such as RMG, leather, and agro-processing. It should seek
to diversify its export markets by exploring agreements with emerging economies in Asia, Africa,
and Latin America. Comprehensive consultations with domestic industries are also essential to
ensure that FTAs provide sufficient safeguards for vulnerable sectors while encouraging
competitiveness through investment in technology, skills, and innovation.

Recently Bangladesh also expressed interest in joining the Regional Comprehensive Economic
Partnership (RCEP) and ASEAN. Membership in the RCEP will give Bangladesh expanded market
access, particularly to major economies such as China, Japan, South Korea and members of
ASEAN.247 Bangladesh is also considering FTA negotiations with some other countries. However,

247Bangladesh economy set to gain from RCEP’s diverse trade facilitation:

https://www.globaltimes.cn/page/202410/1321410.shtml#:~:text=Membership%20in%20the%20RCE
P%20will,percent%20of%20the%20global%20population.

White Paper on State of the Bangladesh Economy 178

Bangladesh must strengthen its trade negotiation capacity, diversify exports beyond the RMG
sector, and improve infrastructure to meet regional standards. Additionally, reforms in trade
policies, tariff structures, and regulatory frameworks are essential to enhance competitiveness.

Bangladesh can also energise the SAARC and BBIN processes and expedite the BIMSTEC FTA by
leading discussions on trade facilitation, cross-border connectivity, and streamlined customs
processes. Prioritizing mutual economic gains, Bangladesh could propose joint investment
projects, harmonised regulations, and capacity-building initiatives. Engaging stakeholders and
leveraging diplomatic channels can drive progress and build regional partnerships.

12.3 Key Messages

1. Export diversification: The government should undertake targeted policy interventions

for the development of non-RMG sectors. This may involve a reduction of tariffs on
imported capital goods, tax incentives, and support for technology upgrading efforts to
raise productivity and competitiveness.

2. Address the RMG-related challenges: To enhance the RMG sector's resilience, promote
diversification into non-cotton and MMF textiles and provide financial incentives for
compliance with international standards. Invest in technology upgrades and a green
finance fund to support sustainable practices. Enforce labour standards and collaborate
with global organisations to ensure ethical practices and improve buyer confidence.

3. Smoothening the tariff structure: The government must remove the relatively "anti-
export bias" by reforming the current high-tariff regime, particularly for raw materials
and intermediate goods. Also, it is important to note that a more strategic rather than
wholesale tariff liberalisation policy should be promoted.

4. Strengthen institutional capacity for data accuracy: The reinforcement of the institutional
capacity in data accuracy requires further coordination and integration of technology at
the EPB and Bangladesh Bank to reduce discrepancies in reporting relating to exports. In
this respect, digitalised mechanisms may be provided for real-time tracking of exports
along with the training provided in data collection and validation to enhance accuracy and
transparency.

5. Address capital flight through strengthened trade monitoring: Strengthen trade

monitoring mechanisms to reduce capital flight through trade mis-invoicing. This could
involve closer collaboration between the NBR, Bangladesh Bank, and customs authorities
to enhance data validation processes, implement advanced digital tracking systems, and
regularly audit trade transactions for accuracy.

6. Negotiate strategic FTAs: Bangladesh should negotiate strategic FTAs with its key trading
partners in preparation for the possible loss of LDC trade benefits in 2026. This
negotiation must be sectoral, focusing on comparative advantages; the government must
build negotiation capacity and strategy for favourable terms of trade.

7. Enhancement in FDI attraction strategy: Government efforts to improve the investment

climate by addressing infrastructural impediments, and red tape, and offering
appropriate incentives in high-potential sectors will contribute to making Bangladesh a
more attractive destination for FDI. It is also crucial to provide economic zones for
diversified industries aside from the RMG sector to attract FDI and spur sectoral
diversification.

White Paper on State of the Bangladesh Economy 179

References

ADB. (2016). Bangladesh: Consolidating Export-led Growth - Country Diagnostic Study. Asian
Development Bank. https://www.adb.org/publications/bangladesh-consolidating-export-
led-growth
European Commission. (2023). Corporate Sustainability Due Diligence Directive. European
Commission. https://commission.europa.eu/business-economy-euro/doing-business-
eu/sustainability-due-diligence-responsible-business/corporate-sustainability-due-
diligence_en
ILO. (2022). Trade Union Organizing In Bangladesh’s Ready-Made Garment Sector Amidst Covid
Pandemic: Status, Challenges And Scope. International Labour Organization.
https://www.ilo.org/media/371121/download
Khatun, F. (2024). The new tariff policy may help increase competitiveness.
https://www.thedailystar.net/opinion/views/macro-mirror/news/the-new-tariff-policy-
may-help-increase-competitiveness-3400366
Light Castle (2024). Bunon 2030’s Policy Dialogue: Key Insights into the Future of Sustainable
Apparel. April 2024. https://lightcastlepartners.com/insights/2024/08/apparel-
sustainability-bunon-2030/
McKinsey & Company. (2022). The State of Fashion 2023: Resilience in the Face of Uncertainty.
McKinsey & Company.
Raihan, S. (2020). Sustaining South Asia’s Regional Integration Process. In: Raihan, S., De, P.
(eds) Trade and Regional Integration in South Asia. South Asia Economic and Policy Studies.
Springer, Singapore. https://doi.org/10.1007/978-981-15-3932-9_1
Raihan, S. (2024). Informal Institutions, the RMG Sector, and the Present Challenge of Export
Diversification in Bangladesh. In: Raihan S, Bourguignon F, Salam U, eds. Is the Bangladesh
Paradox Sustainable?: The Institutional Diagnostic Project. Cambridge University Press;
2024:101-136.
Raihan, S., Khorana, S., & Uddin, M. (2022). Navigating LDC graduation: modelling the impact of
RCEP and CPTPP on Bangladesh. Journal of the Asia Pacific Economy, 29(3), 1599–1621.
https://doi.org/10.1080/13547860.2022.2114227
Raihan, S., Uddin, M., Hossain, I., Sharmin, E. and Aahad, MA (2023), “Expanding Private
Investment in Bangladesh in the Context of LDC Graduation”, A report prepared for the
Economic Relations Division, Ministry of Finance, the Government of Bangladesh.
Sattar, Z. (2024a). Changing trade policy directions is imperative now.
https://www.thedailystar.net/opinion/views/news/changing-trade-policy-directions-
imperative-now-3626601
Sattar, Z. (2024b). Looking for Trade Policy directions in the Forthcoming Budget
https://policyinsightsonline.com/2024/05/looking-for-trade-policy-directions-in-the-
forthcoming-budget/
Textile Today (2020). Why will Vietnam overtake Bangladesh in RMG export?
https://www.textiletoday.com.bd/will-vietnam-overtake-bangladesh-rmg-export
The Daily Star (2024). Progress slow in signing preferential trade deals with trading partners.
https://www.thedailystar.net/business/economy/news/progress-slow-signing-
preferential-trade-deals-trading-partners-3714896
World Bank. (2023). Bangladesh Development Update: New Frontiers in Poverty Reduction.
World Bank Group.
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0310012023/original/Bangladesh-Development-Update-October-2023.pdf

White Paper on State of the Bangladesh Economy 180

 C. SOCIAL

White Paper on State of the Bangladesh Economy 181

Chapter XIII. Poverty, Inequality, and Vulnerability: A Story of Fragile Glory

13.1 Introduction

Based on primary analysis of the Household Income Expenditure Survey (HIES) 2016 and 2022
data, along with a few consultation interviews and a secondary literature review, we critically
examine four narratives that together create an overarching portrait of the glory over the last 15
years of the past regime, which we argue to be fragile.

The first narrative is about Bangladesh making accelerated gains in poverty reduction and human
development along with impressive GDP growth during the past regime. We make the case that
this is, on the one hand, a truncated reading of a much longer trajectory of progress that cuts
across political regimes and, on the other hand, the creation of a narrative using convenient truth
and abusing statistics. The indicators used to construct the narrative of accelerated poverty
reduction and human development progress give us an incomplete picture that hides the fragility
and vulnerability of the glory. The weaknesses of the narrative become apparent when we show
how those escaping poverty largely hover around a bare survivalist poverty line and fall back to
poverty with shocks, which are becoming even more intense and complex in recent times.

The narrative and record of human development progress rest on a few critical first-order
successes—again, with a much longer history and trajectory driven by complex dynamics of
policy, non-governmental, and people’s initiatives that cut across political regimes. Moreover, the
poor progress on second-order challenges related to quality has been absent from the
mainstream narrative.

The second narrative has been about the inevitability of inequality with rapid growth, which has
no global evidential basis. Along with increasing income inequality, which is now at the level of
highly unequal countries globally, we see high levels of wealth inequality in terms of land and
other assets. Without progressive measures of taxation and redistribution, such high levels of
wealth inequality will exacerbate intergenerational inequality, setting in motion vicious and
societally polarizing dynamics of instability.

A very popular and highly visible narrative was of a caring and generous government, articulated
through its expansive social protection programs measured by aggregate budgetary allocation—
the third narrative we examine. We argue that social protection is the site of severe failures in
terms of politicisation, accountability, and inefficiencies despite a very well-thought-through and
government-adopted National Social Protection Strategy, the implementation of which has been
extremely weak.

Digitalisation promises were also central to the narrative of creating opportunities and improving
services for the poor. The promise proved to be largely a pipedream with extremely low usage, at
best, offering marginal value and, at worst, leading to new forms of corruption and wastage.


The chapter has been prepared by Dr Imran Matin, Executive Director, BRAC Institute of Governance and
Development (BIGD) and Dr Kazi Iqbal, Research Director, Bangladesh Institute of Development Studies
(BIDS).
Research support was received from the following people at BIGD – Prof. Munshi Sulaiman, Research
Director; Ms Marjan Hossain, Senior Research Associate and Mr Sheikh Arman Tamim, Research Associate
for; and editorial support was received from Ms Nusrat Jahan, Head of Communications and Knowledge
Management are duly acknowledged.
The chapter benefitted from discussions with Dr S. R. Osmani, Professor, Ulster University and the BBS
team working on HIES.

White Paper on State of the Bangladesh Economy 182

We structure the chapter in five sections. It begins with the examination of trends in poverty and
economic growth, followed by an analysis of inequality and its connection to the poverty-growth
nexus. The third and fourth sections explore trends in human capital and social protection
services, respectively, and their roles in addressing poverty and inequality, and section five
addresses digital exclusion. Finally, we provide observations on data before concluding the
chapter.

13.2 Trends in Poverty and Economic Growth

While economic growth in Bangladesh has accelerated significantly in recent years, the
rate of poverty reduction has slowed. Figure 13.1 illustrates the trends in GDP growth
alongside poverty rates based on the upper poverty line. From 1990 to 2022, the poverty rate
dropped by 38 percentage points, from 56.7% to 18.7%, averaging a reduction of about 1.2
percentage points annually. Economic growth reached its peak in the past decade, and per capita
Gross Domestic Product (GDP) more than tripled from 2012 to 2022, compared to 88% growth
from 2000 to 2010 and only 40% in the 1990s. However, poverty reduction was most rapid
between 2000 and 2010, with an annual decrease of 1.74 percentage points. According to the
trends in economic growth and poverty reduction, the past three decades can be characterised as
three distinct phases: (a) 1990s, characterised by slow economic growth and gradual poverty
reduction; (b) 2000–2010, marked by moderate economic growth and accelerated poverty
reduction; and (c) a period of rapid economic growth but with a slowing rate of poverty reduction
since 2010.

Figure 13.1: Annual per capita GDP growth and poverty rate trend

Source: Poverty estimates for 1991-2010 and for 2016-2022 were taken from the HIES 2010 report (Page 61) and
HIES 2022 report, respectively; Per capita GDP estimates were taken from World Development Indicators (WDI):
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=BD.

The changes in national income and consumption of the past decade have been less
favourable for the poor, even when considering changes in measurement methods. There
are two important changes worth considering in comparing the long-term trends in poverty and
per capita GDP. First, when changing the base year for calculating GDP from 2005–06 to 2015–
16, the Bangladesh Bureau of Statistics (BBS) incorporated a broader range of economic activities,
including new sectors and restructuring existing ones. This change resulted in a sharp rise in per

White Paper on State of the Bangladesh Economy 183

capita GDP between 2015 and 2016. However, a high rate of GDP growth has continued since
then. Second, new poverty lines were estimated with expanded food and non-food items to adjust
to the changed realities of poverty and the essentials of living in the current context. With the
updated poverty lines, the rate of poverty reduction has been 1.84 percentage points per year
since 2010 as opposed to 1.74 from 2000-2010 (Table 13.1). Both figures are much higher than
the 1.3 percentage points reduction in poverty between 2016 and 2022.

Table 13.1: Poverty incidence over time (2000-2022)

Years of HIES Upper poverty line Lower poverty line
National Rural Urban National Rural Urban
2000 48.9 52.3 35.2 34.3 39.5 13.5
2005 40 43.8 28.4 25.1 28.6 14.6
2010 31.5 (37.1) 35.2 21.3 17.6 (12.2) 21.1 7.7
2016 24.3 (26.5) 26.4 18.9 12.9 (9.2) 14.9 7.6
2022 18.7 20.5 14.7 5.6 6.5 3.8
Source: HIES reports 2000-2022 (BBS) Note: Consumption basket of food and non-food items was expanded in 2022
which makes poverty lines (upper and lower) of 2022 incomparable with the previous rounds of HIES. Hence, BBS re-
estimated 2016 and 2010 poverty lines. The figures in the parentheses at the national level represent the fraction of
people under upper and lower poverty lines adjusted for 2022 basket. This exercise was not carried out for 2000 and
2005 due to a lack of comparable baskets.

Economic growth’s power to alleviate poverty is waning. A broad consensus has emerged that
growth now reaches the poor far less effectively than in previous decades. New facets of
poverty—such as geographic isolation, ecological risks, and entrenched policy biases—have
increasingly constrained the role of growth in poverty reduction (Sen and Ali, 2015). Although
the elasticities of both extreme and moderate poverty steadily declined between 2000 and 2016
(Iqbal and Pabon, 2018), meaning that they have become less responsive to growth, there has
been limited action to address or reverse the trends. The COVID-19 pandemic has dealt a severe
blow to low- and middle-income households, and its impact is likely underrepresented in current
poverty metrics, creating further complications in assessing the growth-poverty relationship for
the period. In fact, there are considerable questions on the reliability of the government estimates
of income poverty for 2022 in capturing the post-COVID reality—distressed coping and rising
cost of food and essentials (Fielding et al., 2024).

Progress observed in poverty reduction is not revealing the underlying vulnerability of

many just hovering above the lines. One crucial determinant of the poverty rate is the income
threshold at or below which individuals are classified as poor. Figure 13.2a shows the cumulative
distribution of per capita consumption expenditure for 2016 and 2022, with the upper poverty
line marked on the horizontal axis. For comparability, we inflate the consumption expenditure of
2016 to 2022 prices.248 First, the distribution shows a reduction in poverty from 2016 to 2022,
irrespective of the poverty line, known as stochastic dominance in poverty literature (Figure
13.2a). However, an examination of the sensitivity of the poverty estimates to variations in the
poverty threshold reveals the underlying vulnerabilities (Figure 13.2b). When the threshold is
increased by 10%, a high concentration of households just above the poverty line is observed.
Analysis reveals that a 20% rise in the 2022 income threshold would nearly double the
percentage of the population classified as poor and more than double the share categorised as
extremely poor. Despite a general trend of declining poverty, a modest increase in the poverty
line can dramatically alter poverty rates, highlighting the vulnerability of those living just above
the current threshold.

248Throughout our primary analysis of HIES 2016 and 2022 data, we inflated the 2016 figures to 2022
price when comparing monetary values.

White Paper on State of the Bangladesh Economy 184

Figure 13.2a: Cumulative distribution of per capita consumption in 2016 and 2022

Note: Author’s calculations using HIES 2016 and 2022 data. The 2016 consumption expenditure and poverty lines were
adjusted for inflation (by a factor of 1.43 (CPI 2022/CPI 2016)). For easier visualisation, the cumulative distribution is
restricted to 50,000 BDT.

Figure 13.2b: Cumulative distribution of per capita consumption in 2022 (With a 10%
increase in poverty thresholds).

Note: Author’s calculations using HIES 2022 data. For easier visualisation, the cumulative distribution is restricted to
50,000 BDT.

Multidimensional poverty saw more substantial improvement during the 2010s compared
to income-based poverty, yet urgently requires updated data. The multidimensional poverty
index (MPI) value declined significantly, from 0.29 in 2010 to 0.10 in 2020 (Table 13.2). From
2015 to 2020 alone, approximately 19 million people in Bangladesh moved out of
multidimensional poverty, according to the latest MPI estimates. Beyond income, a major driver
of this progress was the improvement in nutrition; more specifically, malnutrition rates dropped
from 36.5% to 9.5% between 2010 and 2020. However, the available data does not yet reflect
potential setbacks in these gains, as food insecurity has risen in the wake of the COVID-19

White Paper on State of the Bangladesh Economy 185

pandemic and due to the persistently high inflation in the last couple of years. Educational
indicators in the MPI also raise concerns. Although the percentage of households without a
member completing six years of schooling declined from 24% in 2010 to 17% in 2020, the real-
world impact of these six years has diminished, especially as issues with education quality
continue to grow. Later in this chapter, we explore how these educational challenges might shape
future poverty and inequality trends.

Table 13.2: Multidimensional poverty indicator for Bangladesh (2010-2020)

Program Indicators Definition Weight 2010 2015 2016 2020
Oxford Data Source DHS MICS DHS MICS
Poverty and 2007 2012- 2014 2019
Human 13
Development Nutrition Any person under 70 1/6 36.50% 11% 23% 9.50%
Initiative years of age for whom
(OPHI) there is nutritional
information is
undernourished.
Child Mortality A child under 18 has 1/6 24% 12% 15% 1.30%
died in the household
in the five-year period
preceding the survey.
Years of Schooling No eligible household 1/6 23.70% 17% 15% 16.70%
member has completed
six years of schooling.
School Attendance Any school-aged child 1/6 9% 15.50% 9.50% 6.80%
is not attending school
up to the age at which
he/she would complete
class.
Cooking Fuel A household cooks 1/18 56.70% 36% 40% 23.30%
using solid fuel, such as
dung, agricultural crop,
shrubs, wood, charcoal
or coal.
Sanitation The household has 1/18 48.20% 23% 28% 15.60%
unimproved or no
sanitation facility or it
is improved
Drinking Water The household’s source 1/18 2% 3% 3% 1.40%
of drinking water is not
safe, or safe drinking
water is a 30-minute
walk or longer walk
from home, roundtrip.
Electricity The household has no 1/18 38.80% 22.50% 26% 4.60%
electricity.
Housing The household has 1/18 54.10% 35% 37% 23.30%
inadequate housing
materials in any of the
three components:
floor, roof, or walls
Assets The household does 1/18 45.30% 27% 26% 16.10%
not own more than one
of these assets: radio,
TV, telephone,
computer, animal cart,
bicycle, motorbike, or
refrigerator,
and does not own a car
or truck.
Multidimensional HxA 0.291 0.174 0.196 0.104
Poverty Index
(HxA)

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 Program Indicators Definition Weight 2010 2015 2016 2020
Incidence of Proportion of the 57.80% 37.30% 41.30% 24.60%
Poverty (H) population that is
multidimensionally
poor
Average Intensity Average proportion of 50.40% 46.60% 47.40% 42.20%
Across Poor (A) indicators in which
they are deprived
Source: All indicators were taken from Global MPI country briefs, for the years of 2010-2020.

The gender dimension of poverty cannot be captured by female headship, and we must
consider pervasive lived experiences like gender-based violence. Female headship is
associated with various other types of vulnerability and not income poverty. In fact, households
headed by women are less likely to be poor than male-headed households. However, gender-
based violence continues to affect women in Bangladesh. They are often constrained in their
economic and educational pursuits, largely due to the pervasive violence and safety concerns.

Despite progress in mandating policies aimed at addressing gender violence, its incidence
remains high. The incidence of partner violence (physical and/or sexual) reported by women
from the poorest households (61.4%) is nearly double the rate reported by women from the
richest households (BBS, 2016). Moreover, the fear of violence, within or outside the household,
could also limit women’s mobility and consequent access to education, employment, and even
healthcare. In the 2019 Multiple Indicator Survey, 25% of women reported feeling unsafe walking
in their neighbourhood alone after dusk, and this perception particularly resonated among
younger (ages 18-19) (36%) than older women (17%) (ages 45-49) (BBS & UNICEF, 2019). This
concern for safety reportedly heightened during the pandemic, particularly for female-headed
households, who struggled the most in meeting their daily needs and ensuring their daughters’
safety (Sultan, Mahpara, and Tasnin, 2023). The concern for their daughter’s safety is also likely
to increase the likelihood of child marriage in those households. Women who are married off
early are less likely to continue education after marriage, which has a higher chance of happening
in households in the poorest quintile compared to affluent homes (NIPORT and ICF, 2024).

Despite laws like the Nari o Shishu Nirjatan Domon Ain and the Domestic Violence Prevention
and Protection Act (DVPPA) 2010, widespread belief that marriage is a sacred and private
institution has led to inaction by service agencies and legal practitioners. The findings suggest
that effective implementation of the DVPPA will need a fundamental change in norms and
attitudes among implementers to overcome the barriers to action; it will also need a provision of
supplementary support to victims and revisions to the procedures to enable easier access to the
protection of the Act (BIGD, 2023)

13.3 Rising Inequality: All in the Top

The tolerance of growing income inequality for the sake of faster growth has been
detrimental to the poor. In recent years, discussions in policy circles as well as on news and
social media have emerged that advocate for accepting the increasing inequality as a trade-off for
accelerated growth. The (in)famous Kuznets Curve—hypothesizing an inverted-U relationship
between inequality and GDP, predicting that inequality initially increases with growing national
income but eventually declines with greater prosperity—has gained traction despite significant
criticism of the notion that economic growth will naturally reduce inequality. This scepticism is
valid in the context of modern economies, where empirical evidence supporting the existence of
the curve is scarce (e.g., Gallup, 2012; Chang et al., 2021). As a result, inequality has continued to
rise in Bangladesh, with the Gini coefficient reaching 0.50 nationally in 2022, 0.54 and 0.45 in
urban and rural areas, respectively (Table 13.3). While Bangladesh is not unique in experiencing
rising inequality alongside economic growth (Osmani, 2018), it now ranks among the countries
with the highest income inequality globally. As of 2021, among the 72 countries with Gini

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coefficient data in the World Bank database, only Colombia, Brazil, and Panama reported values
exceeding 0.50. Although there are issues with the comparability of the estimates across
countries, Bangladesh’s current income inequality is worryingly high.

Table 13.3: Income and Asset Gini (2016-2022)

Region/HIES years Income Gini Asset Gini
2016 2022 2016 2022
National 0.48 0.50 0.82 0.84
Rural 0.45 0.45 0.75 0.81
Urban 0.50 0.54 0.85 0.84
Source: Author’s calculation using HIES data (2022 and 2016).

The inequality in assets looks far worse than income inequality. The asset Gini, which
measures wealth inequality, has also increased from 0.82 in 2016 to 0.84 in 2022 (Table 13.3).
While demonstrating an ever-increasing concentration of wealth at the top income levels, even
these large Gini figures most likely underestimate the real wealth inequality due to incomplete
data at the rich households’ end. This discrepancy becomes evident when examining the value of
assets held by the wealthiest 10% of income earners (Figure 13.3). According to the HIES 2022
data, households in the highest income bracket reported owning assets worth only BDT 7.36 lakh
(BDT 4.17 lakh in rural and BDT 12.26 lakh in urban households). These figures may seem
implausible when compared to casual observations of wealth ownership. Although increasing
between 2016 and 2022, these figures appear hugely underreported in both rounds to draw any
meaningful conclusion on the real dynamics.

Figure 13.3: Average value of assets in the top and bottom income decile in 2016 and
2022

Source: Author’s calculation using HIES data (2022 and 2016).

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Despite underreporting, land accounts for half of the reported wealth and is heavily
concentrated among the rich. Asset disaggregation by consumption decile reveals that land and
real estate constitute over half of the total value in wealth accumulated across consumption
deciles (Figure 13.4). Real estate wealth inequality can arise from either the concentration of land
ownership or the appreciation of land and property values. Households in the highest income
decile report the highest concentration of real estate. They also exhibit a higher propensity for
investing in return-generating assets such as stocks/bonds and jewellery in both 2016 and 2022
(Figure 13.3). For those in the lower consumption deciles, a good portion of the non-land assets
are household durables that depreciate rather than generate income, except for livestock. It is
worth mentioning that many households reported that they do not own any real estate, and the
value of the assets was all self-reported. Predictably, the average amount of land owned is almost
unchanged between 2016 and 2022 (Figure 13.5). Also, the differences in the average quantities
owned by households in richer and poorer quintiles are not very large, and the richest quintiles
own just 0.03 acres of land on average. However, the real difference can be seen in the value of
land— for the upper quintiles, the value was not only many times higher in 2016 but also
increased drastically by 2022, which was not the case for households in lower quintiles. The main
reasons for the stark inequality in the value of land are location, access to infrastructure, and
utilities. The disparity in land value appreciation among quintiles suggests that government
investments in infrastructure have disproportionately benefitted the wealthy and neglected the
poor.

Figure 13.4: Average value of land and total assets by consumption decile (2016 and 2022)

Source: Author’s calculation using HIES data (2022 and 2016).

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Figure 13.5: Amount and price of land in 2016 and 2022

Source: Author’s calculation using HIES data (2022 and 2016).

Gender inequality in financial assets persists across all the wealth groups. Access to
financial services is one of the basic prerequisites of wealth accumulation. There is a persistent
gender gap in access to bank or mobile money accounts across all wealth quartiles (Figure 13.6).
The GGiFI survey data reflects that not only are women more financially excluded, but the depth
of their inclusion is shallower. While 32% of men fall within the high financial inclusion category,
it is only 18% for women. The survey also finds that from the point of view of usage, women are
far less active than men, reflecting the importance of gender norms in shaping financial inclusion
for women (CRD, 2024)

Figure 13.6: Access to bank and mobile bank accounts, by income quartile, region and gender

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Source: Author’s calculation using 2022 HIES data.

The gender gap is less prominent for ownership of mobile money accounts compared to bank
accounts across wealth categories. However, account ownership is the most basic form of the
disparity in access to cheaper credit or the ability to make higher-yielding financial investments.

Current inequalities can hinder progress in the future. Overall, despite the rural bias of HIES,
the significant asset inequality observed within this sample suggests a grim reality, which often
remains and continues to be misreported/under or unreported. Unless corrective measures are
taken, the benefits of economic growth in future are going to be skewed against the poor as the
country has already at a highly unequal distribution of income and wealth.

13.4 Human Capital Disparities and the Threat of Rising Inequality

Bangladesh is yet to realise economic growth driven by human capital. The economic
growth over recent decades has been driven by low-skill, labour-intensive activities in sectors
like garment manufacturing rather than by advancements in human capital. Investment in human
capital accumulation, encompassing the skills, education, health, and productivity of the
workforce, can achieve faster economic growth through high-value economic activities and
reduce inequality (Osmani, 2018). While progress in literacy rates, enrolment, nutrition, and life
expectancy has been notable, the country faces huge challenges with the quality of education and
aligning skills with market demands.

Changes in real wage rates indicate a further widening of income gaps. With few assets to
rely on, labour is one of the few viable pathways for the poor to “catch up.” The average monthly
income for individuals engaged in wage employment rose from BDT 4,000 in 2016 to BDT 6,900
in 2022. During this period, real wages increased most noticeably for those in the highest income
group across genders (Figure 13.7). For middle-income earners, wage increase was modest, and
it was the least for the poorest. In both years, women in the lowest income quintile reported
earning nearly half of what men earned. Gender disparity in earnings is somewhat smaller yet
persistent in the higher income quintiles. Additionally, the reported average monthly income
seems surprisingly low, especially in the highest income groups (e.g., BDT 31,000 per month in
the highest quintile group). Nonetheless, the wage ratio between the highest and lowest quintiles
remained nearly constant, with individuals in the highest quintile earning 4.7 times more than
those in the lowest quintile in both 2016 and 2022.

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Figure 13.7: Monthly wage rate in 2016 and 2022 by income quintile and gender

Source: Author’s calculation using HIES data (2022 and 2016) (BBS, 2022, 2016).

The quality of education indicates limited prospects of improving productivity soon. The
scarcity of financial resources and credit for the lower-income groups, coupled with strong
inflationary pressures, makes it challenging for these households to invest in children’s
education. In a two-phased study where learners were tested for foundational skills, fewer poor
students were found to perform at grade levels than their non-poor peers (Figure 13.8).249

Figure 13.8: Share of children performing at grade level in foundational tests by poverty
quintile

Note: Poverty status here was measured using a Poverty Score Card
Source: BIGD & CGD, 2023.

Class-level disaggregation further indicates that there is a persistent gap between poor and rich
students. The gap appears as early as class one, and it widens as they progress onto higher grade
levels (Figure 13.9). For poor families, educating their children can lead to upward mobility, but
poor children are also struggling the most in getting quality education.

249The PREPARE surveys were conducted over the phone, on an existing sample frame of12,391 children
(aged 5-18 years) from 8,052 households, across all 64 districts in Bangladesh. The first round was
completed in January 2023, followed by a second round after 3 months that was completed in July 2023
(Hossain et al., 2023)

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Figure 13.9: Students performing at grade level expectations in Mathematics by class and
poverty status

Source: BIGD & CGD, 2023.

Competency achievement is low across all groups. While concern is growing about the
inequality in human capital accumulation in terms of the learning achievements of children, even
the richest children are not necessarily doing well—only 36% of students from the highest
income quintile performed at grade level in English competency tests. Although results were
somewhat better for Bangla (72%) and Mathematics (62%), these figures still reflect a low overall
quality of education. An excessive focus on enrolment rates, politicised pass rates in public exams,
and frequent, uncoordinated changes to curricula contribute to these challenges, undermining
both the intrinsic quality of education and the potential for future economic growth.

13.5 Social Protection: Too Little to Make a Dent

Strengthening social protection programs is essential, with significant room for

improvement. Poverty and asset dynamics underpin the need for well-designed and targeted
safety net programs, regional targeting, and effective graduation models for further reduction of
poverty. There are different safety net programs implemented by different ministries and
departments. However, there is rampant evidence of leakages, mis-targeting, duplications, and
non-coordination among implementing bodies (Rahman, Choudhury and Ali, 2012; Barkat-e-
Khuda, 2011).

The coverage has increased substantially. We gathered information from multiple secondary
sources on four key programs: the old age allowance, allowance for widows and destitute women,
freedom fighters’ allowance, and allowance for persons with disabilities (Table 13.4). Between
2007 and 2021, the number of recipients for these schemes grew significantly—most notably,
recipients of the allowance for persons with disabilities increased more than tenfold, while the
freedom fighters’ allowance saw the smallest increase, from 100,000 to 192,500 recipients.

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Table 13.4: Number of beneficiaries of selected SSPs for 2007, 2012, and 2021
Year Old Age Allowance for Freedom Fighter Allowance for
Allowance Widow/Destitute Allowance Person with
(in 000s) Women (in 000s) (in 000s) Disabilities
(in 000s)
2007 1700 750 100 200
2012 2476 920 200 286
2021 5701 2475 192.5 2008
Source: Allowance amounts were collected from various sources, which include reports from the Ministry of Social
Welfare, the department of social services, and newspaper articles.

The amounts are generally inadequate, and the real value has changed only for the
freedom fighters’ allowance. The monthly allowance amounts are BDT 500 for old age and
widow allowances and BDT 750 for people with disabilities. The school stipend program, the
largest social transfer initiative, provides an allowance of BDT 150 per month. In real terms, these
amounts are too small to drive any significant change, and their purchasing power has remained
largely stagnant over the years. However, the monthly allowance is BDT 20,000 for freedom
fighters. When adjusted to 2022 values (Table 13.5), the real value of most transfers has barely
been maintained. Unsurprisingly, the freedom fighters’ scheme stands out, having nearly doubled
in real value, making it the most substantial social transfer among other government-to-person
(G2P) schemes (Figure 13.10).

Table 13.5: Real value of selected social transfer schemes

Year Old Age Allowance for Primary Freedom Allowance
Allowance Widow/Destitute Education Fighter for Person
Women Stipend Allowance with
Disabilities
2016 566.09 566.09 141.52 11321.88 707.62
2017 669.45 669.45 133.89 13388.91 803.33
2018 634.28 634.28 126.86 12685.66 888.00
2019 600.69 600.69 120.14 14416.62 840.97
2020 568.35 568.35 170.50 13640.33 852.52
2021 538.48 538.48 161.55 21539.39 807.73
2022 500.00 500.00 150.00 20000.00 750.00
Source: Allowance amounts were collected from various sources, which include reports from the Ministry of Social
Welfare, the department of social services, World bank reports, Microsave reports and newspaper articles.

Figure 13.10: Proportional change in SSPs in 2022 relative to 2016

Freedom Fighter Allowance 1.8

Allowance for Person With Disabilities 1.1
Primary Education Stipend 1.1
Allowance for Widow/Destitute Women 0.9
Old Age Allowance 0.9

0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2

Source: Author’s own calculations.

Mis-targeting adds to this inadequacy. Social transfers are not targeted to the poor—the
decline in the incidence of social transfer beneficiaries as we move up the income group is very
low (Figure 13.11). This pattern is almost identical for universal schemes such as school stipends

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or cash transfer schemes that are meant to be more strictly targeted towards the poor. Urban
social transfers have lower coverage but follow the same pattern of beneficiary incidence across
income groups (Figure 13.12). However, given that income distribution is clustered around the
poverty line, better poverty targeting may not be the best strategy for social protection.

Figure 13.11: Percentage of households covered by SSPs across consumption decile (2022)

Source: Author’s own calculations using HIES 2022 data.

Figure 13.12: Percentage of HH receiving SSPs in rural and urban (2022)

Source: Author’s own calculations using HIES 2022 data.

Existing data could be better leveraged to enhance targeting in social protection programs.
Because rigorous targeting can be costly, geographic targeting is often used as a cost-effective

White Paper on State of the Bangladesh Economy 195

alternative to improve targeting efficiency. In 2016, the HIES expanded its sample size to provide
more accurate poverty estimates at the district level, as opposed to previous rounds focusing on
divisional and rural-urban estimates. Although techniques like small area estimation can further
refine these estimates, the expanded HIES 2016 data presented an opportunity to allocate
allowances by district, potentially improving support for poorer households. Currently, there is
only a weak positive correlation between district poverty rates and the percentage of households
receiving social support programs (Figure 13.13). Social transfer programs intended as safety
nets could thus benefit from using available secondary data to improve targeting effectiveness.

Figure 13.13: Scatterplot of district level poverty rate and SSP coverage

Source: Author’s own calculations using HIES 2016 data.

Coastal districts vulnerable to climate shocks appear to have been prioritised for social
support programs. A higher proportion of households in coastal districts at risk of cyclones and
increased salinity (WRPO, n.d) receive any form of social support than districts with similar
poverty rates without such risks (Figure 13.13). This pattern suggests that geographic targeting
may be in use, offering a foundation that could be further strengthened to reach additional
poverty pockets using existing data. Techniques like integrating additional data sources, such as
night light imagery or mobile usage data, with census and household surveys can cost-effectively
enhance targeting. However, there has been limited progress in adopting these advanced
methods.

13.6 Digital Exclusion: A New Dimension of an Unequal Society

Digital literacy and access to direct digital services remain low. A survey in 2019 found that
almost all rural households had at least one mobile phone, but only 41% had smartphones, which

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are required for accessing many digital services.250 Most people knew that the government had
digitised services. The term ‘digital’ was familiar to all. However, they were not fully aware of
which services were available digitally. Additionally, a significant share of the respondents
reported that they could not read or send SMS messages, which is essential for using digital
services. The 2019 survey revealed that regions with lower internet access, particularly rural
areas like Rangpur, faced significant challenges in digital engagement.

Limited digital literacy hampers service utilisation and creates dependence on

intermediaries. Limited digital literacy means reliance on intermediaries. In the aforementioned
survey, only 18% of respondents successfully retrieved information from government portals,
and many reported seeking digital services through intermediaries like computer shop owners.
Access to intermediaries was widespread, with 50% of the population using them. For instance,
door-to-door agents charged minimal fees to pay bills online, and local Bkash agents managed
school stipend payments for students. However, many households lacked access to computer
shops. In 2021, a follow-up survey indicated that many users accessed services like birth
registration and national ID registration through intermediaries rather than their devices.
Despite substantial growth in the use of mobile financial services, most respondents still
depended on local agents for transactions. Ultimately, users tend to access services driven by
necessity, and most remain disproportionately unaware of the full range of available digital
services. To increase uptake, mass communication campaigns and user-friendly service
interfaces that cater to the digitally illiterate population are needed.

There is a significant gender gap in digital access—women are less likely to own mobile
phones or utilise digital services. While awareness and access to devices have improved,
disparities based on gender, income, and education persist. The GGiFI survey finds that almost
83% of men had MFS access, compared to only 47% of women (CRD, 2024).

13.7 Observations on Data and Independence

This chapter primarily relies on HIES data, which primarily aims to generate poverty estimates.
While our limited analysis does not indicate any immediate cause for concern regarding the
poverty estimates and associated methodologies, it reveals a significant gap in the sampling of
higher-income households and/or the completeness of the information collected from them. This
issue may stem from strategic underreporting, including motivations like tax evasion. Addressing
this bias will require establishing the independence of the BBS from other government branches
and fostering public trust that their data will be used solely for explicit research purposes without
risk of misuse. Increasing the frequency of surveys and more spatially disaggregated surveys are
other critical considerations given the complex poly-crisis context and the need for more localised
development planning. Innovative partnerships between public and private research institutes
could be worth exploring.

The methodologies employed in HIES have undergone various changes over time, making it
challenging to track these modifications in detail. It is crucial to document these changes
comprehensively to build organisational memory and ensure that future analyses can accurately
reflect trends and shifts in data collection practices.

250BIGD conducted two rounds of nationally representative (rural) surveys, one in 2019 and one in 2021,
to understand the state of digital literacy and the use of public digital services. The study was intended to
understand the barriers to the uptake rate of digital services despite policy priority and investments in
infrastructure.

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13.8 Conclusion: A Record and Narrative of Fragile Glory

Bangladesh has made notable progress in poverty reduction and human development, achieving
significant advancements across key indicators. This progress is the result of a long history of
carefully designed and implemented policies and programs. However, this success has been
framed within a simplified political narrative that overlooks the evolving realities on the ground.
Independent evidence highlights the increasing fragility of resilience among the near poor,
particularly in the context of the post-COVID poly-crisis. The analysis here exposed the superficial
nature of Bangladesh’s poverty alleviation efforts, yet official statistics have failed to address the
issues of fragility and vulnerability. Critiques based on independent research and evidence have
largely been ignored.

The sharp rise in income and asset inequalities, with wealth increasingly concentrated in the top
decile even in limited data samples, further underscores this disparity. Real wage growth is
primarily occurring within this top decile, which is also accumulating high-value land and assets
due to privileged access to information and capital. In contrast, there is little change in the
economic position of the middle segments, particularly in terms of asset accumulation, reflecting
deepening inequality. Additionally, the early and persistent learning disparities between the poor
and non-poor have contributed to a low human capital trap, further underscoring the fragility of
poverty reduction efforts.

To address the fragility, a forward-looking, human capital-focused growth strategy is essential.

Such a strategy could pave the way for a new trajectory in Bangladesh—one characterised by
lower inequality, a more sustainable escape from poverty, greater social mobility, and a stronger,
more engaged citizenry.

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MicroSave Consulting (2022, September 27). Women at The Heart of G2P Initiatives. MicroSave
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_49a5_b77e_5108186638dc/wp005.PDF

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Chapter XIV. Reality of Human Development: Mind the Gaps*

14.A Health and Nutrition: Not Thriving

14.A.1 Introduction

Bangladesh has made remarkable progress over many years in expanding coverage for essential
public health interventions, such as immunization. These results have markedly lowered
maternal and child mortality rates. In contrast, there is very limited coverage of services related
to secondary and tertiary care. We spend more than one percentage point lower in health as a %
of GDP compared to the South Asian average, and our out-of-pocket expense is more than 20
percentage points higher than that of our South Asian counterparts, which has actually been
growing over time. This has resulted in Bangladesh’s health system as extremely pluralistic with
weak state capacity and willingness to coordinate and regulate both itself and other health actors.

The discussion on health mainly hovers around coverage, however, the quality remains poor and
out of pocket expenditure remain extremely high with extremely low levels of accountability and
reliability251. The deployment of public expenditure (%) in health sector is one of the lowest
among the globe, while the out of pocket expenditure add soar to already fragile economic
conditions of the households (Table 14.A.1; ANNEX I Health).The chapter tries to focus on some
of the systematic issues which largely hinder the access to assured quality services in health
sector in Bangladesh.

14.A.2 Primary Health Care: Low Facility Readiness and Poor Supervision

The government is one of four main groups involved in Primary Health Care provision, the others
being the for-profit private sector, nongovernmental organizations (NGOs or non-profit private
organizations), and development partners (representing overseas governments,
intergovernmental organizations and private charities). The government takes lead
responsibility for national policy, planning and decision-making for all health care and sees itself,
through the Ministry of Health and Family Welfare, as the major health service provider.

For rural PHC, Bangladesh has established 14,327 Community Clinics (CC) at grassroots levels.
Supply of medicines at CCs is not harmonized with the size (i.e., number) of the local population
or disease burden. The CCs have average or poor-quality equipment in 88% of facilities, and
average or poor-quality drug supplies in 59% of facilities (MOHFW et al., 2019252). Union level
facilities also lack basic logistics and equipment. Only 18% of Upazila Health Complexes (UzHCs)
have functional X-ray machines and 14% ultrasound machines, while stock out of any
commodities was 28.6% (in the last 12 months of the survey by NIPORT, et al 2020253) at 287
UzHCs. Infrastructures at UzHCs often require significant maintenance.

*The chapter has been prepared by Ms Sharmind Neelormi, Professor, Department of Economics,
Jahangirnagar University, with contribution from Dr Imran Matin, Executive Director, BRAC Institute of
Governance and Development (BIGD) and Dr Kazi Iqbal, Research Director, Bangladesh Institute of
Development Studies (BIDS).
251 https://www.tbsnews.net/bangladesh/health/tough-choice-health-beats-education-household-

expenses-770110
252 MOHFW, DGHS, CBHC, & WHO. (2019). Independent evaluation of community-based health services in

Bangladesh. https://www.who.int/docs/default-source/searo/bangladesh/pdfreports/2019-20/cbhs---
report-2019.pdf?sfvrsn=fdecaade_2
253 NIPORT, MOHFW, & ICF. (2020). Bangladesh Health Facility Survey 2017. NIPORT - ICF.

https://www.dhsprogram.com/pubs/pdf/SPA28/SPA28.pdf

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14.A.3 Sexual, Reproductive, Maternal, Newborn, Child and Adolescent Health

The rate of reduction in the Maternal Mortality Ratio (MMR) has slowed down considerably since
2011. There has been no reduction of MMR in the post-natal period with 73% of maternal deaths
occurring within the 42 days after delivery with 56% deaths occurring in the first 24 hours.
Haemorrhage (31%) and Eclampsia (24%) continue to be the major causes of such deaths as in
2016, while indirect causes, (ANC) mainly undetected or poorly managed NCDs, contribute to
10% (NIPORT et al., 2017)254.

Coverage of quality of ante-natal care is very low at 17.7%, while 47% of the births are conducted
by unskilled providers, and 50% of the 3 million (1.5 million births) annual births take place at
home. At facilities, 33% of the women undergo C-section during delivery nationally, though that
rate is 84% in private facilities and most are considered unnecessary (NIPORT et al., 2020255).
Only 4% of the facilities offering normal delivery have facility readiness for providing the
services. Only 7% of home births get postnatal care (PNC). Since 2018, the MOHFW has
introduced the first-ever licensed midwives in facilities at upazila level and below.

The neonatal mortality rate (NMR) is reducing slowly. Newborn deaths constitute 67% of the
total deaths among under 5 (U5) children. Bangladesh will soon become a GAVI (the Vaccine
Alliance) graduate country, and support from GAVI will no longer be available. The GOB has to
take responsibility for financing routine vaccines starting in 2026, as well as new vaccines,
including HPV which is to be introduced soon.

Globally the Bangladesh Expanded Programme on Immunization (EPI) is recognised for its
excellence in coverage and reach. However, there are significant low performance of EPI coverage
in hard to reach areas (char, haor, Chittagong Hill Tracts) and also in a number of city
corporations. For example, in 2019, the EPI coverage in the city corporations varied to a large
extent, it was 92.4% in Rajshahi City Corporation while it was only 63.8% in Sylhet City
Corporation in 2019. The urban EPI coverage rate (79.2%) is substantially lower than that in the
rural (91.8%).

The government declared and established new city corporations in the last one and a half decade,
having a thrust on urbanisation. These establishments were not well thought through and the
readiness of these city corporations to provide services to people was inadequate. There is almost
no public PHC infrastructure in urban areas. Some of the gaps in urban areas have been filled by
NGOs but mostly by private for-profit facilities, which have flourished in an unregulated market
(Evans & Alam, 2017)256.

The Local Government (City Corporation) Act, 2009 and the Local Government (Municipalities)
Act, 2009 vest the responsibilities of providing PHC services under their jurisdiction with City
Corporations and Municipalities. However, a lack of a regular health budget and limited financial
and human resources for those LGIs make it difficult for them to provide quality PHC service to
the urban population.

Another issue is mobility of mothers causing significant loss due to follow up. A number of young
mothers migrate to cities and other areas for jobs (RMG and others), and the destination city

254 NIPORT, International Centre for Diarrhoeal Disease Research, Bangladesh (icddr,b), & MEASURE
Evaluation. (2017). Bangladesh Maternal Mortality and Health Care Survey 2016. NIPORT, icddr,b, and
MEASURE Evaluation
255 NIPORT, MOHFW, & ICF. (2020a). Bangladesh Demographic and Health Survey 2017-18. NIPORT/ICF.

https://www.dhsprogram.com/pubs/pdf/FR344/FR344.pdf
256 Evans, J., & Alam, M. I. (2017). Primary health care systems: Comprehensive case study from

Bangladesh. WHO.

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corporations often do not have the mechanism to identify these mothers (and their children) and
include them in the programme in their system.

Table 14.A.1 EPI Coverage in Bangladesh

National Rural Urban City Corporation
EPI Coverage 83.9% 91.8% 79.2% 82.9%
(2019) Rajshahi (92.4%)
Sylhet (63.8%)
Source: EPI coverage evaluation survey, 2019.

Adolescents have the highest fertility rate and contribute 18.3% of the total annual births.
Violence against adolescent boys and girls are increasing. Cases of depression and suicide are
high among this group. Adolescents receive SRHR services largely from private sector providers
including unqualified ones as they have very limited opportunities for correct and complete SRHR
information through the education system or elsewhere (NIPORT et al., 2021).

Sexual, Reproductive, Maternal, Newborn, Child and Adolescent Health (SRMNCAH) services are
provided both by DGHS and DGFP. Overlapping mandates of DGFP and DGHS in providing
SRMNCAH services is inefficient in the context of acute shortage of skilled HR and resources
constraints.

The inequitable provision of SRMNCAH services, particularly for underserved and marginalized
groups of populations is also a hindrance to provision of quality SRMNCAH services. All these are
contributing to inefficient use of resources (e.g., preventing Obstetricians and Anaesthetists of the
two Directorates to work in one another’s facility, oversupply in one while shortage of supply in
another facility, fragmented information on SRMNCAH performance, etc.).

14.A.4 Family Planning Programmes Require Momentum

The total fertility rate (TFR) of the country went down from 2.12 in 2010 to 2.04 in 2020 (BBS,
2021). Family Planning (FP) activities are spearheaded by the DGFP, which also prioritizes
maternal health. The contraceptive prevalence rate (CPR) in the country was 63.9% for all
methods (BBS, 2021).

Due to the COVID-19 pandemic, probably, contraceptive use decreased in 2020-21, resulting in
an increase in unwanted pregnancies, according to DGFP Management Information System (MIS).
However, this situation has started to reverse gradually. The performance of long acting and
permanent methods is yet to reach the pre-pandemic period level. Despite the initiatives, unmet
need for FP services is still around 12% among the married women. FP discontinuation rates
increased from 30% in 2014 to 37% in 2017 (NIPORT et al., 2020a).

Use of Menstrual Regulation (MR) among married adolescent women is quite low based on the
BDHS 2014 data (NIPORT et al., 2016). Public sector contraceptives are dispensed based on
marital status. Due to religious and other social situations, information regarding MR may not be
properly disseminated to or reach adolescents and youths.

FP support is not available to women in private facilities post-delivery. So is the case with the
50% of women who are delivering at home. On the other hand, very little post-partum family
planning (PPFP) counselling and services are being provided from UHFWCs.

Unavailability of skilled service providers at the different levels − district and below − are
hampering provision of FP services. Availability of human resources in the DGFP is poor at
community level due to high rates of vacancies (M. H. Kabir & Hossain, 2022). Vacant positions at
DGFP should be filled-up on priority basis to ensure provision of FP services.

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To address gaps arising out of vacancies, NGOs have been contracted by DGFP to perform
LARCPM in hard-to-reach areas. FP services provided by private providers and NGOs need to be
monitored for ensuring their quality and accountability.

14.A.5 Delivery of Nutrition Programmes Encounters Structural Limitations and Rampant

Corruptions

Despite notable improvements, about 4.8 million children remain stunted and 1.6 million remain
wasted in Bangladesh. Furthermore, no significant changes were found in reducing wasting,
which has been hovering around 8-10% for last two decades. More than half of adolescent boys
and girls are underweight, and one third of adolescent girls are below the cutoff height of 145 cm
and remain nutritionally at risk. Teenage pregnancy and low birthweight rates (often related to
early pregnancy) are high.

Bangladesh has made progress in improving child and maternal nutrition outcomes over time.
Much of this resulted from a combination of nutrition-specific and sensitive drivers within a
wider enabling environment of pro-poor economic growth, of which key factors are income
growth, smaller family size, sizable gaps between births, parental and particularly women's
education, and wider access to health.

The reduction of chronic undernutrition (stunting) was higher in rural than urban areas. Both the
urban and rural population face the triple burden of malnutrition — the co-existence of
undernutrition, micronutrient deficiencies, and overweight and obesity, though the prevalence of
over nutrition is more pronounced in urban areas. Urban slums have a higher prevalence of
underweight, stunting and wasting than the rural areas. 28% of Under 5 children are stunted,
whereas the South Asian average rate of stunting among U5 children is 21.8%.

Geographic disparities also persist; Sylhet division continues to have the highest rates of
malnutrition in children under-5 for all three undernutrition parameters (stunting, underweight
and wasting).

Availability, accessibility, and utilization of essential nutrition services through PHC continue to
be low. Community outreach is not sufficient to sustain a continuum of care and increase
utilization effectively. Utilisation is an issue because parents and caregivers only visit the health
facility when there is a health concern. Often, nutrition services are provided by both DGHS and
DGFP at facilities at primary, secondary and tertiary levels, which gives a skewed representation
of coverage of services.

Health Population Nutrition Sector Development Programme (HPNSDP) suffers from serious
allegations of financial fraudulence involving DGHS and Institute of Public Health Nutrition257
(IPHN). The awareness programs are allegedly governed by a syndicate among DGHS, IPHN,
MoH&FP258. The Anti-Corruption Commission (AAC) also probed into and found proven
allegations involving the Ministry of Health and Family Planning in the systematic corruption in
the 4th HPNSP Program259.

The governance issues in the Health, Population and Nutrition programs in Bangladesh by the
Directorate General of health services (DGHS) are much talked about and featured in various
media reports but there have not been any significant and consequential action to resolve the

257 https://www.kalerkantho.com/print-edition/culture/2011/05/05/151179
258 https://www.risingbd.com/amp/national/news/60160
259 https://www.banglatribune.com/others/606810

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corruption issues260. Allegedly, the political high-ups and the government bureaucracy maintain
an unholy alliance that is characterized by mutual benefits through a corrupt health system.

Corruption in HPN programmes are identified as the main cause for poor delivery of the activities
and poor nutritional outcome.

14.A.6 Non-Communicable Disease and Mental Health (NCDs)

Notably cardiovascular diseases (stroke and heart attacks), cancers, diabetes, chronic respiratory
diseases, etc., as well as mental disorders, other mental health conditions and neurological
disorders, are the leading causes of premature death and disability globally as well as in LMICs.
The Strategic Investment Plan for 5th HNP has identified that people suffering from NCDs in
Bangladesh, in general, lack access to quality, safe, effective and affordable essential health
services, which is almost absent, especially in rural areas. The proportional mortality (% of total
deaths) from NCDs is currently contributing to about 70% of total mortality in Bangladesh, which
is gradually increasing while deaths due to NCDs were only 10% several decades ago.

In Bangladesh, the total number of NCD deaths in 2021 was 557,200 and the probability of
premature mortality was 19%. To address Non-Communicable Disease (NCD) burden, the focus
of the 4th HPNSP was mainly limited to strengthening control of risk factors, and early detection
and management of NCDs, which could be considered moderate in scope, given the disease
burden of NCDs. This approach seemed to be inadequate to address the fast growing
consequences of NCDs. Slow implementation of interventions is rapidly increasing health care
costs, and continued inadequate investment in actions against NCDs will have enormous health,
economic, and societal consequences in all countries (Nishtar et al., 2018). Though deaths from
NCDs occur mainly in adulthood, many have their origins in early life, even before conception.

Mental health (MH) disorder affects one’s family and community. Treatment of mental disorders
is hampered due to widespread social stigma, lack of awareness and also lack of trained providers
and facilities. Accordingly, a large unmet need remains, which compounds the effects of disease
on the patients suffering from mental disorders. Based on the criteria of high burden (in terms of
mortality, morbidity and disability) and large economic costs or association with violations of
human rights, the WHO identifies the following as priority conditions of MH in Bangladesh:
depression, psychoses, mental and behavioural disorders in children and adolescents, disorders
due to substance use, self-harm/suicide, epilepsy and dementia (NMIH et al., 2022).

Mental health care is almost non-existent at PHC facilities and needs to be introduced in these
facilities with provisions of screening, identification and counselling of priority mental health
conditions (IRT, 2020).

14.A.7 Secondary, Tertiary and Specialised Care Facilities

Secondary, tertiary and specialized care facilities (STSCF) are supposed to serve referred
patients, whose conditions could not be treated at the primary level. Lack of a functioning referral
system across the various tiers of the health system is repeatedly quoted as a challenge for
facilities (IRT, 2020).

260https://bangla.thedailystar.net/news/bangladesh/crime-justice/news-477136
https://www.dainikamadershomoy.com/details/018de68e70c86
https://m.dainikshiksha.com/
https://www.kalerkantho.com/print-edition/culture/2011/05/05/151179
https://banglanews24.com/health/news/bd/812975.details

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Bangladesh has 0.8 hospital beds per 1,000 populations (Abdullah, 2020), which is far lower than
the minimum of three recommended by the WHO. Public sector secondary and tertiary care
hospitals across the country are utilized beyond their capacity, which is evident from hospital bed
occupancy rates (BOR). In 2022, the BOR was 137% on average, with higher average BOR of 147%
in secondary level hospitals (DGHS, 2023). Overcrowding of patients in the inpatient department
(IPD) affect services provided, diagnostic tests and availability of drugs. Consequently, patients
have to buy drugs from outside or resort to private diagnostic centres for tests. The outpatient
departments (OPD) of district hospitals are similarly over-burdened, mostly with patients whose
illness could have been treated at lower levels of the health system. Doctors, thus, allocate very
little time to patients compromising clinical assessment and diagnosis, which leads to poor
quality of care.

District hospitals are not properly equipped to provide quality services. Studies found a lack of
facility readiness as only 66% of District Hospitals (DH) have a full set of six basic pieces of
equipment (adult scale, infant/child scale, blood pressure cuff, stethoscope, thermometer, light
source for examination). The availability of infection control measures or any one from the list of
14 WHO recommended essential medicines vary considerably across DHs. Laboratory diagnostic
capacity is particularly low in DHs for NCD-related tests. More specifically, only 29% of DHs can
conduct a blood glucose test for diabetes and only 40% can conduct a liver or renal function test
(NIPORT et al., 2020b).

Moreover, on average, 24% of district hospitals face stockout of essential medicines. Geriatric and
palliative care services are not available in the DHs. Management of IPD or OPD at facilities is
hampered due to infrastructural limitations. Defined service provisions/standards should be
mapped to architectural or building design. Hospitals at different levels should have physical
infrastructure based on services they provide and other requirements.

The MOHFW has developed the Bangladesh National Healthcare Quality Strategy (2021-2030)
for quality improvement, which highlights minimum standards for hospitals encompassing areas
across general management, patients’ rights, service delivery standards across a continuum of
care and support service standards. However, despite the policies and strategies in place, the
access to quality secondary, tertiary and specialized health services remain quite challenging.

14.A.8 Corruption: The Picture from the Demand Side

The Transparency International Bangladesh published a report261 where evidence based and
empirical study based documentation were carried out on the corruption of service sectors in
Bangladesh, including health sector.

Among the households that received health services, 48.7 percent were the victims of corruption.
This rate was 45 percent in the rural area and 51 percent in the urban area. Among the service
recipient households, about 6.2 percent had to pay bribe while receiving health services and the
average amount was BDT 680. By institution, the highest number of households received
healthcare services from the Upazila Health Complex (32.2%), but the corruption rate was
highest at the District Sadar/General Hospital (52.4%). The highest incidence of bribery was in
medical universities (12%). According to the survey, the average amount of bribes was
comparatively highest in District Sadar/General Hospital (BDT 704) and lowest in Community
Clinics (BDT 17).

261TIB, 2021. Corruption in the Service sector, National Household Survey 2021. Transparency
International Bangladesh
https://www.ti-bangladesh.org/images/2021/report/nhs/NHS-2021-Extended-Executive-Summary-
En.pdf

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The households that received services from government health facilities experienced corruption
while receiving different services. The corruption rate was the highest in the case of receiving diet
service (66.4%) followed by 27 trolley/wheelchair services (56.5%), stitching, bandage and
dressing (55.1%), surgical operations services (48.5%) and COVID-19 vaccine registration or
vaccination (42.8%). The service recipients using trolleys/wheelchairs were the most frequent
(43.6%) victims of bribery or unauthorized payments, with an average bribe of BDT 141.
However, the highest amount of bribe or unauthorized payment was paid for delivery services
and C-section services, with an average bribe of BDT 2,256 per household.

14.A.9 Rampant Systematic Corruption in Health Sector

Through procurement and supply chain management

Delivering health services depends on public procurement of health commodities—from general

medicines to hospital equipment—on both small and large scales. The DGHS has more than 60
procurement entities under its umbrella. Prior to the COVID-19 pandemic, all tenders for the
DGHS were managed and conducted by the Central Medical Stores Depot. However, during the
pandemic, a significant number of procurements have been redistributed among different
sections of the DGHS.

The DGHS oversees the procurement of various medical and non-medical commodities essential
for healthcare provision. Key stakeholders involved in this process include the Ministry of Health
and Family Welfare (MOHFW), Central Medical Stores Depot (CMSD), and national-level health
programs like National Tuberculosis Programme (NTP), National Nutrition Services (NNS), and
others.

The government budget provided to public hospitals is allocated on the basis of number of beds
and staff employed. Important factors such as the quality of services, case mix and severity, and
other cost factors are not sufficiently considered while allocating budget, which leads to
inefficiency and inequity in the health system. Further, budget execution in many hospitals is
poor, especially since local hospitals have limited authorization for purchasing goods for
hospitals whenever required.

In this system of procurement, the health related products are being bought through open tender
where, allegedly, the corruption is rampant262. For example, a 1200 bed hospital used to go for
bulk procurement as against its official bed numbers. It is a common phenomenon in Bangladesh
that more than 3000 admitted patients may stay in that 1200 bed hospital. The hospital
administration has to accept the over burden of patients, which often compromise quality
management. There has been always a deficit in the supply of essential health service goods in
the hospitals. Sometimes this ‘regular deficit’ phenomenon leads to corruption. Transparency
International, Bangladesh (TIB) also reflected on this in their studies263. TIB revealed that health
services are deeply troubled by corruption and lack of accountability. Allegedly there have been
large scale financial misappropriation and inefficiency in the procurement system264. Even a High
Court bench provided their observation and concerns265 over the unlimited corruption266 in the
health sector.

262 https://www.dhakatribune.com/bangladesh/corruption/214162/medical-equipment-scam-govt-
orders-legal-action
263 https://www.ti-bangladesh.org/articles/commentary/6729
264 https://www.shomoyeralo.com/details.php?id=83242
265 https://bangla.thedailystar.net/news/bangladesh/crime-justice/news-477136
266 https://bangla.thedailystar.net/node/175701

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However, there are instances where the under-the-table dealing is to receive less/quality
compromised products that are not at par as specified in the tenders267.

Doctors and the health professionals in Bangladesh need to work through different systematic
challenges in a weak health system with low budgetary provisions. However, their relentless
efforts can be more effective if the rampant corruption268 can be checked by effective governance.

Through outsourcing of services

Deployment of human resources to clean and run a hospital with health workers, ‘outsourcing’ of
such service deliveries in public hospitals, community clinics have been introduced and are in
practice. There has been allegedly widespread corruption in contracting out the services, and
largely, the services provided by the outsourced service providers are unsatisfactory to public
health service entities269.

Through career mobility of young doctors and connection with pharmaceuticals

After passing out from Medical Colleges, the young doctors struggle with surviving daily
expenses, they have to go for higher professional degrees, where they are offered with meagre
honorarium (mostly with non-paid). The private hospitals have become their resort for their
living, where they use to get paid around 800 BDT per 8 hours of work (usually it extends up to
10 hours without any extension of payment)270. The doctors who are students of Post Graduate
education and research are not offered with any residential facilities, it is too much to ask from
them to just volunteer their services at the age when people use to get married and start families.

There is a common practice in the health service sector that pharmaceutical companies (largely
through their Medical Representatives) maintain a good relationship with the practicing doctors
so that they doctor prescribe their medicines by commercial name (not by generic name)271.

Through diagnostics tests and private hospitals

Diagnostic tests are very important for the detection of the disease and providing the right health
care provisions. However, the instruments, and test methods have been changing fast in
accordance with the innovation of new knowledge based technologies. Investment in new state-
of-the-art diagnostics is dependent on investment and maintenance of these instruments.
Matching human resources (who can operate that instrument) is also an integral part of this.
Because of high prevalence of diseases, and the density of doctors providing quality private
services are believed to be in the cities, the patients from distances visit the doctors in cities. The
diagnostic centres have been mushrooming in cities without any quality check and they do not
have any accountability.

Government hospitals possess quality diagnostic instruments, however, maintenance and human
resources to handle those are often not being in place. The cost of the diagnostic test is mostly
unregulated.

Allegedly the doctors and diagnostic centres are believed to be connected, the diagnostic centres
use to offer a percentage of the test cost which is borne by the patients. It is a common complaint
by the patients in Bangladesh that the doctors suggest for unnecessary diagnostic tests.

267 https://www.kalbela.com/ajkerpatrika/firstpage/27139
268 https://samakal.com/bangladesh/article/239846
269 https://www.somoynews.tv/news/2024-10-21/SsDPV2s9
270 Revealed from the consultation
271 https://sarbojonkotha.info/pdf/sk-19-oshudh-company.pdf

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76.87% of the total health expenditure are going to private facilities, while 81.95% of current
health expenditure are going to private health care facilities. The private sector has agreeably
filled a significant gap of health service facilities against a growing demand, which the public
sector is justifiably unable to meet. Regrettably, due to a lack of specific legal and regulatory
framework – and more so, in the absence of any strategically designed road map towards
achieving health service excellence – the private health sector has witnessed mushrooming
growth, with the almost-exclusive motive of making profits272. This rises to the concerns of quality
drugs in the market, pricing of the drugs.

Professional expertise, experience, and excellence have been undermined to allow private health
businesses to flourish on power drawn from money, fraudulence, and connections. The much-
talked-about Regent Group's collusive fraud to extort public money in the name of providing
health services during the COVID crisis, without meeting the minimum basic requirement of
having a license, is no isolated event. It is common knowledge that the overwhelming majority of
private healthcare establishments do not meet the minimum level of professional skills,
equipment, and facilities.

Again, there are definitely some exceptions. But the private health sector has been captured by
unscrupulous hospitals, clinics, and diagnostic centres all over the country, creating a thriving
business sector that is based on extortion, fraud, and various other illegalities, and non-
compliance of whatever regulations or policies that exist. All these have rendered quality health
service in Bangladesh a pipe dream. The Central Hospital story is just an example of a frustrating
state of health rights and security.

DGHS, allegedly, does not have any quality control mechanism (giving and cancelling of license,
monitoring quality) over private clinics/ hospitals273.Not only the lack of governance from DGHS,
a whole nexus of institutional corruption and absence of accountability involving the MoH&FP,
health service Division, other public health service entities, diagnostic centre have created a
culture of impunity in the private health service sector in Bangladesh.

All these mechanisms of systemic corruption came together during COVID. See Annex VI Health
for details.

Through appointments, promotions, transfer, leave permission decisions of doctors and

health professionals

Allegations of irregularities in the recruitment process of public bodies, such as general and
specialised public universities, are nothing new. Barring a few exceptions, it has become almost
a way of life. Partisan political influence, nepotism, favouritism, and various types of illicit
payments – which have been allowed to be institutionalised are some of the major causes for
violating the relevant rules.

The Super Specialised Hospital of Bangabandhu Sheikh Mujib Medical University could not
become fully operational two years after its inauguration in 2022 due to the absence of the
required manpower and logistics274.
• For the hospital, 157 employees, including 52 doctors, 29 officers, 53 nurses, and 23
technicians, received training in South Korea for two to four months. But only six doctors,
five officers, 50 nurses, and 11 technicians joined the hospital. The remaining 85 doctors
and professionals did not report back to the hospital authorities. All cost were borne by

272 https://www.ti-bangladesh.org/articles/commentary/6729
273 https://www.jugantor.com/tp-firstpage/764074
274 https://www.newagebd.net/post/country/238425/corruption-irregularities-handicap-bsmmu-unit

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 the Hospital Authority and they didn’t take any actions against those who didn’t report
back.
• a number of high-value machines, air conditioners, lifts, and other medical equipment
became dysfunctional soon after their installation due to their low quality. Many other
pieces of equipment remained unboxed due to mismanagement.
• It was alleged that a syndicate backed by then vice-chancellor Sharfuddin leaked the
question paper to appoint people of their choice in exchange for bribes ranging between
Tk 10-20 lakh.
• There are complains that the BSMMU authorities leased out its space for a medical shop
to a business that could not fulfil the tender requirement.
• Allegedly corruption and irregularities at all stages have been found, including in the
recruitment of manpower, in the purchasing of equipment and renting of spaces to
facilitate services at the specialised hospital.

There were protests under the banner of a professional group of doctors who alleged that the
outgoing/recent past vice-chancellor of BSMMU appointed more than 100 teachers and staffers
in exchange for money275.

The above are few of the examples, the extent is actually with no boundaries. Also there are
instances that the doctors and health professional are kept hostage and are not given permissions
to seat for the professional exams for excellence, even though the doctors/ health professional
bear the cost by themselves. The system not only involve financial corruption but it also create
an environment of nepotism, favouritism and political corruption.

14.A.10 Health Financing: Inadequate with Poor Implementation

Total Health Expenditure (THE) for Bangladesh is defined as Current Health Expenditure (CHE)
plus expenditure made on gross capital formation, health education and research. THE and CHE
for Bangladesh in 2020 is Taka 777 billion ($9.1 billion) and Taka 719 billion ($8.5 billion)
respectively. THE accounts for 2.8% of Bangladesh’s Gross Domestic Product (GDP) in 2020,
while CHE’s share in GDP is 2.6%. Per capita THE for 2020 is estimated Taka 4,578 ($54) and CHE
is Taka 4,239 ($50). During the last one decade, THE remained steady at around 3% of GDP. Since
2010, THE share of GDP has remained between 2.8% to 3%.

A comparison of Bangladesh’s expenditure on health with that of its regional neighbours or other
least developed countries reveals a rather gloomy picture. Bangladesh consistently has one of the
highest out of pocket spending compared to other LDCs and Low MICs (Table 14.A.1; ANNEX I
Health).

Budget allocation for health has been less than 1 percent of GDP for the past 20 years, indicating
that health care has been one of the least prioritized sectors for the government (Figure 14.A.1,
ANNEX II Health). It is important to note that the rate of increase in non-development
expenditures has outpaced that of development expenditures. Consequently, the portion of the
total budget allocated to non-development expenditure has grown over time. In FY2010, 41
percent of total budget was directed towards non-development expenditures which has risen to
62 percent in FY 2024. The actual expenditure on the development budget could not keep pace
with the increase in non-development budget (Figure 14.A.2; ANNEX III Health).

The gap between government expenditure and out-of-pocket cost has been increasing, showing
increased pressure on middle- to middle-income families (Figure 14.A.3, ANNEX IV Health).

275 https://www.tbsnews.net/bangladesh/health/bsmmu-super-specialized-hospital-govt-inquire-
alleged-graft-recruitment-645758

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Upgradation of existing facilities and construction of new ones, including repair and maintenance,
are conducted under the Physical Facilities Development (PFD). The PFD OP receives the highest
allocation in the MOHFW’s development budget. Besides, MOHFW has 37 discrete projects (FY
2022-23 ADP) for establishment of new medical colleges and hospitals, etc. The PFD OP alone
constitutes 23.65% of the total development budget of the 4th HPNSP and 24% of the total ADP
allocations of FY 2022-23. Moreover, due to less absorption capacity of major OPs, substantial
allocations were diverted to PFD almost every year for accelerating fund utilization during the
revised ADP preparation, further raising PFD OP’s share of the development fund. However, due
to this practice, other important development activities suffer. From 2017-18 to 2020-21, PFD OP
enjoyed 32% of the total funds released and spent around 30% of the total funds of the 4th
HPNSP.

The utilisation of budget has worsened over the past decade. The proportion of health financing
from international/ external source as loan/assistance have been declining over the years (Figure
14.A.4 ANNEX V Health)

14.A.10 Utilising NGO Capacities for Health Service Delivery

The GOB has a long history of collaboration with NGOs for poverty alleviation, which has
contributed to improving the health status of the population, especially among marginalised
groups. MOHFW has collaborated with NGOs in delivering TB, maternal and child health and
family planning, Expanded Programme of Immunization (EPI), leprosy elimination and
nutritional programs.

NGOs are one of the key actors in delivering HNP services. According to the Bangladesh National
Health Accounts 1997-2020, NGOs accounted for around 6.7% of the total health expenditure
(THE) in the country, which they met from their own source or funds received from the DPs (HEU,
2022). NGOs have also tested alternative approaches for service delivery, some of which have
been scaled up by the government. In urban areas, NGOs provide PHC services particularly for
the urban poor and collaborate with government in public health and disease specific programs.

In 2020, NGO activities comprised 37% of the total funding (BDT 33.8 billion) spent for public
health programs (HEU, 2022). NGOs also played a key role in delivering HNP services to the FDMN
communities in Bangladesh. NGOs run around 1,614 hospitals and other healthcare facilities in
the country, some of which are situated outside the main urban areas (DHIS2 data). NGO hospitals
accounted for BDT 36,119 million of hospital expenditure, which was around 20% of the total
hospital expenditure in the country during 1997-2020 (HEU, 2022).

The GOB provides grants in aid from its operating budget to NGOs. Besides, Ministry of Social
Welfare (MOSW) and Ministry of Women and Children Affairs (MOWCA) also provide funds to
NGOs to build or expand hospitals. In the fiscal year 2016-17, 41 NGOs received around Taka 69.5
crore from the MOHFW as grants-in-aid (Khan & Huque, 2016).

White Paper on State of the Bangladesh Economy 211

Table: 14.A.2 Categories of health financing initiatives of NGOs
Category
Voucher Schemes ORBIS, Population Council, RTM International and ICDDR,B,
Marie Stopes Clinic Society, Concern Worldwide and BRAC
Prepaid health cards BRAC, GK, Grameen Kalyan, Dhaka Community Hospital, ICDDR,B
Micro health insurance Nirapotta of SAJIDA, Niramoy of InM, LASP of ICDDR,B, BADAS
Health Insurance for Garments Workers, Grameen Kalyan, SNV-
FPAB, Ad-din
Catastrophe loans Emergency loan of SAJIDA, Brac Medical Treatment Loan
Source: Quayyum et al, 2021.

14.A.11 Conclusion

Despite Bangladesh’s progress in population health and health service provision, driven by a long
history of health and non-health programs and a multi-actor partnership between government,
NGOs and Development Partners, progress in real outcomes in recent times have been poor, and
incongruent with the narrative of expansion of coverage, physical infrastructure, and
digitalisation. There remains significant challenges regarding equity in coverage, especially urban
poor, quality of service provision, the growing burden of NCDs, and the need to bolster financial
protection from health shocks as a major driver of descent into poverty. High and growing out of
pocket health expenditure is both inequitable and creates room for unbridled privatisation of
healthcare, which can be challenging given poor regulation. Even the low allocation of health
budget has serious implementation and corruption challenges.

Improvement in quality of health and education provision is critical to build the foundations of a
nation and is central to the state-society contract. This needs urgent renewal with space to bring
in new partnerships and innovation with effective state stewardship.

14.B Education Sector

14.B.1 Introduction

The economy of Bangladesh seems to have fallen into the lower middle income trap. So far, the
growth of the economy rests solely on the accumulation of factors of production - capital and
labour. The risk of relying too much on factors is that at some point the growth slows down as
additional number of labour and capital cannot produce the same amount of output. The only
known way to break this shackle is to increase the total factor productivity, particularly labour
productivity. Education and skill of the labour force are the key to enhance the labour
productivity and sustain higher growth.

Bangladesh has made progress in a few areas such as adult literacy rates (growing from 58.6% in
FY2010 to 73.9% in FY2018) and gender parity in gross enrolment at primary level education. So
far the success in education is in coverage, not in quality of education and training (ANNEX I
Education). The switching from quantity to quality of any public service delivery, including
education, requires a whole new set of policies and interventions. This is where our education
programs and projects lack severely. For example, in the case of Primary Education Development
Programme (PEDP), the key indicators of success are still the enrolment, intake, completion and
dropout rates. The quality has been compromised in pursuit of quantity.

White Paper on State of the Bangladesh Economy 212

Education in Bangladesh is plagued by persistent absenteeism at the primary level (Kumar and
Saqib, 2017276), a high secondary dropout rate (Hossain, 2021277), concerns about the quality of
education (Ali, Zulfiqar and Siban S., 2024278), ineffective teaching method (Farooqui, 2014279),
weak education architecture for school dropouts and adult education, hostile learning
environment at tertiary level influenced by political criminalisation, decaying social esteem of
teachers, insufficient resources (Islam, 2021), and the adverse impacts of COVID 19 on learning
quality (Hosen, et al., 2022280).

While education as a sector covers a wide ranging topics, this chapter takes a very narrow and
focused approach by flagging only a few key issues.

14.B.2 Education Deprived of Quality

A developing country with limited resources always encounter a dilemma that where to
emphasize and invest more- a trade off between tertiary and non-tertiary education. From the
empirical studies of both developing and developed countries, the lesson is that this trade-off's
social and economic cost is very high (Hanushek E.A., 2013281). Higher education has little added
value in explaining economic growth if the learning skills are not ensured. Without building on
strong basic cognitive skills in primary and secondary education, quality tertiary education seems
to be illusive; without quality tertiary education, good teachers cannot be produced for the non-
tertiary level.

Acute learning deficiency in primary education

The increase in passing rate in primary level terminal examination (PEC) with inflation of grades
bundled with little learning competency is revealed through the national Student assessment
(NSA) programme by the Ministry of Primary and mass education (MoPME). The assessments
over the years demonstrate no sign of improvement in learning competency among the primary
school students, rather, the level of competency declines throughout all the grades of the students.
ANNEX III Education shows a snapshot of deficiency in learning competency among primary
school students and its trends over years.

The learning competency gap starts from early childhood and is revealed through the
performances of Grade 3 students, only half of grade 3 students earned grade level competency
in Bangla and 39% in mathematics. It is alarming to note that after all five years of education in
the primary school, only 50 percent of the students could secure grade specific proficiency in
Bangla and only 30 % in mathematics (ANNEX II Education).

• The National Student Assessment 2022 found that over 60 percent of third graders and
70 percent of fifth graders do not have the proficiency in mathematics appropriate for
their grades. Shockingly, 51 percent of the third graders and 50 percent of the fifth
graders lack grade-level competence in Bangla.
276
Kumar, A., Saqib, N.2017. School Absenteeism and Child Labor in Bangladesh. The journal of
Developing Areas, 51 (3), 299-366.
277
Hossain, T.,2021. Factors leading to School Dropout in Bangladesh: An Empirical Approach. Global
Journal of Human-Social Science, 21(2), 45-49.
278
Ali, Zulfiqar, S. M., and Siban Shahana., 2024. The Quality Crisis: New Evidence on Learning in Primary
Education in Bangladesh. Research Report. Bangladesh development Studies.
279
Farooqui, S., 2014. The Struggle to Teach in English: A Case Study in Bangladesh. Hournal of Education
and Human Development 3(2), 441-447.
280
Hosen, M., Uddin, M., Hossain, S.& Islam, M., 2022. The Impact of COVID 19 on Tertiary Educational
Institutions of Bangladesh, Ministry of Planning.
281
Hanushek, E. A. (2013). Economic growth in developing countries: The role of human capital.
Economics of Education Review, Volume 37(December 2013), Pages 204-212.

White Paper on State of the Bangladesh Economy 213

Using nationally representative data from the Bangladesh government’s National Student
Assessments (NSA 2011, 2013, 2015, 2017, 2022) and Learning Assessment of Secondary
Institutions (LASI 2015), it is observed that learning outcomes at the primary level are low and
uneven, and have not been improving. Low and uneven learning outcomes are observed at the
junior secondary level as well. Furthermore, while students perform relatively well in areas
related to knowledge and understanding, they face significantly more challenges in answering
questions requiring application of higher-order thinking skills.

In the Era of ‘I am GPA 5’ Level Quality Education

In 2001, when the Grade Point evaluation system was first introduced, 76 students from all over
the country secured GPA 5. In 2024, the number increased to 1,63,845. The average passing rate
at SSC was 35.22% in 2001, while the rate hits 83.04% in 2024.

Every year, thousands of students in Bangladesh take part in the Secondary School Certificate
exams and the Higher Secondary School Certificate exams under the General Education Board.
Under such a Grade Inflation, in 2016, a write up in a newspaper (just after the Secondary School
Certificate, SSC, result in 2016) was published, describing how the students who secured GPA
Five could not answer basic English translations or basic knowledge about the country. In
response to a question, one student who secured GPA 5 in that SSC Exam, made the translation “I
am GPA 5”282. And it became a mirror of our ‘quality of education’ despite of high passing rates
and surge of students securing GPA 5.

Discussions with a number of secondary school and higher secondary level teachers revealed that
there were instructions from the board (informally, through senior teachers in the schools) that
they should give marks liberally, the practice was to assign marks at the next higher grade with
respect to what a student actually earned. While examining a Board final exam, there were also
an untold discouragement on allowing ‘fails’.

Out of Pocket expenses for education

The study of Education Watch (2022) revealed that the average annual family cost of education
for a primary student in Bangladesh during the period of January to December 2022 was BDT
13,882; for a secondary student, the family cost stood at BDT 27,340 (expenses including private
tutoring, purchases of commercial guide and note books).

Approximately 41 percent of parents at the primary level and 17 percent of parents at the
secondary level reported that the most they could afford to spend per child per year were no more
than BDT 2000, significantly lower than the average costs incurred in both 2022 and 2023. The
study identified a widespread reliance on guidebooks as compensation for inadequate classroom
instruction. According to students, 92% of primary students and 93% of secondary students
depended on commercial guidebooks, which are aggressively marketed with incentives offered
to schools and teachers to encourage students to purchase them.

Equity deficit is manifested in low quality learning outcome

A notable 8.7 percent enrolment decline is found from 2019-2022, accentuated in char and
coastal regions (18 percent) with a contrast to urban areas experiences (3.3 percent)283. Urban
learners consistently outperformed their rural counterparts, underscoring significant

https://m.somewhereinblog.net/mobile/blog/Enamhoque/30136967
282

S M Zulfiqar Ali and Shahana S., 2014. The Quality crisis: New Evidence on Learning in Primary
283

education in Bangladesh. Bangladesh Institute of Development studies, 2024.

White Paper on State of the Bangladesh Economy 214

geographical disparities. Non-government and private school enrolment rose significantly to 35
percent in city corporation areas compared to rural and other urban areas284.
A World bank study (World Bank, 2019285) have shown that

• at the primary level, students from the privately managed Kindergarten schools perform
better than students from government primary schools (GPS); and
• students from both these types of schools generally have significantly higher learning
outcomes than students from nationalized GPS after 2012-13 and other types of schools.

Students from the primary schools in urban areas have been performing better than rural
students, and the char performed the worst286. The char schools have the highest percentage of
students in the basic competency category across all Bangladesh locations.

These two contrasting data reveals equity deficit among rural, urban, city corporations with higher
degree of deprivation in hard to reach and climate change and disaster prone coastal areas. Distinct
characteristics of equity deficits are impacting students’ quality287

• Students with less- educated parents tend to exhibit relatively poor performance;
• Economically disadvantaged households, as indicated by household incomes, contribute
to subpar performance.

The poor, disadvantaged, and middle class strive for upward social mobility through education
for the next generation. The low quality and equity deficit has been creating a vicious cycle and the
poor and disadvantaged people are trapped with restricted social mobility.

Primary Education: Gender Parity attracts all the lights on the agenda

Bangladesh has achieved a remarkable milestone in gender parity in primary school enrolment.
However, there remain tons of challenges which is hardly highlighted in government documents.

The enrolment of female students steadily goes down along with the higher tiers of education.
Most strikingly, we are educating women where the highest unemployment rate is for women
with tertiary education, and that too in urban areas (ANNEX IV Education).

From 2012 onwards, all the teachers in the primary education requires registration from the
government as a testimony of qualified teacher. From 2012-13, all the primary schools in
Bangladesh were brought under Monthly Payment Order (MPO) schools.

According to National Academy for Primary Education (NAPE), 31.3% of the government primary
school teachers have no Bachelors (Honours) degree. This indicates that the sector is struggling
to attract educated individuals. The salary structure is clearly not lucrative enough to attract
qualified teachers. On top of that, many people with no qualification but 'political connections'
are recruited all the time. The recruitment process is also riddled with corruption, with question
paper leaks a common phenomenon during recruitment exams.

284
Education Watch
285
World Bank, 2019., Bhatta, S.D., and Uttam Sharma., 2019. Whither Quality? What do Recent National
Assessments of Students Learning Outcomes in Bangladesh.
286
S M Zulfiqar Ali and Shahana S., 2014. The Quality crisis: New Evidence on Learning in Primary
education in Bangladesh. Bangladesh Institute of Development studies, 2024.
287
S M Zulfiqar Ali and Shahana S., 2014. The Quality crisis: New Evidence on Learning in Primary
education in Bangladesh. Bangladesh Institute of Development studies, 2024.

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According to Government policy, 60% of the primary school teachers have to be female, 30 % are
from ‘Possho quta’ (daughters or sons of primary school teachers, current/retired, can get the job
if he/she is passed in a competitive exam, with a preference), and 10% are open to all. In 2021,
about 64.41 percent of Government Primary School (GPS) teachers were women (ANNEX V
Education). There are debates regarding the efficiency outcome of this model. Female teachers
are placed in their hometowns for the job. Women's groups say that this is creating women’s
agency at the local level; however, the educationalists disagree.

The career mobility of the primary school teachers remains a soar in the society. They enter in
the job at 14th grade, and after all the years of services, they retire at Grade 11. While a lecturer at
the university is joining in Grade 9, The public university teachers in Bangladesh are also
underpaid. However, the pay scale of primary school teachers is humiliatingly low.

And there is the CATCH for educated women to get into primary school as teachers with such a
low level of payment, so that they can maintain the job of teaching along with accomplishing all
the domestic household/ family responsibilities bestowed upon them (as part of their social
norm). The greater access to primary school teaching for women is a ‘low level equilibrium trap’
for society. The political leadership doesn’t intent to employ high quality teachers for primary
schools, if not so, the teachers wouldn’t have sat in protest at the central Shaheed Minar288
demanding a dignified salary structure.

National Curriculum and Textbook Board (NCTB)- in a state of confusion

For the last one and half decades, the debates around school curriculum and following the quality
of education have remained talk of the education sector and the people of Bangladesh. In the first
half of 2010, NCTB introduced ‘Srijonshil’ way of educating students, and accordingly changed the
syllabus. Then in 2022, they came up with a new way of educating students, namely, experience-
based education, this actually had a lot of adverse repercussions from all over the country. The
key challenges of the new curriculum introduced by NCTB in 2022 were

• There was no year end score based evaluation;

• The teacher student’s ratio, teachers’ training and the physical infrastructure of the
schools were not in favour of successful delivery of such education program

Recently NCTB got back to their previous syllabus before 2022.

The whole process is allegedly related to the corruption related to publications of Books and
handing it over to the students on the first day of their classes, which is highly politically charged.
A study by Transparency International revealed that NCTB officials are not only involved in
irregularities in publishing and distributing free textbooks, they also arbitrarily changed some of
the textbook contents in primary and secondary levels due to political and communal
pressures289. The average expenditure of printing books by NCTB (primary and Secondary) is
around 1400 crore taka each year, and there are allegedly huge corruption compromising
printing quality.

Madrasah Education: Remains a Mystery and Marginalised

Bangla medium, English medium and Madrasah – is one of the most debatable issues in the
education system of the country. Among these streams, Madrasah education in Bangladesh, which
has a long history, has been the most neglected in the education policy debate. There are two

288
https://www.banglatribune.com/others/276287;
https://banglanews24.com/education/news/bd/625924.details
289
https://www.ti-bangladesh.org/articles/story/5403

White Paper on State of the Bangladesh Economy 216

types of religious schools: Aliya (registered) and Qawmi (non-registered) (ANNEX VI Education).
The registered Madrasahs cater about 3.83 million students, including Ebtedayee (BANBEIS,
2018). For Aliya, DME and Bangladesh Madrasah Education Board (BMEB) are the custodians.
For Qawmi, the custodian is the concerned Committee of the Qawmi Madrasahs performing
independently & without the GoB participation. About one fifth of the total post primary students
are in Madrasah education290. Madrasas, especially in Qawmi Madrasah, remain marginalized and
a mystery in policy discourse.

The Government of Bangladesh (GoB) promulgated a Law depicting the degrees of Qawmi to
recognize Dawrae Hadith (Takmil) Certificate in Qawmi Madrasah with the equivalence of post-
graduate degree of Islamic Studies and Arabic. Ex-Prime Minister was honored with the title
“Mother of Qawmi.” She was given the title at a rally called “Shokrana Mahfil,” at Suhrawardy
Udyan, in Dhaka, in November 2018, just before the National Parliament election in 2018, for
recognising the top Qawmi degree, the highest degree equal to a post-graduation in the Madrasah
education system. The recent law calls for closing the gap with Aliya and general stream.

Literature suggests that poor households tend to send their children to Madrasas more than the
richer households. Rural-Urban distribution shows that 85.94% of all madrasahs were located in
rural areas (BANBEIS, 2022291). As the marketable skills acquired in the madrasa is poor, their
earning can also lower than students from general stream. This creates low income trap the poor
can’t escape If the madrasa students are not given market skills (Iqbal,K.,2020). Parents send
their children to madrasas largely because there is no opportunity to support poor families in
general education, they are leaning towards madrasa education. Many parents send their children
to madrasa for religious reasons also. One of the main reason for opting madrasa education is that
private tutoring is not required in madrasas292.

Aliya Madrasa Education

About 54% of the students in Madrasah are female. In Aliya Madrasah, they get education
according to the syllabus of Bengali medium (following NCTB) with religious readings. In Qawmi,
the female students are given religious training to make them competent/ worthy for their
families to uphold a religious lifestyle (National Qawmi Madrasah Education Board, 2020293).

Lack of science education remains a challenge for Aliya Madrasahs. In Aliya madrasah up to higher
secondary level, there are only two streams - science and arts, excluding business studies.
However, according to Bangladesh Madrasa Education Board, 76 Madrasahs out of 119 in Dhaka
district do not have any Alim level student in their science department. Also, only 25.55 percent
madrasahs have science laboratories (BANBEIS, 2018).

Lack of qualified teachers in madrasas is one of the main reasons for poor cognitive ability.
Teachers are not well trained - in Aliya Madrasah only 23 percent of the teachers were trained.
Number of teachers having Non-Government Teachers’ Registration & Certification Authority
(NTRCA) certificates was also few. Among 113368 teachers only 19.66 percent have NTRCA
(BANBEIS, 2018).

Bangladesh Bureau of Statistics, 2021. National education Statistics, 2021.

290

Bangladesh Bureau of Educational Information and Statistics (BANBEIS), Ministry of Education,2022.,

291

Bangladesh Education Statistics, 2021.

292
https://www.dhakatribune.com/bangladesh/bangladesh-others/135780/why-some-parents-prefer-
madrasa-to-school
293
National Qawmi Madrasa Education Board, 2020. Qawmi Madrasa -Porichiti.pdf

White Paper on State of the Bangladesh Economy 217

Given the growing number of girls in Madrasah, the low share of female teachers is a matter of
concern. Currently, 55.24 percent of female students are taught by 12.7 percent of female
teachers.

Qawmi Madrasa Education

Qawmi madrasas are not registered with the government system. There were 36,597 Qawmi
madrasas across the country (BANBEIS,2022294), most of which are run in private donations.

In terms of curriculum and education, Qawmi madrasas are entirely different from Aliya. They
are believed to be following the syllabus of Madani or Darul Uloom Deoband. Unlike class beased
education, Qawmi madrasas have six levels of education which takes on an average 7-8 years to
complete starting from Ebtedaiyah (primary) to Dawra-e- Hadith (post graduate). Unlike general
stream and Aliya students, science and English are not widely taught in Qawmin. According to
Befaqul Madarisil Arabia Bangladesh (privately run Qawmi Board). From pre school to grade 7,
Qawmi madrasa schools rarely have science studies (Iqbal,K.,2020295)

The Government of Bangladesh (GoB) promulgated a Law depicting the degrees of Qawmi to
recognize Dawrae Hadith (Takmil) Certificate in Qawmi Madrasah with the equivalence of post-
graduate degree of Islamic Studies and Arabic. Ex-Prime Minister was honored with the title
“Mother of Qawmi.” She was given the title at a rally called “Shokrana Mahfil,” at Suhrawardy
Udyan, in Dhaka, in November 2018, just before the National Parliament election in 2018, for
recognising the top Qawmi degree, the highest degree equal to a post-graduation in the Madrasah
education system. The recent law calls for closing the gap with Aliya and general stream.

The Government needs to implement policies to change the curriculum of Madrasa education by
giving financial assistance to introduce science, mathematics, social studies, Bengali and English
in their curriculum so that academic proficiency for all the primary and secondary classes is
attainable for children studying in Madrasah institutions. This will enable Madrasah students to
transit to higher and tertiary education and also ensure quality standards similar to the national
education system.

14.B.3 The Quantity and Quality Crisis: Evidence on Post-COVID Learning Situation in
Primary and Secondary Education

School closures in Bangladesh from March 2020 to September 2021 and again in February 2022
have disrupted the education of around 37 million children. The cessation of schooling also
exacerbated worrying gaps in basic literacy and numeracy skills that existed before the pandemic
(UNICEF, 2021).

Transition from Primary to Secondary Schools

Transition of those who were in grade V of primary education (excluding the 4.5% dropout), 70%
transitioned to regular government-assisted and government secondary schools. ANNEX VII
Education portrays the trend of transition of students who were in grade V in 2020 to different
secondary educational institutions, after COVID (excluding drop outs).

A small but noticeable trend of shifting to Madrasah was observed out of both primary and
secondary school 2020 cohorts. The move from the primary school level (6.4%) to Madrasahs is

294
Bangladesh Bureau of Educational Information and Statistics (BANBEIS), Ministry of Education,2022.,
Bangladesh Education Statistics, 2021.
295
Kazi Iqbal., 2020., Managing the skill gap through better education: TVET and Training Strategies

White Paper on State of the Bangladesh Economy 218

significantly higher than that from the secondary level. The observed trend of choosing Madrasah
may have been influenced by the pandemic induced impacts on families.

High dropout rates

The impact of pandemic consequences has been multi-faceted - with low resilience to shock
added to already low learning outcomes and high dropout rates. The most vulnerable children,
especially those unable to access remote learning, were at risk of not returning to the classroom
and even being forced into child marriage or child labour.

The average dropout rate in primary schools after COVID was 4.5 percent, while the dropout rate
is higher among boys (7 percent) (1.7 percent dropout rate for girls). The dropout rate was 6
percent in secondary level education, same for both boys are girls.

• At the primary level, the highest dropout rates were observed in grades 4 and 3, with
approximately 36.5% and 33% of students discontinuing their education, respectively.
• At the secondary level, the most significant dropout occurred in grade 8, with 37.26% of
students discontinuing their studies.

It’s important to note that dropout is not solely attributed to one factor but rather influenced by a
combination of factors. These dropout-inducing factors predated the pandemic but were
exacerbated by the multifaceted effects of the pandemic. The following reasons have been
identified as major contributing factors behind the dropouts after COVID (ANNEX VIII Education).

• The primary reason for school dropout is poverty. Nearly 90% of primary level dropouts in
urban areas came from families with an income below Tk 15,000. Similarly, at the
secondary level, almost two-thirds of dropout families had a similarly low income.
• Following economic reasons, students’ reluctance to continue their schooling emerged as
the second most important factor leading to dropout. This indicates a negative school
experience, potentially influenced by the treatment received from teachers or peers, and
the overall learning environment.
• Early marriage emerged as a significant factor leading to the dropout of female students,
especially at the secondary level. Related to early marriage is the reluctance of families to
support girls’ education, which was cited as a contributing factor to girls’ dropout.
• Engagement in income-generating activities or child labour was identified as a reason for
dropout by 13.7% of primary level and 21.1% of secondary level students. Additionally,
the responsibility of assisting with household chores contributed to dropout, with 20.7%
of primary level and 10.2% of secondary level students citing this factor.

The current number of students in GPS are 134,84,617 (BBS, 2021). The cyclical dropout rate of
primary school students in 2021 was 14.15 and the out of pocket expenditure deficit by parents
to continue with their child’s education in the GPSs was around 11,882 BDT/ student (Please see
14.B.2.3). If a mechanism can be devised to cover the cost of education for these dropout children
by the public exchequer, it is calculated that only an increase in 2.5% in Business As Usual
budgetary allocation for education sector (for example: FY 2024-25 budgetary allocation for
education sector was 94,710 crore BDT) can lead to ZERO dropout rate in GPSs. The mechanism can
a mix of services- ‘one meal a day’, giving extra tuitions in the schools, providing education
materials free/ subsidized rates to the students from hard core poor families (about 14.5% of
total students) and others.

White Paper on State of the Bangladesh Economy 219

Widening Learning Gap

A government study by the Bangladesh Examination Development Unit (BEDU) under Dhaka
Education Board, after COVID, showed that 80 percent of class-8 students suffered significant
learning losses in Bangla, the first language of most students, compared to expected grade level
competency. In comparison, about 76 percent students in the same class had suffered losses in
English and 69 percent in Mathematics. According to a recent study by NCTB, school closure due
to COVID-19 had a substantial learning loss to primary students, and Class-V students were the
worst affected among them. The average English learning rate for the Class-V students came
down to 36% after the closure, while it was about 49% before the closure in comparison to
expected grade level benchmarks. The study mentioned that about 48% of Class-V students with a
severe and moderate learning gap in Bangla, 61% in English, 59% in mathematics, 54% in science
and 60% in Bangladesh and Global Studies.

In the study of Education Watch 2022296, the overall result showed that 28.9% of class VIII
students could not obtain the pass mark of 33 out of 100, while it was 26.2% for class IX.

Technology divide

The students affected by COVID-19 included children from ethnic communities, who are
disadvantaged in various ways. A UNICEF 2021 report mentioned that about ‘56 per cent of
students were not participating in online lessons or Sangsad TV, which was more evident among
the students of ethnic minorities (75 per cent).’

Remote learning was minimally accessed, with only 9-11 percent of primary students and 16.2
percent of secondary students engaging with televised educational programs during school
closure. Access ro digital devices varied across the economic classes. There exists a disparity in
the provisions of multimedia facilities and internet connectivity between urban and rural areas
educational institutions.

Many schools, both at primary and secondary levels, are equipped with internet connections and
multimedia facilities. However, insufficient maintenance and budgetary constraint remains a
challenge.

14.B.4 Tertiary Education

Since 2009, there has been a boom in establishing new universities, both in public and private
sectors. Currently, the number of public universities are 61, and the number of private
universities are more than 110. There were 4756747 students in 2022 enrolled in the public and
private universities (including colleges under 17 public universities and Madrasah).

Development Budget for Public Universities: Revealed Construction Bias

With a very insignificant allocation on research at Tertiary level public education (Universities),
a noticeable and unabated jump in development expenditure (largely infrastructure) and
Operational Cost is noticed.

As The number of Universities (including the Science and Technological Universities) reaches to
61 (ANNEX X Education), almost one University in every district, it might seem to be quite rational

296
Education Watch, 2022. Post Pandemic education: recovery and Renewal of school Education,
Campaign for Popular education (CAMPE).
file:///C:/Users/ADMIN/Downloads/14082023060039pmEducation_Watch_Report_2022_Full_English%
20(1).pdf

White Paper on State of the Bangladesh Economy 220

that the development and operational budget allocation increased following logical sequence.
Even then, the meager allocation on research doesn’t justify the notion of quality improvement at
tertiary education. And the question remains, whether the decisions on the establishment of
universities came through an informed decision making process.

The operational expenditure (non-development expenditure) always surpassed the development

expenditure, with hardly any budget on research. The research funds (distributed in the
universities) are distributed within the universities and within the teachers as like “Sweets after
Prayers’ (Milad Shinni), without judging any merit to any research initiative. This not only
discourages the intelligent and interested faculties, but also creates an academic atmosphere
where academic excellence does not get any social accolade.

Before every National Parliament Elections during the past Government regime, it is revealed that
there had been a spree of providing permissions to new Universities, or setting up new campus
of an established university, or creating provisions for teachers and staff recruitments with the
permissions to start academic activities in newly established universities which lacked the
infrastructure to serve the students properly. A few of the examples (ANNEXES XI, XII, XIII
Education) may shed light on this trend. Figure 14.B.1 shows that before the national election
years, the allocation for public universities increased, the development cost (mostly
infrastructure) almost doubled, demonstrating how political corruption used the education
sector to maintain their influences at local level (ANNEX X Education and Figure 14.B.l).

Figure 14.B.1 Trends in Allocation for Public Universities-2009/10-2024/25

7000

6000

5000

4000

3000

2000

1000

Development (Infrastructure) Research Operation cost (Total)

UGC largely failed to uphold its Autonomy before Political Power

University Grants Commission, UGC, was established on 16th December 1972 and later enacted as
an autonomous apex body in Higher education. The function of UGC is to cater the academic and
financial needs and demands of the universities. At the beginning, UGC has got the mandate to
coordinate and facilitate the six universities with autonomy under 73 Act, without interfering in
their respective policies, strategies and administrative day to day decisions. However, over
decades, UGC has emerged as an important tool for any government to control the higher
education sector so that the government could have established its political biases and political
control. Even during the July mass uprising, UGC directed all the public universities authorities
(including the six universities under 73 Act) for indefinite closure and accordingly forced the
students to vacant the halls within a narrow window of time amid the agitation and violence by

White Paper on State of the Bangladesh Economy 221

the Student Front of the then ruling government party (protected by the law enforcing agencies)
in the campuses and on the streets.

In the last government regime, UGC’s function was shrink in the sense that their involvement in
any decision making on setting up new universities or taking decision on allocation of resources
were marginalized. They were asked to prepare University Acts for the MoE to place in the
Parliament. Earlier, it was a standard practice that, UGC would work for feasibilities on new
university set up, then with the concurrence from the MoE, UGC would prepare the University Act
to place in the Parliament, would prepare Development Project proposals (DPP).

It is to be noted that, till 2005/6, as directed by the Ministry of Education, MoE, (please read, as
directed largely by political intent from Prime Minister’s Office), the University Grants
Commission (UGC) used to form a ‘Project’ to assess the feasibility and to guide the initiation of
establishing a university. Then the UGC would forward the respective ‘University Act’ to MoE to
place at the Parliament for Vetting.

Or, the whole public expenditure at tertiary level was designed in such a fashion that the
‘construction contracting’ would be an instrument at local level to serve the vested interest
groups (local Member of Parliament/ would be MPs/ their families/ influential Government
Bureaucrats).

The last DPP passed in the ECNEC for a public university was Sheikh Hasina University,
Netrokona, in 2018. The standard practice was that, after the DPP was passed, MoE used to
appoint a Project Director to oversee the infrastructure related activities. When the infrastructure
of the new university was about to complete and set ready for academic activities, then there used
to be the appointment of Vice Chancellor. After 2018, Universities were set up without having any
DPP passed. The new Universities after 2018, they do not have any DPP passed for their
infrastructural development, VCs were recruited with political blessings and they tried to start
the academic activities without having minimum infrastructure facilities and no of teachers.
Recruitment of teachers were largely influenced by political interest, nexus among university
authorities, local political MP and mastans from the ruling party, local contractors, students wing
of the ruling government’s political party- all grouped up in an unholy nexus. A group of teachers
also found their incentives and confidence in joining the nexus and gave a clean chit to the whole
process as being the so called ‘authority’ of the university.

Student file in Bangladesh Bank doesn’t speak the reality

It is more common in past few years that the students are going abroad at tertiary level (undergraduate
level), and the reason remains the lack of quality education. It is of interesting inquiry that, whether
this flight of students, in most cases they get settled over there, are indicative of lack of livability in the
country.

Students need to open ‘student file’ with Bangladesh Bank to send money to their respective
institutions, and only the amount which are documented as tuition fees are allowed to be sent.
Bangladesh Bank data shows that during calendar year 2020- 2024 (till October, 2024), 4376 students
have sent their tuitions through Bangladesh Bank’s students’ account, and the aggregated amount they
have sent is about 290 crore Taka. According to UNESCO297, in 2023, 52,799 students from
Bangladesh travelled overseas to pursue their studies. The question is how this differences are
made between Bangladesh Bank and UNESCO data on the outbound students’ number. Allegedly, one
of the sources of capital flight is through getting education in developed countries, showing USA,
Canada, and UK on top of this list as destination countries.

297
https://data.uis.unesco.org/index.aspx?queryid=3807

White Paper on State of the Bangladesh Economy 222

The number of Bangladeshi students pursuing higher education in the United States has reached
an all-time high, with over 17,000 enrolled in 2023 in the US institutions, according to the 2024
Open Doors Report on International Educational Exchange298.

The reports and information on outbound international mobility of Bangladeshi students are
public. Bangladesh Bank failed get hold of the matter.

National University-Hardly any vision to quality education

About 3.6 million youths (3,679,310 students, about 70 percent of all tertiary level students) are
currently studying in affiliated Colleges under national university.

The National University (NU) is being financed by its own income, the major sources are namely:
Admission fees, Registration fees, Examination fees, Affiliation fees, other fees and revenue
(salaries for government colleges’ staffs/ teachers). NU doesn't provide salary of the college
teachers. The teachers of the government colleges get salary and other benefits from government
as per National Pay scale. On the other hand, teachers of the Non-Government Degree Colleges
under MPO (Monthly Payment Order) system get an amount equivalent to his/her basic salary
along with token money for house rent (Tk. 1000) and medical expenses (Tk. 500).

Students bear tuition and other expenses of their own as out of pocket expenses from their family
income. Unlike other public University NU doesn't receive any recurring grant through UGC to
finance its revenue budget. In case of development expenditure except few projects under
government financing (along with soft loan from multilateral agency like World Bank), most of
the development programs of NU are financed by its own reserve fund generated through savings
and investment.

In the financial year 2022-2023, NU was compelled to pay to the government BDT. 1,000 (one
thousand) crore under a parliamentary law of (enacted without any stakeholder consultation) for
depositing Surplus fund of the Autonomous, Semi-government, Statutory authorities, Public non-
financial authorities, self-regulatory institutions to the government exchequer. The NU Authority
confirmed that, the fund of National University which they had to forego was not at all surplus
money, rather kept for emergency development expenditure such as establishing connectivity
with all the affiliated Colleges and NU, setting up of examination halls at the district level and
providing for future pension liabilities of the employees. At present, NU is facing huge financial
pressure due to unjust transfer of fund without having any commitment of payback to one of the
major contributors to national economy supplying huge work forces. It is pertinent to mention
here that NU is going to face the serious financial crisis in few days ahead arising out of a pending
Supreme Court verdict of possible rejoining of 988 employees terminated during the immediate
past regime.

Currently, about 48 percent of NU graduates are unemployed

Follow-up tracer study results show that 28.73 percent graduates from the national university
affiliated colleges are salaried employed, while 47.91 percent are unemployed; 10.93 percent are
self-employed, 12.40 percent are involved in full-time/part-time study. Almost 60% of the
unemployed graduates surveyed seem to have been unemployed for more than two years after
graduation. Most students in the NU colleges have parents with primary and secondary education.

298
https://www.thedailystar.net/news/bangladesh/news/bangladeshi-students-studying-us-reach-
record-high-3755901?fbclid=IwY2xjawGoRpRleHRuA2FlbQIxMAABHd8JGXQA0VU-
DCXCz_8sul62h9CEhidZVrk7pEA5-xIA406zHZnMJWq_2g_aem_k_wemsLoeCfF0sYU63MgaA

White Paper on State of the Bangladesh Economy 223

Figure 14.B.2 Labor Market Outcome and Economic Activities of Graduates

50 47.3

40
29.4 27.6 28.2
30 25.1

20

10

0
Gov Hons Colleges Gov Masters Colleges Non Gov Hons Non Gov Masters All colleges
Colleges Colleges

Salaried employment Self employment Parttime employment & study Unemployment

Private University –showing promises despite challenges

In 1992, the Parliament passed the Private University Act of 1992 and a new system for higher
education emerged in Bangladesh. The first private university approved on 5 November 1992 by
the GoB was the North South University (NSU). The University Grants Commission (UGC) is the
apex body of the government for funding of public universities.

In its earlier years, the private universities became critical in filling the gaps left by public
universities, while the target group of students were from the high income group families. The
quality of education was largely believed to be better in the public universities. For about last one
and a half decade, the Private Universities, especially a number of well performing private
universities, could attract a large number of students. Not only the students who couldn’t get the
admission in the public universities, a large number of students opted as ‘choice’ for the private
university education. And the students from different economic classes started to get into private
university education.

A number of factors contributed to the process.

• Completion time of under graduation programme started getting priority over quality
education as the society started putting more value to go abroad and get settled over
there. Admission of an educational institution abroad had been the instrument for the
entry to that roadmap.

• It usually takes relatively longer time in public universities to complete the under
graduation, while the private universities offer timely completion of undergraduate
programs. There is also a time lag for the public universities to start their first year
programme at the under graduation level because of the system of ‘admission tests’ for
selecting the students, and after that there are systematic lag in starting the program.

• Private universities’ practices of ‘no students’ politics on campus’ attracted a large

number of parents who could afford to educate their children in private universities.

Due to the business strategy of the private universities, the number of full time faculty members
seem to be inadequate to run the academic activities smoothly. To fill up that void, and leveraging
on the low salary structure base of the public university for their teachers, a significant number
of public university faculty members teach in the private universities as part timers. In a number
of well performing private universities use to recruit good quality faculty members. Their
promotion decisions are also often contingent upon quality publishing publications.

White Paper on State of the Bangladesh Economy 224

However, there are only a few private universities who have earned reputation for their quality.
UGC seem to be not much effective in regulating the issues related to private universities. UGC
does not seem to be quite effective in regulating the issues related to the private universities.
There are allegedly a number of unfair practices in a number of private universities 299

• Rather that earning a certificate through rigorous education process, Students are getting
certificates in exchange of money;
• Lack of qualified faculty members;
• Lack of permanent university campus;
• Students -Teachers ratio are high;
• Conflict among the members of the Board of Trustees;
• Unlawful engagements and financial corruption by the members of Board of Trustees.

The then finance minister proposed 10% Value addition Tax upon higher education in private
universities in the draft proposed budget of FY 2025-16/. The decision has sparked considerable
debate. Following strong Students’ protests (‘No VAT on Education’300), the VAT was withdrawn
by the finance division.

Technical and Vocational Education- Spending is almost similar to Public Universities

Under the overall directions and guidance of the Technical and Madrasah Education Division
(TMED) of the Ministry of Education (MoE)- Bangladesh Technical Education Board (BTEB)
usually approves Technical & Vocational Education and Training (TVET) institutions, students’
admissions, curricula developments, conducts examinations and certification. On the other hand,
Directorate of Technical Education (DTE) is mainly responsible for the management &
administration of working staffs and the physical infrastructures associated, overall planning,
implementation & development.

TVET encounters a number of challenges, some of the issues are as follows

• Majority of the teachers of private TVET institutions are not properly qualified and trained;
• Large number of teaching posts are vacant in the most of the TVET institutions particularly in
public TVET;
• Lack of sufficient teachers training facility to face the challenges of the TVET system and
identify the basic concepts of improving the quality of TVET delivery;
• Poor monitoring and no performance evaluation of TVET;
• Insufficient creation of job opportunities for the TVET graduates;
• Small Industrial base and slow growth to accommodate the skilled workforce comfortably &
sustainably;
• Female students have limited access to TVET enrolment and to employment due to social
stigma and lack of gender friendly environment in TVET institutions and employment;
• Low connection with national/international labour employment markets;
• Weak governance of TVET;
• Participation of private sectors and employers with TVET providers is inadequate.

The expenditure on TVET has creased substantially from FY 2019-20 to FY 2023-24 (42 percent).
The spending of public Universities and TVET institutions are almost close, however, the uptake

299
https://bangla.thedailystar.net/top-news/news-439766;
https://www.kalbela.com/ajkerpatrika/firstpage/85778;
https://www.bbc.com/bengali/news/2014/06/140630_mh_private_university
300

https://www.universityworldnews.com/post.php?story=20150915193445894#:~:text=The%20Banglad
esh%20government%20last%20week,in%20its%20budget%20this%20June.

White Paper on State of the Bangladesh Economy 225

of TVET students in the labour market are not providing much of promises. The thrust of
expenditure in TVET was, with no exception, on infrastructure building (establishment of new
training centre).

Low enrolment in STEM

Although there has been a significant increase in the enrolment in tertiary education, a large
portion of this increase accounts for increase in enrolment in humanities and social science. Only
about 12.5 percent and 45 percent students from public and private universities respectively
study in science courses. The comparison of STEM enrolment in universities and tertiary colleges
show that enrolment is much lower for the tertiary colleges. Combining all the tertiary
institutions, the STEM enrolment as a share of higher education enrolment stands at 21 percent
(World Bank, 2019).

The readiness of the institutions with quality teachers, laboratory facilities to deliver STEM
education is a matter of concern.

14.B.5 Education Budget- A Fallacy of Prioritisation Characterised by Low Utilisation

The health and education budget remain a mystery because of the tact by the Finance Division as
they include the budget of the Ministry of Science and Technology and the Ministry of Information
and Communication under Education sectors’ budgetary allocation. In 2021-22, the budget for
the Ministry of Science and Technology was 21,204 crore BDT and the for the Ministry of
Information and Communication was 1,720 crore BDT. The allocation for Rooppur Nuclear Power
Plant was added to education sector budget, without any rational. It has been a political Gimmick
to project an inflated budgetary allocation for education sector and the trend is not specific to any
political regime.

Inadequate financing- share of education budget to GDP decreased

Bangladesh has made modest progress in allocating the necessary budgetary resources for
education in recent years. In addition to the inadequate public expenditure on education, there
are worries over the effectiveness of allocated resources to attain desired results.

The health and education budget remain a mystery because of the tact by the Finance Division as
they include a part of the budget of the Ministry of Science and Technology and the Ministry of
Information and Communication under Education sectors’ budgetary allocation. In 2021-22, the
budget for the Ministry of Science and Technology was 21,204 crore BDT and the for the Ministry
of Information and Communication was 1,720 crore BDT. The allocation for Ruppur Nuclear Poer
Plan was added to education sector budget, without any rational. It has been a political Gimmick
to project an inflated budgetary allocation for education sector and the trend is not specific to any
political regime.

Inadequate financing- share of education budget to GDP decreased

Bangladesh has made modest progress in allocating the necessary budgetary resources for
education in recent years. In addition to the inadequate public expenditure on education, there
are worries over the effectiveness of allocated resources to attain desired results.

Total government expenditure on education as a percentage of the total budget and Gross
Domestic Product (GDP) have not shown a progressive trend over the recent fiscal year. Besides,
the budget for the education sector as a share of GDP decreased from 1.9 percent to 1.69 percent
in FY2025 (Figure 14.B.3). This indicates that the government is behind in meeting its targets of

White Paper on State of the Bangladesh Economy 226

spending at least 3.5 percent of GDP in education by 2031 and 4 percent of GDP by 2041, as
envisioned in the Perspective Plan of Bangladesh (2021-2041) (GED, 2020).

Figure 14.B.3 Allocation of Education as a Share of Total Budget and GDP: FY2016-FY2025

16
14 14
14 12.6 12.3
11.8 11.8 11.7 11.9
12 10.7 10.4
10
8
6
4
1.8 1.9 1.8 1.8 1.9 1.9 1.8 1.6 1.5 1.7
2
0
RBFY16 RBFY17 RBFY18 RBFY19 RBFY20 RBFY21 RBFY22 RBFY23 RBFY24 RBFY25

Total Revised budget allocation as percentage of budget

Total revised budget allocation as percentage of GDP

Source: Author’s calculation from budget documents of Finance Division, Bangladesh, various years.
It should be mentioned that Bangladesh was the third lowest among 38 LDCs in terms of average
education expenditures as a percentage of GDP from FY2016-FY 2023 (The World bank, 2024).
Haiti and Somalia are the only two countries that spent less than Bangladesh during 2016 to 2023.
Bangladesh’s education expenditure as a percentage of GDP was 1.8 percent in FY 2019, the
lowest among 28 LDCs and second lowest among 104 countries of the world. From 2015-2024,
India allocated 4.1% to 4.6% of its GDP, meeting international benchmarks. Bangladesh is way
behind in aligning with international benchmarks set by ‘Education 2030 Framework for Action’
which recommends that countries allocate 4-6% of their GDP.

Budget utilisation-bias towards non-development expenditure

It is interesting to note that there has been a considerable disparity in the actual spending in non-
development and development expenditure. In the education sector, the portion of non-
development actual expenditure has been significantly greater than the development
expenditure between 2010 and 2024 (Figure 14.B.4).

• With compared to 2020/21, The actual total expenditure in FY 2022-23 increased by 22.66
percent. This increment requires further unbundling. This increment is coupled with a
significant increase in non-development expenditure (17.96 percent) and a significant
decrease in development expenditure (22.01 percent decrease).
• Simultaneously, primary & and mass education and secondary and higher secondary
experienced a substantial decrease in their actual development spending (excepting technical
and Madrasah education). while their operational budget has always been increasing across all
level of education (2020/21-2022/23).

White Paper on State of the Bangladesh Economy 227

Figure 14.B.4 Public Expenditure on Development & Non-Development Expenditure
(actual) for Different Tiers of Education: FY2020/21-FY2022/23

40

30 27.34
25
21.42 20.67 22.66
16.2 16.57 14.99 17.96
20

10

0
Primary and Mass Secondary and Higher Technical and Madrasha Actual Spending
-10 education Education education (Education Sector)

-20
-21.68 -22.01
-30
-28.53
-40
Total Budget Non Development Development

In total expenditure in education sector, the primary and mass education received about 39
percent.

14.B.6 Forms of Corruption in Education Sector in Bangladesh

Studies point to specific forms of corruption in the education sector, however: the collection of
unauthorized payments for admission to schools and skewed distribution of free text books, coercing
students to pay private tuition as well as the demand for bribes to disburse school stipends and
grants. Less obvious forms of corruption also occur, including teacher misconduct, absenteeism
and neglect of duties, inactive school management committees and lack of accountability
mechanisms. Corruption in procurement in education has also recently received attention as a
problem area. Sexual forms of corruption, involving practices such as sexual harassment or paying
for grades with sexual favours, are also an area of concern in the country’s education sector.

Experiences from the local level primary and secondary schools reveal officially invisible
corruption committed by officers assigned to monitor grassroots education, which is also
impaired by politically handpicked managing committees301. Politically driven selection leads to
uneducated or uninterested people being appointed to committees responsible for running
institutions.

Private tutoring and ‘high-stakes tests’ are undermining learning and depriving the poor of the
fruits of education. The implications for social inequalities of expanding shadow education are
increasingly evident and need attention (UNESCO, 2023302).

Question paper Leakage in Public Exams -Heaping of sorrow upon sorrow

The tendency of question leakage allegedly became rampant after 2014 (ANNEX XIV Education).
Question papers of the public examinations such as Primary School Certificate (PSC), Junior
School Certificate (JSC), Secondary School Certificate (SSC), Higher Secondary School Certificate

301
UNESCO, 2017; Global Education Monitoring Report, 2017/18
302
https://www.unesco.org/en/articles/regulating-private-tutoring-public-good

White Paper on State of the Bangladesh Economy 228

(HSC) have been leaked on a regular basis. There have also been multiple university and medical
entrance exam paper leaks303.

The research carried out by the Transparency International observes collusion among officials
(Deputy Commissioner/ Upazila Nirbahi Officer/ bank official) responsible for preservation and
distribution of question papers at the local level. There are risks in the process of checking
questions kept in the vaults on the previous day of a particular examination, and during
distribution in the centers. At the institutional level, a section of teachers violate rules of the
timing for opening packets, taking snaps and sending to students through sms, e-mail, facebook,
and/or viber304.

There is a nexus among question setters of creative section and business persons involved in
coaching centers and guide books. In addition, owners of photocopiers get involved in the
distribution of leaked questions.

Same teachers being appointed as question setters and moderators inspire developing syndicate
and question leaks as some of them are involved in coaching. Lack of adequate training for the
newly introduced creative system put the teachers unskilled, and encourages them to resort to
providing leaked questions to the students for better results. The ranking system of the
educational institutions inspires schools trying any measure to get into the top list even at the
cost of quality of education, which often derives them going for leaked questions.

The limitation of logistics such as absence of digital paper counter help leaking questions, as this
creates the scope for the staff of BG press have a look on the questions. In addition, extra work
load of the BG Press due to two more added public examinations (PECE and JSC) every year
cannot ensure appropriate coordination and supervision.

Denial of incidence of question leakage by the concerned authority and claim this to be ‘suggestions’,
with the added lacking in the enforcement of law encourage the involved persons to carry on
question leakage. The tendency of not disclosing observations of Investigation Committees
obscures a complete scenario about the process and the persons involved, thus keeping them safe.
There has not been any exemplary punishment under the existing law, despite the fact that the
punishment has been reduced from ten to four years in ‘The Public Examinations (Offences)
(Amended) Act, 1992’. In addition, coaching centers have not been closed despite there is a
government policy. Moreover, the law titled ‘The Note-Books (Prohibition) Act, 1980’ is not
properly implemented.

Sexual harassment of female students

In a landmark legal decision in 2009, the High Court issued directives in the form of guidelines to
be treated as law and strictly complied with by educational institutions and employers in the
public as well as private sectors. One of the guidelines was to set up formal complaints
committees in organisations and institutions. While problems of compliance with this ruling
across many organisations have been reported, it has been noted that the University Grants
Commission notified all colleges and universities urging them to set up complaint committees in
accordance with the directives of the court.

303
যি প্রশ্ন িি ফ স
াঁ . Daily Janakantha (in Bengali). 24 November 2017. Archived from the original on 11
March 2018. Retrieved 9 March 2018
304
Transparency International, 2015; Question Leakage in Public Examinations: Process, Reason and Way
Forward

White Paper on State of the Bangladesh Economy 229

In the consultation with women activists and civil society groups, it is alleged that there had been
complains by the female students regarding sexual harassment. TVET institutions are ignorant of
establishing the anti-sexual harassment committee. A number of Universities have formed anti
sexual harassment committee. Often, the members in these committees are appointed from the
authoritarian high ups in the universities.

14.B.7 Career Mobility for Teachers

Primary education was made compulsory in the country in 1993. With the law in place, the
government is responsible for ensuring primary education for all.

The teachers in all tiers of education are under paid. The average salary of a primary school
teacher in the country is only $170.02, which is approximately 27% less than the average monthly
per capita income of the country. In terms of primary school teachers' salaries, Bangladesh ranks
45th among Asian countries and 7th in South Asia. in our national pay scale, primary school
teachers are placed at a very low level.

Table 14.B.1 A comparison with other countries around the world paints a grim picture
of Bangladesh305
Monthly Average Salary of primary School Teachers in South Asia (USD)
Bangladesh Maldives Pakistan Sri Lanka India Myanmar
170.02 953.13 206.07 250.44 284.64 189.22

Currently, assistant teachers in government primary schools in the country receive a salary under
the 13th grade, with a basic of Tk11,000. With housing allowance, medical allowance, and other
benefits, they receive a total of around Tk19,000.

Studies show that the monthly food expense for a family of four in Dhaka is Tk22,664. Such costs
are too high for a primary school teacher to manage, especially those who are the only
breadwinners in their families. The inflation rate has increased sharply in the last couple of years,
standing at more than 9%. However, our primary school teachers are still getting paid according
to the national pay scale 2015, with no adjustment to their salaries according to the inflation.

Entry-level lecturers in a university of Bangladesh earn between $220 to $482 per month. In
contrast, entry-level teachers in India earn between $770 to $2,420, while Malaysian lecturers
make between $700 to $2,800. In Singapore, salaries of university teachers range from $2,950 to
$10,300.

The low pay also demotivates some teachers to allocate much time to the university. They only
come to the campus when they have classes. They do not even carry out rigorous research. Some
even stop research after becoming a professor. Despite the low pay, a large percentage of teachers
are still engaged in rigorous research and lend much time to the university. They regularly publish
scholarly articles.

It is to be noted that, the culture of political criminalization in the educational institutions have
much deeper social effect, as these teachers will be there for teaching for next 30 years or so. The
teachers Associations (professional platforms of teachers) of different tiers do not share any
unified interest, they do not stand by each other’s side. The whole culture has nurtured in such a
way that collective agency of teachers hasn’t been formed and the collusive political and
bureaucratic decision making process overruled the social dignity of teachers.

https://www.tbsnews.net/features/panorama/what-our-school-teacher-salaries-say-about-our-
305

education-881386

White Paper on State of the Bangladesh Economy 230

Teaching is a profession that demands mindfulness and continuous improvement through
persistent effort. Hence it needs a certain salary without any comparison with other professions.
If teachers cannot maintain a modest standard of living with their salary, they cannot be expected
to produce an optimum level of intellectual output.

14.B.8 Conclusion

The thrust of the education system must be on quality education which will drive a
transformational change in human capital development. The skill set must prepare the students
so much so that they will emerge as a global citizen, they will be ready to serve the domestic and
international arena. Amidst the reality of LDC Graduation, Bangladesh needs higher level of
productive efficiency in labour force. Investing adequately on human development to enhance
their productive efficiency should be a priority focus area for the policy makers. Enabling a socio
economic environment where people with higher education and qualification can be objectively
incentivized is critical.

Most importantly, the issue of meeting SDG target referring to no one left behind sheds lights on
the existing equity deficit in the education sector in Bangladesh. Framing and implementation of
an inclusive education with equitable social outcome without any partisan political influences
must be the core of the education system in Bangladesh.

White Paper on State of the Bangladesh Economy 231

14.C Disability-Inclusive Development: A Good Start that Fizzled Out

14.C.1 Introduction

The inclusion of people with disabilities in development processes and outcomes is now a critical
agenda in the larger inclusion commitment of Leave NO One Behind (LNOB) underpinning the
Sustainable Development Goals. In 2007, Bangladesh signed and ratified the Convention on the
Rights of Persons with Disabilities (CRPD) and its optional protocols. In line with this, the country
enacted the Rights and Protection of Persons with Disabilities Act in 2013, which repealed the
Disability Welfare Act of 2001. This marked a significant shift from a charity-based approach to a
rights-based approach in addressing disabilities. The new legislation established the rights of
persons with disabilities, aimed at protecting their dignity and ensuring their participation in
social and state activities. Section 16 of the Rights and Protection of Persons with Disabilities Act,
2013, along with the rights enshrined in the Constitution of Bangladesh, provides as many as 21
rights to persons with disabilities and, in many sections, imposes certain duties and obligations
on different committees, from grassroots to national level for the advancement of PWDs.

Persons with disabilities face wide-ranging human rights abuses, including institutionalisation,
isolation, stigma and discrimination, and lack of access to health, education, justice and
employment opportunities. A lifelong and lifecycle approach to address the issues of persons with
disabilities is completely missing. This has been not only a challenge of resources or technical
know-how but also a challenge of mindset, politicisation, inefficiencies, wastage and corruption.

The immediate past government initiated a number of activities for the advancement of persons
with disabilities. This has been the poster child of inclusive development of the last regime. There
was a strong narrative that the last regime created an enabling environment in favour of persons
with special needs, especially individuals with autism. The main focus of the paper will be to
investigate the reality of disability-inclusive development claims and the narrative of the past
regime by exploring services and gaps.

14.C.2 Identification of Persons with Disabilities: Slow Progress and Gaps in

Implementation

The NSPSD 2021 survey reports that around 4.8 million people in Bangladesh live with
disabilities as defined by the 2013 Act. When measured with the Washington Group framework,
which represents a broader measure, the total number increases to over 12 million.

A pilot initiative was taken by the Department of Social Welfare (DSW) in 2012 to finalise the
technical aspects of identifying the number of individuals with special needs. In 2013, the
program for identification was initiated nationally, engaging doctors and civil surgeon offices. In
2015, the system of getting included in the government information system was developed. 306

Through this identification, individuals with special needs get the entitlement to be included in
different services like Disability Allowance and National Identification Cards. However, the
understanding of the doctors and the lack of capacity to understand the extent of diversity had
been a great challenge for this program to succeed. Following the universal definition of disability
was also a challenge.

According to the latest DSS Survey, just over 35% of the persons with disabilities are registered,
which is very low to make meaningful progress towards the commitment of a rights-based

306
www.dis.gov.bd

White Paper on State of the Bangladesh Economy 232

approach to disability inclusion enshrined in the Rights and Protection of Persons with
Disabilities Act, 2013.

14.C.3 Jatio Pratobandhi Unnyan Foundation (JPUF): An Opportunity Wasted

An independent body was formed in 1999 under the Ministry of Social Welfare (MoSW), aiming
to develop and empower people with disabilities in Bangladesh. The planned focus was to
undertake initiatives to improve the quality of life and advocate for policies to promote inclusive
growth and social integration of people with disabilities. The planned modus of operandi was to
support the NGOs, including Organizations of Persons with Disabilities (OPDs), working to
empower citizens with disabilities.

However, the agency largely deviated from its original roles and responsibilities. The NGOs who
have been working in the disability sector and led the agenda to formulate JPUF in 1999, became
marginalised as JUPF emerged as an administrative and procurement instrument led by
government officials.

Control from the top: Weak administrative governance

The Board of Directors of JPUF is comprised of 24 members; among them, 21 are government
officers, 3 are NGO representatives, and only one is a person with disability. The frequent
transfers of government officers hinder their understanding of issues and weaken governance.
The Board of Directors of JPUF spend time discussing agenda items mainly related to
administrative issues, not programmatic, defeating the whole purpose of the board, which is to
review and approve proposed new programs/ initiatives/schemes for the wellbeing of persons
with disabilities.

Subarna Bhaban: A big gap between concept and practice

With a $22 million loan from the World Bank in 2008 and with public expenditure, JUPF started
to work on building facilities to create employment for persons with disabilities, to provide
support in procuring/producing assistive devices, to provide high-quality rehabilitation support
for 250 individuals with disabilities and other related supports.

The original concept was to provide rehabilitation and skill development services mainly to
children/persons with neuro-developmental disabilities, including residential facilities on the
campus with required support. The infrastructure was designed considering the unique needs of
children/youths living with neuro-developmental disabilities. JPUF constructed a 15-story
building inside the JPUF campus, but it deviated from the original program concept. Currently,
this infrastructure is underutilised, and people with disabilities are not receiving any service or
support from it.

Procurement process: Wasteful and Corrupt

The assistive devices, critical to improving the quality of life of persons with disabilities, should
be customised based on their needs and requirements. JPUF does bulk procurement without
paying attention to the customisation needs and understanding the demand. No proper
assessment is conducted, and there is no consultation on appropriate design with the
occupational therapists. In many cases, inappropriate and uncustomised assistive devices may
cause harm instead of their intended benefit. Apart from its inappropriateness, procurement is
done at a very high price307.

From the White Paper consultation, it was found that a leading NGO in the disability sector developed a
307

model of mobile rehabilitation units using small-sized pick-up vans with all accessibility features, which

White Paper on State of the Bangladesh Economy 233

One Stop Service Centres: A good model poorly implemented

JPUF operates 103 One Stop Service Centres in different parts of the country to provide adequate
service delivery and ensure rehabilitation services are as proximately as possible. The primary
concept was to mainstream disability health services into government health facilities. The model
was piloted in 2 government district hospitals by a leading NGO in the disability sector to be
scaled up by the government308. However, the JPUF centres are run in parallel and isolated from
the mainstream health service facilities. There is no accountability in place to monitor and ensure
the essential service quality of these centres. Individuals with special needs are marginalised, and
many of them do not have the confidence even to complain. Several of these centres were cited in
the WPC consultation as extremely poor quality. All these were built with public expenditure but
failed to deliver critical services to one of the country's most vulnerable citizens.

14.C.4 Many Faces of Access Constraints: Big Room for Improvement

Mobility Constraints: Deepening exclusion by design

The Act requires accessibility of the persons into all premises, public and private, including open
spaces and buildings, and to use public transport without restrictions. Moreover, Rules 5(5) and
13 of the Building Construction Rules, 1996, and Bangladesh National Building Code Act, 2008
provide specifications for disability-friendly construction.

Very few governmental buildings have ramps and lifts, and most public buildings are largely
inaccessible to persons with disabilities. Moreover, most of the public institutions do not have a
disability-friendly washroom. No audio facilities exist in any public place, so a person with visual
disability cannot access such space. Again, the 2013 Act does not specify that buildings, premises
and facilities require braille signage to make all private and public structures accessible to
persons with visual disabilities.

Section 32 provides for accessibility in all public transport for persons with disabilities with the
reservation of 5% of the seats. However, those reservations have no use as the entrance to public
transport is not in any way disability-friendly, and wheelchair access is almost impossible for
buses and trains of our country.
Accessibility has been ensured in the Metro Rail Transportation system. However, due to the lack
of accessibility to the mass transportation system, reaching Metro Rail stations for individuals
with physical disabilities is still a hurdle.

Hear us: Approval of Sign Language and Braille System

The main problem of persons with hearing disabilities is communication. Neither can they
express their feelings in common ways, nor do people with hearing disabilities understand how
they express themselves. Moreover, as sign language differs from region to region, they face
communication problems among themselves, too.

Several disability rights activists and NGOs facilitated the process of compiling standard Bangla
Sign Language as an alternative method of communication. As a result of their relentless advocacy
initiatives, on February 1, 2009, the then-PM announced the adoption of Bangla sign language at

can move through the narrow roads of the most remote rural areas. However, JPUF procured big-sized
pick-up vans that could not travel to most rural areas. As a result, people living in remote areas are
deprived of the necessary rehabilitation services. That NGO has been running three service vans; each
was bought at around BDT 22 Lakh. Allegedly, the JUPF bought much larger vans, which are not practical
for reaching remote areas, at around BDT 1 crore each.
308
From the White Paper consultation.

White Paper on State of the Bangladesh Economy 234

the national level and declared February 7 as the National Bangla Sign Language Day to be
observed in Bangladesh. Nevertheless, since then, the concerned authorities have made no
notable efforts to promote sign language as the recognised official language for persons with
speech and hearing disabilities in Bangladesh. Individuals with visual disabilities are using the
braille system. However, the braille system is not yet gazetted.

Constraints of Access to Justice

The courts in Bangladesh are not disability friendly. Schedule 12 of the 2013 Act requires
arrangements by police, prison and court officials to ensure access to justice for 'disabled victims'
of violence. However, both the Act and Schedule are silent on the procedures required for
'disabled offenders'.

There are no clear procedures or guidance for court officials on recording witness statements of
persons with speech and hearing disabilities. The need for interpreters in the process of justice is
also ignored. More surprisingly, the Prevention of Women and Children Repression Act of 2000
fails to protect, especially women and girls with disabilities from all forms of abuse and torture.

Constraints of access to education

The Act refers to 'general education' for those studying with non-disabled students and 'special
education' for students with disabilities, requiring extra care and taught through a different mode
of education (section 16). However, the Primary Education (Compulsory) Act 1990 allows scope
for refusal of admission based on "illness or any unavoidable reason" or if a primary education
officer decides that it is not "desirable" to admit a child because one is "mentally retarded"
(Section 3(3)(a)&(e)). Furthermore, there is generally no adapted curriculum for children with
disabilities. Children with psycho-social disabilities get even fewer opportunities to get inclusive
education. Braille textbooks and materials, including writing frames and stylus, are not available
much.

Constraints of access to skills, jobs, and livelihoods

Though the right to work and employment has been guaranteed and duty has been imposed on
the employers to employ persons with disabilities respectively in Sections 16 and 35, certain laws
directly discriminate against persons with disabilities, prohibiting their inclusion in Public
Service above certain grades. Certain legal provisions prevented individuals with disabilities from
being eligible for employment in various services. These provisions include Schedule II of the
Bangladesh Civil Service (Age, Qualification and Examination for Direct Recruitment) Rules 2014
and Schedule III of the Bangladesh Judicial Service Appointment Order, 2007, including The
Bangladesh Judicial Service (Formation, Appointment and Temporary Termination, Termination
and Suspension) Rules, 2007. Moreover, there is no quota for job seekers with disabilities in the
private sector and no specific remedy against any discrimination by private employers.

In 2020, 285 persons with physical and visual disabilities passed the primary school teaching
examination. However, they were denied appointments and had to go to the judiciary. In
September 2024, their verdict came in favour of the deprived persons with disabilities. There are
about more than 1lac educated persons with disabilities who could access employment, but it
remains a huge challenge.

Bangladesh National Social Welfare Council provide livelihood support to persons with
disabilities and organisations working with persons with disabilities through the
Ministry/Department of Social Welfare. Allegedly, this program provided funds to relatives of
political leaders, including to a newly registered organisation run by the wife of a then-seating
minister.

White Paper on State of the Bangladesh Economy 235

Access constraints to SRH Care

There are significant gaps in the provision of sexual and reproductive healthcare (SRH) for people
with disabilities, in part stemming from a harmful perception in Bangladesh that persons with
disabilities are asexual or less sexually active and, therefore, less likely to have SRH needs or be
exposed to sexually transmitted diseases and/or different types of violence. This stigma,
alongside limited training on inclusive care for healthcare workers, means people with
disabilities in Bangladesh often face additional barriers to seeking sexual and reproductive health
care beyond Accessibility (Article 9) and other Impediments to the Right to Health (Article 25).

Access constraints to voting and participation

Very often, persons with intellectual or psycho-social disability are excluded from the voter's list.
Persons with visual disabilities do not have specific ballot papers that they can use to vote in
secret. Neither is there any reserved seat in an elective body. There are several specialised sports
and cultural activities for people, but they are usually not mainstream.

Implementation capacity and coordination constraints

Anything related to persons with disabilities is dealt with by the Ministry of Social Welfare and
the Department of Social Services, including education, health, legal aid, and financial assistance.
This is a significant concern as the ministry and department do not have adequate capacity and
mandate to handle issues within the framework of mainstreaming the services required by
persons with disabilities.

14.C.5 Social Protection

Disability allowance for persons with disabilities was introduced in 1993 and was targeted
specifically at low-income individuals with disabilities. In 2015, the coverage of Disability
Allowance was made universal for all persons with disabilities. There has been a significant
increase in the number of beneficiaries of Disability Allowance over the years. The coverage was
approximately six lakh in FY2015-16, which increased to over twenty lakh in FY2021-22. This
represents a range of 25% to 50% of persons with disabilities in Bangladesh, depending on the
measurement and survey used.

The White Paper consultations reveal that many persons with disabilities do not receive disability
allowance despite having their disability card. While some are financially comfortable and do not
need support, a significant proportion are unaware of or do not know how to access the support.
As the budgetary allocation covers every registered person with a disability, there is room for
misappropriation. Allegedly, the government officials and the people at local government play a
role in this.

Caregiving is critical to the quality of life of persons with disabilities. However, caregivers are not
considered a part of social protection support for this community.

14.C.6 The Problem of Picking and Promoting Favourites: A Weakening Impact on the
Larger Movement

An impetus in the disability sector was created focusing on autism, and the former government
took a keen interest in leading the initiatives. A number of policies and practices were initiated,
such as the Neuro-Developmental Disability Protection Trust in 2013.

White Paper on State of the Bangladesh Economy 236

The government of Bangladesh constituted a Board called the Neuro-Developmental Disability
Protection Trustee Board in 2014 after establishing the Trust through the implementation of the
Neuro-Developmental Disability Protection Trust Act, 2013 to improve the overall quality of life
of people with neuro-developmental disabilities. 74 schools for children with neuro-
developmental disabilities have been receiving government assistance for teacher salaries.

The National Academy for Autism and Neuro-Development Disorder was created in a bid to serve
the Neuro Divergent Disable (NDD) people with greater provisioning of services across the
lifecycle. However, it is unfortunate that having BDT 422 crore of allocation, the corruption
allegation and financial fraudulence made this Academy ineffective.

For the last couple of years, World Autism Day on 2 April has been observed as a high national
priority, with the ousted PM being the programme chair. It certainly created awareness, which
helped individuals with autism be integrated into society. However, in the White Paper
Committee consultation, the persons with disabilities and the professionals working for disability
rights stated that the first Wednesday of April was observed as National Disability Day
(announced in 1999 in Bangladesh). This National Disability Day was shifted to 3 December to
prioritise autism over other disability types, coinciding with the International Day of Persons
with Disabilities, which weakened the national day that held vital significance for the movement.
The whole festivity around the rally, where the persons with disabilities joyfully joined and
marched on the roads to create a visible impact on the public optics, got shaken as the past
government started focusing on having a large rally on Autism Awareness Day (2 April). Persons
with disabilities who are not autistic felt marginalised. The whole disability sector, apart from
those working on autism, felt like a 'foster child' in the activism led by the government.

Such separation neither helped the actions for autism nor served other persons with disabilities
with great confidence. Such initiatives do not and cannot focus on the critical and systematic
constraints. The problem with such a politically motivated, visibility and headline-driven
initiative is that it is designed from a short-term charity perspective and not from a more
systematic, sustainable rights perspective. The politicisation of the agenda by privileging one type
of disability over others weakened a strong movement. As such, these initiatives always create a
bubble of false satisfaction and complacency without creating real effective change.

14.C.7 Conclusion: Bungling A Solid Start and Movement

Bangladesh can be proud of its disability rights movement, which made Bangladesh one of the
first countries to ratify the United Nations Convention on the Rights of Persons with Disabilities
(UNCRPD). The movement worked hard and relentlessly to establish an improved legal
framework in the form of the Rights and Protection of Persons with Disabilities Act of 2013.
Surely, a stride was made to uphold disability rights, dignity and enhanced participation in social
and state activities. The policy decision to form an independent body in 1999 under the Ministry
of Social Welfare (MoSW) to develop and empower the people with disabilities in Bangladesh was
a proud moment to advance the disability rights and justice agenda.

However, what followed is a story of the immediate past regime politicising the agenda, creating
large procurement biases, and picking favourites. In an effort to promote the disability agenda as
a symbol of inclusive development, the regime aimed to establish itself globally as a
developmental state. However, this focus weakened the broader movement and compromised
the tangible progress in the lives of citizens with disabilities.

White Paper on State of the Bangladesh Economy 237

ANNEX I HEALTH

Table 14.A.1 Snapshot on Health Expenditure and Availability of Health Workers in

Bangladesh
Health Expenditure Health Workers
Current Public Out of Per Per Capita Physicians Nurses &
Country/ Pocket Capita Current Midwives
Region PPP
% of GDP % of % of Current $ Per 1,000 Per 1,000
Current people people
2021 2021 2021 2021 2021 2016-21 2016-21
South Asia 3.3 32.3 52.5 70.2 227.8 0.8 1.5
Bangladesh 2.4 16.9 73 57.9 153.6 0.7 0.6
Lao PDR 2.7 26.2 30.9 68.9 234.2 0.3 1.2
Malaysia 4.4 56.2 32.1 487.4 1268.2 2,2 3.4
Nepal 5.4 33.2 51.3 65.0 228.0 0.6 2.0
Philippines 5.9 39.3 44.6 203.0 522,0 0.8 4.8
Sri Lanka 4.1 46.5 43.6 203.
Source: The World bank309.

ANNEX II HEALTH

Figure 14.A.1 Current Health Expenditure (CHE%GDP and CHE per capita, US$)

Source: https://apps.who.int/gho/data/node.searo.GHEDGGHEDCHESHA2011?lang=en.

309 https://datatopics.worldbank.org/health/

White Paper on State of the Bangladesh Economy 238

ANNEX III HEALTH

Figure 14.A.2: Actual Expenditure on Health-Development and Non-Development

Expenditure

30 60

25 50
BDT in thousand Crore

20 40

Percent
15 30

10 20

5 10

0 0
FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23
Non-Development Developmet Total Development Expenditure as Percentage of total

Source: Finance Division, Bangladesh.

ANNEX IV HEALTH

Figure 14.A.3 Government Expenditure and OOPS (GGHE-D%CHE and OOPS%CHE)

Source: https://www.who.int/data/gho/indicator-metadata-registry/imr-details/4953

White Paper on State of the Bangladesh Economy 239

ANNEX V HEALTH

Figure 14.A.4 External Health and Health Priority (External aid per capita and GGHE-
D%CHE)

Source: https://apps.who.int/gho/data/node.searo.GHEDEXTCHESHA2011?lang=en

ANNEX VI HEALTH

Case Study: Corruption during COVID-19 Pandemic exposed fundamental flaws in the
health sector

The World Health Organization (WHO) announced that COVID-19 was a pandemic on 11 March
2020. The virus was confirmed to have spread to Bangladesh on 8th March 2020. The
announcement for the first lock down (10 days from 26th March 2020) came in the wake of three
deaths and 33 reported infection cases. Allegedly, the GoB allowed the country-wide celebration
on the occasion of celebration of his centenary birthday (17th March 2020) and the declaration of
Mujib Borsho (dedication of a year, 17th March 2020-31st March 2021, to his memory).

During the initial stage of the COVID 19 outbreak in Bangladesh, with the announcement of
lockdown, the government Armed forces were deployed to assist the civil administration, 500
doctors were enlisted for the coronavirus infection management process. The pandemic,
however, drew attention to the inadequate healthcare systems of Bangladesh (also in a number
of developing countries), which is plagued by a variety of issues, including financial corruption in
the healthcare industry. There were reports published in the national daily newspapers and
electronic media focusing on widespread corruption exposed in the times of Corona crisis, the
overwhelming scale of irregularities and corruption, the trending culture of impunity, failure of
policy implementation, and arbitrary abuse of laws restricting access to information, freedom of
expression and media freedom thus hindering anti-corruption mitigation measures.
Transparency International raised their concerns regarding the unexpected events that unfolded

White Paper on State of the Bangladesh Economy 240

during the Covid-19 crisis.310 This corruption boom in the health sector and spirally in other
sectors portrayed that Corruption had become ubiquitous in the country.

Here, the corruption started right from procuring essential safety gear like masks, sanitizers,
and personal protective equipment (PPE) to fake testing for COVID-19 to increased cost of
medicines for treating the condition (Zaman, MS Al)311. While developed countries were fighting
high death tolls from COVID-19, Bangladesh was fighting the double burden of a poorly resourced
health system and an all-pervasive corruption in the health system.

Safeguarding frontline health care workers (FLWs): masks, sanitisers, PPE

The government was supposed to provide personal protection to FLWs i.e., doctors, nurses, staffs
coming in direct contact with a confirmed or suspected COVID-19 patient in hospitals for
treatment and management. These included PPE and appropriate quality masks and sufficient
quantity, among others. Newspapers reported corruption in purchasing medical supplies and the
overall procurement process.

Quality of face masks supplied: The hospital authorities questioned the quality of the masks
given as ‘N-95' masks at a certain COVID-19 dedicated hospital in the capital, thereby risking the
lives of the Front Line Health W0rkers (FLWs). Department of Health supplied N-95 masks for
doctors and health workers in different parts of the country, which were supplied by a specific
company, who were allegedly supplying fake N95 masks. According to another report, more than
20,000 fake N95 masks were supplied in 10 different hospitals without quality checks.

Some examples of corruption in the health sector during the COVID-19 Pandemic in Bangladesh
are documented312 (Khanam M., et al., 2023) as follows.

Areas of corruption Specification

Safety goggles The proposed expenditure was BDT 5000/piece, and the market price
was BDT 100/piece.
Medical supplies An automobile company fled after making a contract worth Tk 9 crore.
An electronic equipment supplier misappropriated about Tk 8.28
crore, after securing a deal to supply medical products without
delivering the items.
Website development Tk 10.5 crore was quoted as four websites development cost against
the highest market price of Tk 2 lakh for developing each website.
Computer software Besides, Tk 55 crore was quoted for five pieces of computer software
in place of average unit price of Tk 28 lakh.
Audio-video The price for 30 audio clips was proposed at Tk 11.5 crore whereas a
movie cost Tk 1 to 2 crore.

310
https://www.ti-bangladesh.org/articles/story/6219
311 MS Al Zaman, 2020. Healthcare crisis in Bangladesh during the COVID-19 pandemic., The

American journal of tropical medicine and hygiene, 2020

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7543838/
312 Khanam Mahruaba, Noshin Sayiara Shuchi, Raihana S. Kamal, Syed Masud Ahmed, 2023., Health
sector corruption in the times of COVID-19 pandemic in Bangladesh: Newspapers as mirrors of society.
Science Direct, Volume 9, Issue 12, December 2023, e22318. Accessed at
https://www.sciencedirect.com/science/article/pii/S2405844023095269

White Paper on State of the Bangladesh Economy 241

Areas of corruption Specification
Personal protective The proposed expenditure was BDT 4700, although the original
equipment market price was BDT 2000.
JKG Health Care scam Approved by Directorate General of Health Services, JKG Health Care
set up 44 booths for sample collection. They provided 1925 COVID-19
certificates without collecting samples and testing anything.
Recruitment process of It was found from an audio phone call record that it will cost a
medical Technologist minimum of BDT 10 lac for each appointment.
Procurement at Shaheed Shaheed Suhrawardy Medical College Hospital was involved in
Suhrawardy Medical financial irregularities amounting to Tk 6 crore 40 lakh 31 thousand
College Hospital 800 in the purchase of three types of equipment.
Procurement in Health Since 2014, the Anti-Corruption Commission (ACC) identified
Department corruption worth around Tk 300 crore in the procurement of 19
projects and hospitals in the health sector, among which 10 cases
occurred during the COVID-19 situation.

White Paper on State of the Bangladesh Economy 242

ANNEX I: Education

Table 14.B.1 Gross Enrolment Rate (GER) and Net Enrolment Rate (NER) in Primary Education,
Secondary School, College, Madrasah, Vocational, Business Management and Tertiary Education in
2021

Type of Education GER NER Dropout

Total Boys Girls Total Boys Girls Boys Girls
(a) Primary Education 105.72 105.32 106.14 97.42 97.39 97.44 15.05 13.25
(b) Secondary Level (School, 75.52 66.40 83.15 70.25 63.29 79.09 32.50 40.29
Madrasah, Voc.Grade 6-10)
1. Secondary School 60.05 54.15 65.40 58.83 52.36 64.77 33.59 36.44
2. Madrasah (Dakhil:VI-X) 12.16 10.57 13.75 11.81 10.23 13.38 34.33 46.46
3. Vocational (IX and X) 4.61 6.10 3.06 4.38 5.79 2.91 32.09 28.25
(c) Higher Secondary Level (College, 48.79 48.50 49.88 40.54 41.88 40.49 20.74 21.56
Madrasah and BM: Grade 11-12)
1. College (11 and 12) 37.70 35.34 37.70 33.55 31.57 35.21 19.16 20.36
2. Madrasah (11 and 12)) 3 3.55 3.28 3.55 2.89 2.91 2,76 18.96 27.24
3. Business Management 7.53 9,89 7.53 7.16 9.39 4.52 46.03 44.66
(d) Diploma Level 2.49 3.75 2.49 7.63 8.01
n(e) Tertiary Level 20.19 20.19 20.19
Source: Bangladesh Bureau of Educational Information and Statistics (BANBEIS) Ministry of Education, Bangladesh Education
Statistics 2021

ANNEX II Education

Table 14.B.2 Percentage distribution of students in grade specific performance level and mean
score level at Grade 3 and Grade 5
2011 2013 2015 2017 2022
Grade 3 47% 51%
Bangla
Grade 3 Math 34% 39%
Grade 5 44% 50%
Bangla
Grade 5 Math 32% 30%
Mean Scale Scores
Grade 3 100 104 100 103 103
Bangla
Grade 3 Math 100 103 98 98 104
Grade 5 116 115 112 109 110
Bangla
Grade 5 Math 118 115 110 112 113
Source: The National Student Assessment (various years); Ministry of Primary and Mass education

White Paper on State of the Bangladesh Economy 243

ANNEX III Education

Figure 14.B.1 (a) Bangla Mean Scale Scores

120
118
116
114
Scale Scores

112
110
108
106
104
102
100
98
2010 2012 2014 2016 2018 2020 2022 2024
Year

Grade 3 Scale Scores Grade 5 Scale Scores

Source: Author’s calculation using National Students Assessment (NSA) 2011, 2013, 2015, 2017, 2022.,
NSA, Monitoring and Evaluation Division, Directorate of Primary Education.

Figure 14.B.1 (b)Math Mean Scale Scores

105
104
103
Scale Scores

102
101
100
99
98
97
2010 2012 2014 2016 2018 2020 2022 2024
Year

Grade 3 Scale Scores Grade 5 Scale Scores

Source: Author’s calculation using National Students Assessment (NSA) 2011, 2013, 2015, 2017, 2022.,
NSA, Monitoring and Evaluation Division, Directorate of Primary Education.

White Paper on State of the Bangladesh Economy 244

ANNEX IV Education

Figure 14.B.2 Female Unemployment -education and location disaggregated

25
19.17
20
15.19
15

10 7.16
5.56
5 2.92
0.82
0
None Primary Secondary Higher Secondary Tertiary Total

Rural Female Urban Female National Female

Source: BBS, 2022. Labour force survey, Bangladesh Bureau of Statistics, 2022.

ANNEX V Education

Table 14.B.3: Number of Teachers in all GPS by Gender 2021

Male Female Total % of Female
Teachers
Number of Teachers 127809 231286 359095 64.41
Source:
Bangladesh Bureau of Educational Information and Statistics (BANBEIS) Ministry of Education, 2022.
Bangladesh Education Statistics, 2021.

ANNEX VI Education

Table14.B.4 Region disaggregated data on Madrasahs

No. Division No. of Aliyah No. of Qawmi Students
Madrasas Madrasahs
1 Dhaka 910 6860 1043491
2 Mymensingh 764 2388 713641
3 Chattogram 1581 3535 1620813
4 Rajshahi 1402 1557 562879
5 Rangpur 1057 1356 727107
6 Khulna 1094 1100 526893
7 Barisal 1181 602 578082
8 Sylhet 8594 19199 6266623
Source: Bangladesh Bureau of Educational Information and Statistics (BANBEIS) Ministry of Education,
2022. Bangladesh Education Statistics, 2021.

ANNEX VII Education

Table 14.B.5 Transition of students from Primary to secondary Schools

Govt assisted/ Private Madrasa Tech and
Govt schools (Kindergartens)/NGO run (Qawmi and Vocational
Aliya)
% of students who were in 71 21 4 4
Grade V before COVID
transited to (after COVID),
(approximately)
Source: Education Watch, 2023. School Education in Bangladesh: Post Pandemic resilience and
Sustainability. Campaign for Popular Education in Bangladesh (CAMPE).

White Paper on State of the Bangladesh Economy 245

ANNEX VIII Education

Figure 14.B.3 Reasons behind school dropouts by geographical cluster -students' view

Others (school timetable/ scool distance/ 12.2

10
transportation system/ language problem/Insecurity… 18.7

29.6
Closure of school due to pandemic 19.8
24.8

Helping with housework/Involvement in family 36.4

31.7
income generating activity/ child labor 32.2

Student reluctance in education/ Reluctance on girls' 47.1

44.4
education… 52.9

13.1
Child Marriage 24.4
27.2

59.2
Poverty 70.9
67.2

0 10 20 30 40 50 60 70 80

City Corporatin Rural Urban

Source: Education Watch, 2023., School Education in Bangladesh: Post Pandemic Resilience and
Sustainability, Campaign for Popular Education (CAMPE), 2023; accessed at
https://www.campebd.org/page/Generic/0/6/18

ANNEX IX Education

Table 14.B.6 Number of Students in Public and Private Universities

PUBLIC UNIVERSITIES
University Students Students Transgender/ Foreign Students
(male) (female) others (Total)
53 Public Universities313 4,28,126 2,97,840 5 7,25,971
Affiliated Colleges under 17 18,73,692 18,15,968 36,89,678
Public Universities/
Madrasahs
23,01,818 21,13,826 5 44,15,649
PRIVATE UNIVERSITIES
110 Private Universities 2,39,224 1,00,585 2 1,287 3,41,098
TOAL STUDENTS (Public & Private Universities)
Total 2541042 2214411 7 1287 4756747
Source: Annual Report, University Grants Commission, 2022.

313
The number is 61, as of October 2024.

White Paper on State of the Bangladesh Economy 246

ANNEX X Education

Table 14.B.7 trends in Allocation in Public universities (2009/10-2024/250)

Year Development Research Operation cost (Total)
2009-10 261.08 7.64 975.26
2010-11 451.51 9.01 1177.62
2011-12 545.57 11.30 1291.97
2012-13 547.88 9.31 1469.27
2013-14 710.08 12.41 1780.39
2014-15 979.14 15.06 1986.16
2015-16 986.52 15.32 2727.77
2016-17 1324.14 31.98 3418.47
2017-18 1250.02 59.40 3787.22
2018-19 3049.86 67.10 4731.01
2019-20 1966.16 76.38 5021.22
2020-21 2561.33 90.89 5340.24
2021-22 3574.66 117.74 5606.09
2022-23 3352.38 140.00 5841.07
2023-24 2595.88 164.00 6082.15
2024-25 4917.51 210.00 6382.40
Source: Communication with University Grants Commission (UGC).

ANNEX XI Education

The case of Cumilla University (Second Campus)

Before the 11th Parliament Election in 2018, In October 2018, Cumilla University Authority
decided to acquire land for the second campus, some 1.2 kilometres away from the current
campus. Allegedly, there was a vested interest in serving the then Planning Minister (and then
became Finance Minister) and his families314 at his election constituency and greater Cumilla
region.

The then Education Minister placed before the Parliament ‘Sheikh Hasina University Bill, 2017’ (to
be established in Netrokona) in November 2017. Another bill was passed in parliament to set up
a science and technology university named after Bangamata Sheikh Fazilatunnesa Mujib in
Jamalpur. The Minister said the move aimed to advance higher education and research. One
newspaper report quoted from the then Deputy Minister for Education- "As per the prime
minister’s instructions, we need universities in these districts. These new universities should
focus on how to take over the district-level university colleges where undergraduate courses are
taught while also developing new post-graduate level courses and research and development315."

314
https://www.youtube.com/watch?v=hQd01zAOh08
https://samakal.com/bangladesh/article/263015/%E0%A6%B2%E0%A7%81%E0%A6%9F%E0%A6%
AA%E0%A6%BE%E0%A6%9F%E0%A7%87-
%E2%80%98%E0%A6%AC%E0%A6%BF%E0%A6%B6%E0%A7%87%E0%A6%B7%E0%A6%9C%E0
%A7%8D%E0%A6%9E%E2%80%99-
%E0%A6%B2%E0%A7%8B%E0%A6%9F%E0%A6%BE%E0%A6%B8-
%E0%A6%95%E0%A6%BE%E0%A6%AE%E0%A6%BE%E0%A6%B2
315
Accessed at https://www.dhakatribune.com/bangladesh/education/327194/ugc-recommends-six-
new-public-universities

White Paper on State of the Bangladesh Economy 247

Before the 12th National Parliament election in 2024, in October 2023, The UGC sent a letter to
the Ministry of Education on setting up six universities in six districts including Rajbari, Bhola,
Joypurhat, Cox's Bazar, Narail and Barguna. The UGC made the decision after the ministry had
sought its opinion on setting up new universities in nine districts. The apex body did not
recommend setting up universities in Mymensingh, Rangpur and Gaibandha. In August 2023, the
UGC permitted three new public universities to conduct academic activities and enroll students
for the 2023-24 academic year. These are Kurigram Agricultural University, Sunamganj Science
and Technology University and Bangabandhu Sheikh Mujibur Rahman Science and Technology
University, Pirojpur. The university in Sunamganj was established in 2020, while the other two
were established in 2022.

ANNEX XII Education

In Chadpur Science and Technology university, allegations have it that the influential people,
reportedly close to ex-education minister Dipu Moni and her close relatives, were involved with
the process to extract about Tk 3.59 billion (359 crore) more from the government than to be
spent for land acquisition. A coterie of influential people has bought nearly 62.5 acres at an
inflated price 20 times more than the actual price of the land chosen by the government for the
Chandpur Science & Technology University316.

• 23 December 2019: Cabinet approved University Act

• 18 May 2020: Influential coteries started buying lands
• 9 September 2020: JS Approved Chandpur University Act
• 6 April 2021: Administration approved land acquisition
• 16 November: District administration submitted report after scrutiny of deeds

Deed mentioned that the price of land was over twenty times its market price.

ANNEX XIII Education

This unholy nexus is not only prevailed in the ‘recently announced/ established’ universities.

“ODHIKOTORO UNNAYAN project in Jahangirnagar University creating Odhikotoro

nuisances in academic sphere

On October 23, 2017, the Executive Committee of the National Economic Council (ECNEC)
approved a Tk1,445cr development project for Jahangirnagar University. The authority,
allegedly, initiated the infrastructural work without considering the Master Plan of the University
designed by the renowned architect, keeping the vegetation and ecologically sensitive wetlands
where birds flew from across the globe during winter. The students and teachers tried to
communicate their concerns; however, no attention was given. Then there was fuel to add fire
when an audio was divulged-

• In September 2019, an audio record was divulged between proctor and students leaders of
the ruling party revealing that the then Vice Chancellor gave the leaders two crore taka as ‘Eid
Gift’.
• Students leaders of the ruling party demanded “4 to 6 percent” in cuts from a Tk 1,445-crore
project at Jahangirnagar University, Vice Chancellor alleged317.
• After initial denial to a number of media outlets, the then president of the student wing of the
ruling party admitted that they indeed demanded their “fair share” from the VC, although he
316
https://en.prothomalo.com/bangladesh/crime-and-law/web-of-corruption-of-ministers-men
317
https://www.dhakatribune.com/bangladesh/politics/187391/central-chhatra-league-leaders-
accused-of

White Paper on State of the Bangladesh Economy 248

 would not say how much. They brought allegations against the VC and her family of giving Tk
1.6 crore to the students leaders at Jahangirnagar University so they did not get in the way of
the development project318.
• On November 5th, 2019, During a sit-in protest in front of the VC’s residence on campus the
protestors including teachers and students were attacked by a group of students belonged to
the students wing of the ruling party,.
• Later in the day, the authorities shut down the university for an indefinite period. They also
banned processions and rallies on the campus until further notice. "It's a joyous day for me…
I am very grateful to students, they took the responsibility upon themselves and did it," she
said. "I have said it's a mass upsurge’.
• On November 7th, 2019, Former Prime Minister told protesters to provide evidence of
corruption against the vice chancellor of Jahangirnagar University.
• The protesting teachers and students of Jahangirnagar University sent documents concerning
the alleged corruption of the institution’s Vice Chancellor to the Ministry of Education.
Nothing was probed into; NO Enquiry Commission was formed.

ANNEX XIV Education

There were allegations of question leakage in 63 examinations between 2012 and 2015, of which
all questions of Primary Education Completion Certificate (PSC) and JSC held in 2013 and 2014
were leaked319.
• In 2014, question papers from all Bangladesh public examinations were leaked but the
government initially denied this allegation. However, after a few days, the then Minister of
Education of Bangladesh declared quick action would be taken against people involved in
question paper leaks320.
• During the 2014 HSC examination period, the English exam schedule of Dhaka Board was
changed due to leaks. Other tests' question papers were leaked but no further action was
taken321.
• There were allegations of medical and dental entrance test question paper leaks in
2015322. The Health Minister denied this allegation323. An inquiry team was established which
confirmed the allegations and suggested the entrance test be retaken. Students and renowned
Bangladesh educators protested against the leak and demanded the test be retaken, but no
action was taken. The demonstration was described as 'illogical’ and the then Health Minister
described the demonstrations as hype.
• In 2018, the question paper of Dhaka University D unit (Gha Unit) entrance test was allegedly
leaked. The government denied this allegation324.

318
https://www.thedailystar.net/frontpage/bcl-president-secretary-demands-fair-share-in-
jahangirnagar-university-project-1799683
319
Transparency International, 2015; Question Leakage in Public Examinations: Process, Reason and Way
Forward
320
https://www.bbc.com/bengali/news/2014/06/140611_an_public_exam_question_leak
321
াঁ . Prothom Alo (in Bengali). 10 April 2014. Archived from the original on 11 March
সব পরীক্ষ র প্রশ্ন ফ স
2018. Retrieved 9 March 2018.
322
"Now medical question paper leak!". The Daily Sun. Archived from the original on 2018-03-11.
Retrieved 11 March 2018
323 কমতিনকনল ভতিথ-ইচ্ছু কনদর সনে স্ব স্থ্্ অতিদপ্তনরর ববঠক. Prothom Alo (in Bengali). 19 October 2015. Archived

from the original on 11 March 2018. Retrieved 9 March 2018.

324
https://en.prothomalo.com/bangladesh/news/163697/DU-D-unit-admission-test-question-paper-
leaked

White Paper on State of the Bangladesh Economy 249

• In 2020, the Criminal Investigation Department (CID) of police said that at least 4,000
students were admitted to several medical and dental colleges through answering the
question papers leaked by a gang from 2013 to 2018325.

The group, involving PSC officials and employees, leaked at least 30 question papers of
government recruitment tests, including BCS exams, over the last 12 years. This came to light
after the Criminal Investigation Department (CID) of police picked up 17 people, including five
PSC officials and employees. The arrests were made after CID got information that the questions
for a railway recruitment exam held on July 5, 2024, were leaked326.

During the Press conference of the former PM on her China visit in July 2024, where a number of
her comments pour fuel on the fire of the mass uprising, her comment on question paper leakage
of 46th BCS Exam was “So, those who leak question papers and who buy these are both criminals.
There’s no doubt about it. But who’ll find them out? Actions can be taken if the journalists can try
and find them327”. This demonstrated a lack of seriousness of the intent from the highest tier of
the governance at probing into question paper leakage. While investigation journalism could have
probed into the matter and be useful, however, the intelligence departments and law enforcing
bodies have the mandate and capacity and their responsibilities cannot be looked down upon.

325
https://en.prothomalo.com/bangladesh/crime-and-law/4000-admitted-to-medical-dental-colleges-
with-help-of-leaked-question-papers
326
https://www.thedailystar.net/news/bangladesh/crime-justice/news/psc-question-papers-least-30-
leaks-12-years-3652971
327
https://bdnews24.com/bangladesh/5d3e4fc60fb7

White Paper on State of the Bangladesh Economy 250

Chapter XV. Between Rhetorics and Realities: Gender Issues*

15.1 Introduction

The social structure of Bangladesh is characterised by ‘classic patriarchy’328. Society largely

upholds the practice of rigid gender segregation and a powerful ideology linking family honour
to female virtue. The growth of neo-liberalisation, an urban wage economy, and internal and
international migration have fundamentally transformed the social fabric, household structure
and family ideology. While the country has achieved a number of progresses on several gender
equality indicators such as gender parity in primary and secondary school enrolment, a decline
in maternal mortality ratio, and a sharp decline in TFR (1.9 in 2024), the disparity in many
spheres, violence against women, child marriage, women trafficking, risky female migration, poor
labour market outcomes, etc. loom large.

This chapter begins by identifying biases in showcasing the indices in which gender issues
perform well while shelving others. A wide range of gender disparities in labour market,
education, health, and financial services have been documented. Violence against women and
child marriage issues have been discussed separately. A critical review of laws and institutions
for protecting human rights for women as well as gender budgeting has been added. Finally, the
conclusion suggests a few recommendations for the betterment of the wellbeing of women.

15.2 Overstated Women’s Advancement: Selection Bias in Data Representation

A number of global-level indices have been introduced by different international organisations to

track global progress toward gender equity. These indexes advocate for an integrated, holistic
approach to advancing gender equity, involving multi-stakeholder collaboration. Different indexes
have separate sets of approaches to assess the advancement of gender equity. There has been a
strong selection bias in showcasing the indices which show success while ignoring the negative
ones.

One of the global level indexes which was repeatedly cited by the Government of Bangladesh
(GoB) was the Global Gender Gap Index (GGGI) by the World Economic Forum (please, see the FY
2025. Gender Budget Document, Finance Division, Bangladesh among others). The irony of GGGI
is that it represents a composite index where Bangladesh ranks very high (59th country in 2024),
apparently demonstrating its excellent state of achievements towards achieving gender equity,
whereas such representation might give a false impression.

Bangladesh performed well in its assessment of one component: women’s political empowerment
(secured 7th position among countries) represented by women in parliament, women in
Ministries and Heads of state by male/ female. The way the political culture of Bangladesh
interplays with the feudal supremacy of ‘family aristocracy’, such representation of women’s
political empowerment may overstate the actual scenario of marginalisation of women in the
political system. The other three components in this composite GGGI index are educational
attainment (122nd), economic participation (139th) and health and survival (126th). Bangladesh’s
achievements in these three areas are far from any satisfactory benchmark (Table 15.1).

*The chapter has been prepared by Ms Sharmind Neelormi, Professor, Department of Economics,
Jahangirnagar University, with contribution from Dr Kazi Iqbal, Research Director, Bangladesh Institute of
Development Studies (BIDS); Dr Selim Raihan, Professor, Department of Economics, University of
Dhaka and Executive Director, South Asian Network on Economic Modeling (SANEM) and Dr Imran Matin,
Executive Director, BRAC Institute of Governance and Development (BIGD).
328 Naila Kabeer, Subordination and Struggle: women in Bangladesh;

https://newleftreview.org/issues/i168/articles/naila-kabeer-subordination-and-struggle-women-in-
bangladesh

White Paper on State of the Bangladesh Economy 251

Table 15.1: Global Gender Gap Index: where Bangladesh stands
Gender Gap Economic Educational Health & Political
Index- RankParticipation Attainment Survival Empowerment
(Score) and
Opportunity
Bangladesh 99th 146th 125th 129th 7th
(.689) (.312) (.940) (.962) (.543)
Nepal 117th 137th 130th (82nd 51st
(.664) (.475) (.923) (.969) (.288)
Cambodia 102nd 59th 108th 38th 127th
(.685) (.717) (.968) (.978) (.080)
Source: Global Gender Gap Index, World Economic Forum.

15.3 Poor Outcomes in Labour Market

At the national level, the Female Labour Force Participation Rate (FLFPR) in Bangladesh has been
increasing, however, the worry lies in declining labour force participation in urban areas. This
may be attributed to the lower intake of the RMG sector and also to ‘out of employment’ from
RMG after COVID-19. There are also issues related to the lack of institutional service provisions
for the substitution of domestic services in urban areas.

Figure 15.1 Female labour force participation in Bangladesh from 2010 to 2023
60
51.5
50
37.6 38.6
40 36.4 33.4
42.68
36 33.5 35.66 36.3
30
34.5 32.9
30.8 31
20
23.68
10

0
2008 2010 2012 2014 2016 2018 2020 2022 2024
Total Percentage Rural Urban

A rise in female employment in agriculture: Is it by choice or compulsion?

Participation of women in agriculture is rising rapidly in Bangladesh. More women than the global
average rate are now involved in the country’s agriculture sector. 74.1 per cent of total female
employment is in agriculture. This increase in women’s employment in the agriculture sector is
characterised by low skill and low return.

Women in NEET (Not in Education, Employment and Training) are still very high

Young women aged 15-24 are significantly more likely than men not to be in Education,
Employment or Training (NEET). Although the share of NEET among young women aged 15-24
has decreased from 60.7 per cent to 52.87 per cent between 2016 and 2022 (HIES, 2022), this
proportion is still far above that of young men (12.28 per cent in 2022). Among the NEET youths
(15-29), 65.5% are females and the rest 34.5% are males. The overrepresentation of young
women in NEET can be partially driven by societal expectations and traditional gender roles that
often place a more significant burden on women to fulfill caregiving and household

White Paper on State of the Bangladesh Economy 252

responsibilities. The gender gap can also be explained by unequal access to education and skills
formation, earning differentials, and pressure to prioritise family formation over other activities.

Reaping Demographic Dividend - Not the Case for Women and Girls

It is interesting to note that the age band of 15-29 constitutes the largest proportion (50.28% in
2022) of female employment. A large share is in agriculture. The country could not reap the
demographic dividend for females as much as the male counterpart.

Figure 15.2: Unemployment rate by education level and sex

20 18.88

15

10 9.02

5 3.59
1.49 1.61 2.06
2.22
0
None Primary Secondary Higher Tertiary Others Total
Secondary
Male Female Total

Source: Labour Force Surveys, BBS.

Figure 15.2 reflects the distribution of the unemployed in terms of their education level. The
unemployment rate is higher among literate people in both urban and rural areas, which
conforms to the nature of informality in our employment. Intriguingly,
- the highest unemployment rate rests with women having tertiary education (18.88% of
unemployed women are having tertiary education) that too in urban areas.
- Of women who have received tertiary education, in urban areas 40.1% of them are
unemployed (28.9% of women living in rural areas with tertiary education are
unemployed).

Vulnerability and domesticity of employment

Despite a push in LFPR by women, it is confounding to note that the performance on the
employment front has been less impressive in that the overwhelming majority of the employed
women remain in the category of “vulnerable employment329” (80.8% in 2022), and are still found
in sectors and activities characterised by low productivity and returns. A negligible proportion of
paid female employment (only 3% of all employed women) is in employment where they get an
employer contribution to any pension or retirement fund.330

At present middle-class and rich families usually do not hesitate to invest in their daughters’
education, though 33.4% of girls from the richest families get married before 18 years of age
(about 50% for middle-class girls). It is assumed that after COVID-19 there might be reversal
migration to rural areas due to joblessness from RMG and other sectors. The declining LFPR in

329 BBS, 2022; Either contributing family labour or own account worker; Own-account workers Persons,
who hold self-employment jobs and do not engage ‘employees’ on a continuous basis. Contributing family
workers Persons who hold self-employment jobs in an establishment operated by a related person, with a
too limited degree of involvement in its operation to be considered a partner.
330 BBS, 2022; only 3% employed women in rural areas have employer’s contribution to

pension/retirement funds

White Paper on State of the Bangladesh Economy 253

urban areas and high unemployment rate with tertiary education may find its roots in road safety
and security issues, inadequate public transportation and institutional caregiving arrangements
for the children and elderly, violence in the public and office sphere, and above all the distance
from law enforcement authorities and judiciary.

The social norms of being ‘ideal woman’ leave her no choice but to quit her job outside home/ or
not to take any job outside home. However, often women are entrapped by a self-consoling public
statement of making a ‘Choice’ for being a homemaker over a Professional career. In Bangladesh,
housework/family work was the prime reason (64.5 per cent) for not looking for a job331.

Middle-class urban families have come up with a ‘Housewife PLUS’ model for women, while
society accepts that education makes them worthy of being a ‘good wife’ and a ‘good mother’. At
times, it becomes difficult to realise how often societal norms disguise themselves as personal
choices, whether it’s in career decisions or the subtle influences of traditional customs.
Traditional norms heavily influence familial decisions, leaving women with a limited array of
options cleverly disguised as personal agency.

Gender-biased technological change in RMG

The emergence of the Ready-Made Garment industries (RMG) triggered a social change in
Bangladesh by generating considerable employment for women outside the family unit. The
industry tends to rely on low-paid female labour to compete and maximise profits in a highly
competitive global market with no exception in Bangladesh. The RMG sector went through a
massive restructuring, particularly after the Rana Plaza accident. The sector has become more
capital intensive and the new technology is argued to replace female workers more than males.
The Survey of Manufacturing Industry (SMI) conducted by BBS shows that in 2012, there were
1.81 females per male in the RMG sector. But this figure has decreased to 1.44 in 2022.

Risky Female Migration: Stories of deprivation

Figure 15.3 reveals that Middle Eastern countries, especially Saudi Arabia, Jordan, UAE, Oman,
and Lebanon are the most popular destinations for international female labour migration. This
migration is characterised by low-wage low-skill jobs.

Figure 15.3 Number of Female International Labour Migrants

Malaysia 1995
Bahrain 3114
Kwait 6587
UK 7149
Mauritus 20038
Lebanon 108588
Jordan 204951
Qatar 40578
Oman 124238
UAE 132708
Saudi Arabia 556736

0 100000 200000 300000 400000 500000 600000

Source: BMET.

331 BBS, 2022

White Paper on State of the Bangladesh Economy 254

A study conducted by UN Women emphasises the contribution of women beyond remittances and
explains that the social capital of women migrants, in terms of ideas, skills, attitudes, knowledge,
contacts and networks, can further contribute to socio-economic development, human rights,
gender equality and women’s empowerment in their countries of origin (UN Women 2013).

A study by BRAC332 revealed that about half a million international labour migrants came back to
Bangladesh during/ just after the COVID-19 episode, among them 50,000 are women. One in
every three returnees of female labour was facing the deterioration of economic conditions ever
more than before. Among these returnees, 52% were forced to work, 7% experienced sexual
harassment at the destination countries, and 38% encountered physical violence.

15.4 Disparity in Education: Can’t See the Elephant

Bangladesh is globally acclaimed for her hard-earned remarkable progress in bringing children
to school and has achieved gender parity in primary school enrolment, while the recent progress
is especially pronounced at the secondary level. Apart from the incremental trend in gross
enrolment of female students in secondary schools, the completion rate also increased (about
54%, before COVID-19).

This noteworthy progress has been supported by a number of interventions implemented by

governmental and nongovernmental organisations (Ahmed et al, 2007). In particular,
interventions targeted at promoting girls’ education have helped eliminate or reverse the gender
gap in education in Bangladesh. At the secondary level, the Female Stipend Programs (FSPs)—
Conditional Cash Transfer Programs (CCT) that provide girls with a stipend and tuition fee
waiver—have been especially credited for narrowing the gender gap in enrolment (Ahmed et al.,
2007, Chowdhury et al., 2002, Shafiq, 2009). The FSPs are also found to increase the years of
schooling for younger siblings through positive spillovers (Begum et al., 2017), as well as to delay
marriage and childbearing (Hahn et al., 2018).

Educational attainment shows gender disparities, in higher education and STEM education. While
the secondary school enrolment of female students is relatively high at 77.34%, tertiary
enrolment drops to 20.84%, indicating barriers to advanced education for women. This gap is
further illustrated by a low percentage of female graduates in STEM fields (20.6%) compared to
their male counterparts (79.4%).

Low completion of basic education, less than efficient participation at the higher level of
education, concerning learning outcomes and market relevance of education, the existence of
vulnerable population pockets, child labour, early marriage and increased safety concerns of
female education and participation in the labour market impede actualisation of benefits of hard-
earned gender parity in enrolment in the basic education levels.

Higher enrolment of women at the basic education level, or gender disparity in favour of girls,
does not necessarily mean that they can successfully transform this initial advantage into creating
positive changes in their future lives and society.

In devising policies and designing programs to boost student enrolment and retention, GoB has
made efforts to address the prime challenges historically faced by female students. National
policy has, however, not sufficiently addressed emerging concerns, nor thoroughly addressed

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how the interaction between socio-economic and geo-political dynamics may eventually shape
the parents' decision of sending their children to school. For instance, even in the 8th FYP, early
marriage has been considered a social problem, while ignoring the fact that decisions related to
early marriage also incorporate a "difficult cost-benefit trade-off to parents especially those
under resource constraints...in the marriage market". Similarly, whereas poverty is indeed an
important factor in preventing the enrolment of female students in secondary education, it alone
cannot explain why despite being poor some parents still send their children to schools whereas
financial assistance often fails to prevent drop-out.

It has been of grave concern whether the gender gap in the education system has widened
because of the closure of educational institutions caused by the protracted COVID outbreak. The
report that the Bangladesh Bureau of Educational Information and Statistics has published shows
that the high school graduation rate has declined while the drop-out rate has increased
among girl children. The findings corroborate what many international and national
organisations predicted during the early days of the COVID-19 outbreak.

15.5 Disparity in Health Outcomes: Both Physical and Mental

In Bangladesh, the proportion of women aged 15–19 who have begun childbearing (including
women who have had a live birth or are pregnant with their first child and excluding those who
have had only a pregnancy loss) declined from 30% in 2011 and 28% in 2017–18 to 24% in 2022.
Still, one in four (24%) women aged 15–19 have ever been pregnant, and almost one in five (18%)
have had a live birth (BDHS, 2022). The country has made strides in improving maternal health
(reduced maternal mortality to 123 in 100000 live births) (NIPORT et al. 2013333). 47 per cent of
women in the lowest wealth quintile can access assistance from a trained health professional
during delivery, as compared with 10 per cent in 2011. Among women in the highest wealth
quintile, health professional care during deliveries increased from 61% in 2011 to 87per cent in
2022. Despite such improvement in the Maternal Mortality Ratio (MMR), Bangladesh lags behind
most of the South Asian countries, and the scenario is miles behind a number of South East Asian
countries (for example: Vietnam, and Malaysia).

About every pregnant woman in four from the lowest asset quantile does not have access to any
trained antenatal care from a trained health professional (BDHS, 2022334). Poor maternal
nutrition, which is highly prevalent in Bangladesh, especially among adolescent girls, significantly
contributes to an intergenerational cycle of malnutrition and poverty.

15.6 Women’s Financial Inclusion: Still a Far Cry

Bangladesh has been making progress in reducing the gender gap in financial inclusion. Men and
women manage their financial transactions for varied purposes through Banks, Financial
companies, Micro Finance Institutions (MFIs), and Mobile Financial Service Providers (MFSP).
Banks offer a broad range of financial services and women own 37.5% of the total no of deposit
accounts. MFIs handle microcredit loans and micro-enterprise loans where 33.9% (about one-
third) of the deposit accounts are owned by women. An overwhelming majority of MFI deposit
accounts are owned by women, as they are the primary target for microcredit loan disbursement.
MFSPs are gaining popularity, especially since the outbreak of COVID-19, and 41.7% of MFSP
deposit accounts are owned by women. Women’s usage of MFSPs is largely limited to receiving
money (remittance/ salary), sending money, receiving social safety net (SSN) benefits, and paying
bills (electricity and other utilities).

333 National Institute of Population Research and Training (NIPORT), Mitra and Associates, and ICF
International. 2013. Bangladesh Demographic and Health Survey 2011. Dhaka, Bangladesh, and
Calverton, Maryland: NIPORT, Mitra and Associates, and ICF International.
334 Bangladesh DHS, 2022

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The World Bank’s Findex database reveals that the gender gap in financial inclusion is reduced
by 10% in 2021 compared to that in 2017 (Figure 15.4). Interestingly this trend reflects the
upsurge of adoption of MFSPs, especially during COVID (receiving salary/ SSN benefits/ paying
bills) and also owing to the fact that more than 90% of accounts with MFIs are owned by women.
In cases of loan accounts with different service providers, the gender gap is higher than that for
deposit accounts. The highest no of deposit accounts is with MFSPs (224 million accounts)
followed by Banks (142.3 million deposit accounts).

Figure 15.4 Gender Gap in Account Ownership in Bangladesh- Global Findex Database

A study on women’s financial inclusion involving 7,500 individuals from 3300 Households across
56 districts in Bangladesh has been conducted335. The study reveals that the gender gap in
financial inclusion has been reduced to 6.96%. In the case of banks, the gender gap was reduced
to 17.28% (48% of accounts are with males and 30.47% are for women). The gender gap remains
at 35% in MFSPs. MFIs have a gender gap in favour of women (Figure 15.5).

Social norms having mobility restrictions, lack of asset ownership by women to provide as
collateral, lack of awareness and financial literacy are the drivers towards persisting gender gap
in financial inclusion of women. The digital divide in favour of men also pushes women to use a
mobile device of their husband/ father/ any male member of the family who is most likely to own
a mobile phone. In some cases, women become passive users of financial services. There are
ample instances where one can find that the wife’s/ mother’s wages/loans are being used by the
husband/ father.

Figure 15.5 Gender gap in financial Inclusion in Bangladesh, 2024

140%
120%
100% 47%
80%
60% 30.47%
40% 83%
48% 56%
20%
0%
Banks MFIs MFSP

Male Female

Source: Internal communication with Dr Leela Rashid.

335 Personal communication with Dr. Lila Rashid, Ex Director, Bangladesh Bank who is leading the study.

White Paper on State of the Bangladesh Economy 257

15.7 Child Marriage: Inadequate Efforts to Address Girls’ Early Marriage

Bangladesh has one of the highest rates of child marriage in the world. Progress has been made
in reducing the percentage of women aged 20-24 who are married before age 18, as observed in
the decline from 65% in 2011 to 50 % in 2022. However, over 63% of girls under 18 were married
in the same year, making a significant 10% rise from 2021.

Still more than one in four (27%) girls marry by age 16. It has been reported that 8.2% of girls
under 15 were married in 2023, a rise from 6.5% in the previous year. Early marriage is more
common in rural areas than in urban areas.

Child Marriage Restraint Act, 2017, and Child Marriage Restraint Rule (2018) allowed to lower
the minimum legal age of marriage of girls to 16, despite raising concerns from different walks of
the population, especially from civil society organisations. In Girl’s Summit 2014 held in London,
the ex-Prime Minister made a commitment to end the child marriage of girls below the age of 15
years by 2041 The Government of Bangladesh raised concerns in favour of that Act stating that
pregnant adolescent girls particularly in rural areas would be ostracised by the communities if
they could not marry. Allowing marriage in ‘special cases’, such as pregnancy was the opted way
out from the then ruling government. Rather, a focus could have been to improve the socio-
economic conditions in favour of girls to avoid child marriage. Research and studies show that
child marriage goes hand in hand with dropping out of school, losing out on job opportunities and
experiencing more prevalence of domestic violence.

In an open letter to the then Prime Minister of Bangladesh, the ex-Secretary General of the United
Nations (UN) Mr Kofi Annan warned of the dangers of lowering the minimum age for girls, their
communities and the whole country336. No noteworthy information/ document has been
produced to assess the impact of this Act on child marriage, drop out of schools and other social
outcomes.

15.8 Gender-based Violence in Bangladesh

In December 1993, the Declaration on the Elimination of Violence against Women recognised that
violence against women violates women's rights and fundamental freedoms and called on states
and the international community to work toward the eradication of violence against women. That
same year, the Vienna Declaration and Programme of Action recognised that the elimination of
violence against women in public and private life is a human rights obligation.

Framing GBV against girls and women as a human rights violation implies an important
conceptual shift. It means recognizing that women are not exposed to violence by accident, or
because of an in-born vulnerability. Instead, violence is the result of structural, deep-rooted
discrimination which the state has an obligation to address.

The GOB also recognises GBV as a human rights violation. In Bangladesh, the Violation Against
Women and Girls (VAWG) rates remain high despite progress on normative and policy
frameworks. Bangladesh has adopted several laws, policies, and plans to address VAWG,
including a National Action Plan to Prevent Violence Against Women and Children (2018-2030)
and a National Action Plan to End Child Marriage (2018-2030). A number of statistics can be
representative of the status of VAWG in Bangladesh

- 72% of ever-married women have experienced some form of violence at least once in
their lifetime

Accessed in November, 2024 at https://www.girlsnotbrides.es/articulos/lowering-marriage-age-step-

336

wrong-direction-kofi-annan-warns-bangladesh/

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 - 2% of women took legal action for partner physical or sexual violence
- 25% of women agree that a husband is allowed in hitting/ beating his wife in at least one
of the following circumstances: she goes without telling him, she neglects the children,
she argues with him, she refuses sex with him, and she burns the food.

In the era of cyberspace, violence has taken root and form in a number of ways which are often
quite challenging in terms of technology-supported tracking, supportive rules and policies, and
inadequate technical know-how to manage.

Bangladesh has demonstrated its commitment to gender equality by formulating and amending
discriminatory provisions in legislation. Despite that, some laws and policies are not yet in full
conformity with CEDAW. Call for the removal of all discriminatory provisions in laws and policies,
and their alignment with international conventions ratified, including withdrawing reservations
on CEDAW Article 2 and 16 (1c), enacting the draft sexual harassment prevention and protection
act (2022) for workplaces and educational institutions, redefining the concept of ‘family
relationship’ in the Domestic Violence Act (2010) and amending the definition of rape in laws
addressing gender-based violence.

A culture of impunity had been established through a nexus of rich elites, businessmen and
politicians. Law enforcement authorities seem to be helpless and often allegedly became a part of
the nexus. A number of talked about abduction, murder and rape cases have never been promised
justice, are cited below (these are very few, almost negligible, among many others),

BOX 15.1: A Few Examples

• Tonu, a student of Cumilla Victoria Government College and a theatre activist, was raped and
murdered inside the highly restricted Cumilla Cantonment on March 20, 2016. Law enforcement
agencies have failed to make a single arrest to date, despite four different agencies investigating
the case. They have even failed to submit a probe report (about 48 dates have passed by in the
Cumilla Sadar court).
• Munia Murder (alleged) case in April 2021. Police Bureau of Investigation (PBI) submitted a probe
report clearing all eight accused of charges in a case filed over the rape and murder of Munia. The
accused are very influential in the business and political sphere. In October 2024, the High Court
accepted an appeal for re-investigation against the PBI’s report that allegedly exonerated one main
accused.
• Kalpona Chakma, the organising secretary of the Hill Women's Federation, was abducted from her
home in the remote of Rangamati in June 1996. 16 years after the incident, the AL Government re-
opened the case for court proceedings, general people’s hopes are once again being dashed against
the bedrock of impunity that seems to affect our political system as well as inflict our democratic
institutions with a quiet and sickening silence. A Rangamati court accepted the final report in the
much-talked-about Kalpana Chakma abduction case, after around 28 years of the incident in April
2024. The court also rejected a Naraji (no-confidence) petition filed by the victim's family
challenging the police report, submitted in September 2016. The police failed to identify any
abductors.
• Justice remains a far cry for the families of slain journalist couple Sagar Sarwar and Meherun
Runi 12 years on. Despite the court repeatedly setting dates for the investigation officer to submit
the probe report in the sensational double-murder case, each instance ends in disappointment as
the officer fails to meet the deadline. This frustrating cycle has been going on for the last 12 years,
with the investigators seeking a staggering 107-time extension to submit the probe report.

The cases in Box 15.1 shed light on many of the social problems including the culture of violence,
poor rule of law, gender inequality, victim shaming, a culture of impunity, legal loopholes,
governance failure, and socio-cultural prejudices and stigmas from individual to social domain.
This violence is a result of the lawlessness in society that we continue to nurture, a society
characterised largely by unaccountable law enforcers and a justice dispensation system that has
many loopholes.

White Paper on State of the Bangladesh Economy 259

It is to be mentioned that the lawlessness and lack of accountability have been pervasive in
Bangladesh for every aspect, not just to address GBV. However, as GBV and VAWG find their roots
in socio-economic inequality of power (fuelled and patronised by the political system), whoever
will form the next government, there will not be much hope from political parties to address the
issues unless the collective agencies of citizenship work.

15.9 Institutions and Laws: Are They Enough for Protection?

Bangladesh is a signatory to the Convention on the Elimination of All Forms of Discrimination

against Women (CEDAW) and the Beijing Platform of Action. However, reservations on Articles 2
and 16.1(c) of CEDAW are still in existence337. The core reason behind such reservations provided
by the Government is ‘conflicted with Sharia law based on Holy Quran and Sunnah.’ Moreover,
another reason cited by the Government was the potential movements by the Islamic
fundamentalist groups against the withdrawal of the reservations. Therefore, cautious steps are
being taken so as not to jeopardise the application of the principles of CEDAW.

The constitution of the People’s Republic of Bangladesh has clearly spelt out that ‘the state shall
not discriminate against any citizen on grounds only of religion, race, caste, sex or place of birth’338
and ‘women shall have equal rights in all spheres of the state and the public life’339 considering
these as fundamental rights of the citizens.

Bangladesh has been able to reduce the gender gap; was ranked number seven in terms of
political empowerment as revealed through the Gender Gap Index (WEF, 2023, as the country
was ruled by two women as the head of the executive body of the state for the last 34 years. The
Constitution of Bangladesh, the legal environment, and the National Action Plan on Violence
against Women (2013-2025) were the pillars to ensure women's rights and ending violence
against women and girls.

Despite constitutional supremacy over any other conflicting laws, and the provisioning of
women’s equal rights in the constitution of Bangladesh, the exercise of the rights of women
remains challenging, especially for women living in remote areas and marginalised communities.
Women and girls with disabilities are deprived of their rights and due access to justice. The
concerned Act does not mention anything about concerns of persons with disabilities.

Despite having a directive from the lower court to complete the trial for a case of sexual violence
within 180 days (from the date of the case file), only one case (with a charge of murder and rape
of a woman in Madhupur) has been solved in 172 days.

The directives on sexual harassment have not been turned into law after more than a decadal of
struggles by women activists and Lawyers. Some educational institutions have set up anti-sexual
harassment cells at their workplace, however, these are not functional in many instances and
often remain as a political instrument. The consultation with women groups and practitioners

337 Article 2 is seen as groundwork of the convention which is central to the objects and as a consequence
its importance cannot be mistreated. Article 2 mandates that State parties ratifies the convention by
declaring their intent to enshrine gender equality into their domestic legislation including Constitution,
repeal all discriminatory provisions in their laws, enact new provisions to guard women against
discrimination, take legislative and administrative measures to prohibit discrimination along with legal
protection for women’s right, refrain from taking discriminatory measures and take policy measures
abolishing discrimination against women. Article 16.1(c) provides ‘the same rights and responsibilities
during marriage and at its dissolution.’
338 Article 28(1), Constitution of the peoples’ Republic of Bangladesh
339 Article 28(2), Constitution of the peoples’ Republic of Bangladesh

White Paper on State of the Bangladesh Economy 260

revealed that the Technical and Vocational Institutions do not uphold the anti-sexual harassment
directives, and a large number of related complaints are there.

There have been ample instances where the female wing of the then ruling party’s students’ front
used to abuse university/ college female students on their respective campuses340.

15.10 Gender Budget

Bangladesh has been undertaking gender budgeting since 2009. Initially, the report covered only
four ministries, but over time, it has been expanded to all 44 ministries and 62 ministries and
divisions of the government. Gender Responsive Budgeting (GRB) is an important strategy for
addressing gender disparities. The purpose of gender budgeting as an instrument is to ensure
that gender mainstreaming is integrated into the budgetary system and process and that the
budget allocations at all levels are decided with a gender perspective in mind (Khatun, Behtarin,
Feroz, & Nawrin, 2022341).

In the recent past, the Recurrent, Capital, Gender and Poverty (RCGP) model was developed to
track gender allocation in the total budget, though it was not previously integrated with the
iBAS++ system. But for FY 2024-25, a different methodology was developed for the GBR, including
tracking gender financing among different Ministries and Divisions.

The Finance Division developed a separate finance module in iBAS++ using the ‘Gender Finance
Tracking’ (GFT) Model, in an expectation to generate trustworthy results. Such an initiative has
been appreciated by the Professionals who have been advocating for carrying out necessary
changes in the RCGP Model to integrate result-based finance tracking. However, the initiative still
needs to be assessed. Like in previous years, the formulation of GRB still relies on the assumed
weightage for gender-relevant allocation as reported in Table 15.2.

Table 15.2 Process of assigning weightage as gender-relevant allocation

Gender relevance in a project % of Allocation for the Project
Fully Relevant 100%
Strongly Relevant 67-99%
Moderately Relevant 34-66%
Not Relevant 0%

Because of the paucity of sex-disaggregated data, the above exercise of putting a gender-relevant
weight against allocation might be ‘subjective’, which allows significant technical flaws in
marking gender-relevant allocation. The gender budget allocation, despite its promises, has
remained a regular exercise by the Ministries where Tokenism is the main driver to assess the
relevant weighted allocation. Women groups are quite vocal about tracking the actual
expenditure, however, there has been no such initiative to address the gap from the Finance
division or IMED of the Planning Commission.

The size of the allocation of the gender budget in FY 2025 was 34.11% of the total national budget
and 4.6% of the GDP (Figure 15.6). Though increased in nominal terms, in FY2025 the gender

340

https://thotkata.com/2023/02/25/%e0%a6%aa%e0%a6%be%e0%a6%af%e0%a6%bc%e0%a6%9c%
e0%a6%be%e0%a6%ae%e0%a6%be-%e0%a6%a8%e0%a6%be-
%e0%a6%96%e0%a7%81%e0%a6%b2%e0%a6%b2%e0%a7%87-
%e0%a6%9c%e0%a6%be%e0%a6%ae%e0%a6%be-%e0%a6%96/
341 Khatun,F. Behtarin,J., Feroz,K., & Nawrin,N. (2022). Budget Framework analysis on Challenging Fear of

violence. Plan International, Bangladesh

White Paper on State of the Bangladesh Economy 261

budget as a percentage of GDP decreased from 5.19% in FY2024 to 4.86% in FY2025. It is quite
common that the funds allocated for the gender budget of different ministries and Departments
are cut while the revised budget is prepared. The priorities towards women in the development
budget must not be curtailed when the budget gets revised so that there could be focused
activities and actual spending on gender-relevant development budget.

Figure 15.6 Trend of Proposed Gender Budget, FY2017 to FY2025

40
32.88 33.74 34.09 34.11
35 30.82 30.98
27.98 29.48
30 27.25
25
Percent

20
15
10 5.4 5.5 6 5.74 5.14 5.19
4.73 5.04 4.86
5
0
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25
Gender as percentage of GDP Gender as percentage of Budget

Source: Finance Division, MoF.

15.11 Diversity of Gender Identity and Expression

On 11th November 2013 Bangladeshi Cabinet passed a law which declared hijra, a local term to
describe people who are neither man or women, as separate gender by following the other
countries of South East Asia. Both Bangladesh and Pakistan acknowledged this gender as ‘other’
or ‘third’ respectively. In 2012, Supreme Court of Pakistan had declared people with this sexual
identity as ‘third gender. That was a result of a long legal battle to include the third gender identity
option on national identity cards. Nepal and India have given legal recognition to this gender
before Pakistan. Pakistani Supreme Court has acknowledged ‘third gender’ on human rights
ground thus the decision has not been given based on Sharia law. It is also true for Bangladesh.
Bangladesh government’s decision to acknowledge ‘other’ gender is based on universal human
rights principles

15.12 Conclusion

The strange trend of women in the state administration of Bangladesh being addressed as ‘Sir’
has emerged as gender mangling during the last regime of the government. The psychology
behind this salutation and enforcing it across the bureaucracy is reflective of the past regime's
approach to development including gender. This symbolic and highly visible optics of quick wins
created a narrative of illusion and smokes and mirrors that could be used to deflect criticism and
avoid real accountability for real delivery.

The analysis in the chapter leads us to the following five major observations:

First, despite progress in some indicators like maternal health and primary education gender
parity, deep-rooted structural challenges such as labour market disparities, high rates of child
marriage, and vulnerabilities in financial inclusion continue to hinder gender equality.

Second, the selective emphasis on favourable global indices, such as Bangladesh's ranking in
women's political empowerment, masks significant underperformance in economic

White Paper on State of the Bangladesh Economy 262

participation, educational attainment, and health outcomes, thereby providing an incomplete
narrative of progress.

Third, existing policies and frameworks, including gender budgeting and laws addressing gender-
based violence, are often inadequately implemented, suffer from technical and systemic flaws,
and fail to reach marginalised groups, particularly in remote areas.

Fourth, prevailing societal norms, traditional gender roles, and inadequate economic
opportunities perpetuate the marginalisation of women, especially in employment sectors like
agriculture and RMG, which remain characterised by low skill and low returns.

Finally, addressing gender disparities requires integrated approaches, including effective

implementation of gender-responsive budgeting, robust legal reforms, addressing systemic
impunity, and fostering collective agency for sustained advocacy and accountability.

White Paper on State of the Bangladesh Economy 263

ANNEX I
A number of Index based results to assess advancement towards gender equity
I.NDEX PROCESS RESULT
Global Social Norms GSNI reveals that the patriarchal bias in Almost everybody (99.37%) has at
Index 2023342 Bangladesh is pervasive. least 1 bias.
(UNDP)
Women having the same rights as men is About 92 individuals have at least 2
The GSNI draws essential for democracy biases.
upon data from 91 Men make better political leaders than
countries. The GSNI women do For education, people in
is calculated using The university is more important for Bangladesh show a relatively
data from the World men than women do higher positive attitude (proxy:
Values Survey Men should have more rights to jobs University is more important for
(WVS), which than women do men than women do). In cases of
employs Men make better business executives three other dimensions (political,
questionnaires that than women do economic, and personal integrity),
assess social, Proxy for intimate partner violence Bangladesh exhibits much higher
political, economic Proxy for reproductive rights patriarchal biases.
and cultural values
and norms.
Social Institution Root Causes: Discriminatory legal Ranks HIGH, demonstrating High
and Gender Index, frameworks, unequal power dynamics, gender discrimination in legal
2023 (OECD) restrictive masculinities, biases & frameworks and power dynamics.
stereotypes. The overall score for Bangladesh is
Outcomes: Gender gaps in STEM, limited lower than the regional average.
agency, GBV, gender pay and labour Discrimination in the family is
gaps, and lack of political representation. notably HIGH.
Women, Business Women, Business and the Law 1.0
and the Law Index updates its index of eight indicators BD scores 49.4 out of 100.
2023 (World Bank) structured around women’s interactions The overall score for Bd is lower
with the law as they move through their than the regional average (63.7).
lives and careers: Mobility, Workplace,
Pay, Marriage, Parenthood,
Entrepreneurship, Assets, and Pension.

Women, Business and the Law 2.0

presents a new approach to measure the
implementation gap between laws— de
jure—and how they function in
practice—de facto. It analyses legal
frameworks, supportive frameworks,
and expert opinions on the status of
women’s rights. In doing so, Women,
Business and the Law 2.0 introduces two
new indicators—Safety and Childcare—
and revises the ongoing indicators.

342UNDP, 2023; Coverage of GSNI: it accounts the share of people with patriarchal bias in their thinking
and practices (on 4 dimensions of political, educational, economic, physical integrity) for 80 countries and
territories (accounting for 85 percent of the world population)

White Paper on State of the Bangladesh Economy 264

 Gender Gap Index, Ranked HIGH, demonstrating higher Among 4 components (weighed
2024 (World achievement in lessening gender gap. average of these scores) on
Economic Forum) Education (122nd), Economic
The report weighs aspects like women's participation (139th), Health and
economic participation (including the survival (126th) and Political
gender gaps in income, employment and empowerment (7th),
leadership roles), educational attainment
(with measures like literacy rates and significant higher rank achieved in
educational enrolment), health and political participation (7th at the
survival (such as life expectancy) and global level) which over weighted
political empowerment (female the much below average
representation in parliament, ministerial performances in other 3
positions and years with a male or female components.
head of state).

White Paper on State of the Bangladesh Economy 265

Chapter XVI. Employability and Labour Market Dynamics: The Ticking Time
Bomb*

16.1 Introduction

The labour market of the country has been struggling with creating new decent jobs, enhancing
employability of the labour force and reducing mismatches in the labour market. Against this
backdrop, the primary objective of this chapter is to document some stylised facts about the
labour market dynamics, and to explore the extent and challenges of employability and
mismatches of the labour force, with greater emphasis on the youth and the female. This chapter
also briefly discusses a few aspects of labour market governance. Data issues of the labour market
have also been addressed, by identifying a few key areas for improvement.

The analysis is very descriptive in nature, relying mostly on secondary data such as LFS, SMI,
BANBEIS, and the existing literature. The evidences from public data are triangulated by various
surveys conducted by local research organisations such as BIDS and BIGD. A few consultation
workshops were conducted with youths, graduates, TVET and BBS.

16.2 Major Labour Market Trends: Some Arithmetic

The country has experienced a substantial increase in the size of labour force. The country
saw a substantial increase in the size of the labour force, both in number and in share of total
working-age population over the last couple of decades. The size of the labour force was about 73
million in 2022, registering about a 29 per cent increase from 2010. About one-third of the labour
force was female and two-thirds male in 2022, and roughly one-fourth in urban areas and three-
fourth in rural areas (Table 16.1).

Table 16.1: Labour force by sex and rural-urban (million)

Indicator 2010 2022
Labour force 56.7 73.05
Male 39.5 (69.7) 47.27 (64.7)
Female 17.2 (30.3) 25.78 (35.3)
Urban 13.3 (23.5) 18.36 (25.1)
Rural 43.4 (76.5) 54.69 (74.9)
Note: parentheses indicate percentage of each classification by year
Source: Labour Force Surveys, Bangladesh Bureau of Statistics.

The growth of labour force participation has been low. Overall labour force participation rate
(employment rate) has not increased much; labour force participation rate was 59 per cent in
2010, which increased to 61 in 2022 (Table 16.2).

*The chapter has been prepared by Dr Kazi Iqbal, Research Director, Bangladesh Institute of Development
Studies (BIDS) and Dr Imran Matin, Executive Director, BRAC Institute of Governance and Development
(BIGD).
Research support received from Mr Kazi Zubair Hossain, Research Associate (temporary), BIDS is duly
acknowledged.
The paper benefitted from discussions with Dr Binayak Sen, Director General, Bangladesh Institute of
Development Studies (BIDS); Dr Fahad Khalil, Professor of Economics, University of Washington; Dr Md.
Yunus, Research Director, BIDS; and participants of the focus group discussion - students of BIDS’ MDE
program, researchers of BIGD, local youths of Tala sub-districts of Satkhira organised by BIGD Math Kendra.

White Paper on State of the Bangladesh Economy 266

Table 16.2: Labour Force Participation Rates by Gender, 1999–2022 (%)
Year Labour force participation rate (%), age 15 and above
Female Male All
1999-2000 23.9 84.0 54.9
2002-2003 26.1 87.4 57.3
2006 29.2 86.8 58.5
2010 36.0 82.5 59.3
2013 33.5 81.6 57.1
2016-17 36.3 80.5 58.2
2022 42.8 80.0 61.2
Source: Labour Force Surveys, Bangladesh Bureau of Statistics.

Female labour force participation has increased substantially, though the recent surge is
primarily due to self-employment in agriculture. While female labour force participation
witnessed a secular increase over the last few decades, from 24 per cent in 2000 to 36 per cent in
2010 to 42.8 per cent in 2022, the male’s labour force participation has remained more or less
stagnate at above 80 per cent (Table 16.2). There are indications of increasing feminisation of
agriculture; among the females, 46 per cent were engaged in agriculture in 2000, and this share
has increased significantly over the years to 74 per cent in 2022. However, while there is no
change in definition, this significant rise raises questions about the quality of data.

The manufacturing sector has absorbed labour more from agriculture than the service
sector. About a half of the labour force (51%) was employed in agriculture in 2000 and of the
remaining half, about 36 per cent was in service and 12 per cent in manufacturing (Table 16.3).
About a 5 percentage point drop in agriculture’s share (45%) has been matched by an increase of
the same magnitude in manufacturing (17%) in 2022.

Table 16.3: Sector Composition of Employment by Gender, 1999–2022 (% of column total)

Sector 1999-2000 2010 2022
Total Male Female T M F T M F
Agriculture 50.8 51.9 46.2 47.6 40.2 64.8 45.4 29.7 74.1
Industry 12.4 10.7 18.9 17.3 19.0 13.2 17.0 21.5 8.7
Service 36.1 36.7 33.7 35.4 41.1 21.9 37.6 48.8 17.2
Source: Labour Force Surveys, Bangladesh Bureau of Statistics.

Most of the jobs are in the informal sector. About 85 per cent of the employment is created in
informal sector and this percentage is about 88 per cent in rural areas. The transition from
informal to formal has been very sluggish, the share of informal jobs has been reduced by only
2.6 percentage points over the last 12 years since 2010 (Table 16.4).

Table 16.4: Formal and informal jobs (million)

Indicator 2010 2022
Employed population 54.1 70.5
Formal 6.8 (12.6) 10.7 (15.2)
Informal 47.3 (87.4) 59.8 (84.8)
Note: parentheses indicate column percentage
Source: Labour Force Surveys, Bangladesh Bureau of Statistics.

Self-employment dominates, though the share of employees has increased markedly.

About half of the labour force is self-employed, registering about a 10 percentage point increase
from 2010. This increase in the share of self-employment is driven by females’ greater labour
force participation in agriculture. The share of employees (jobs with monthly salary) increased
from about 15 per cent in 2010 to about 38 per cent in 2022 (Table 16.5).

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 Table 16.5: Structure of Employment by Status, 1999–2022 (% of total employment)
Status 1999- 2000 2002-03 2005-06 2010 2013 2016-17 2022
Self-Employed/Own- 35.1 44.8 41.9 40.8 40.7 44.3 50.6
Account Workers
Male 49.4 50.6 50.0 47.5 52.2 46.5 41.3
Female 10.8 24.5 15.9 25.1 12.3 39.3 68.3
Employee 12.6 13.7 13.9 14.6 23.2 39.1 38.1
Male 15.1 13.8 14.5 17.0 22.2 42.6 49.1
Female 8.2 13.4 11.7 8.9 25.5 31.2 17.9
Contributing Family 6.8
Helper 33.8 18.4 21.7 21.8 18.2 11.5
Male 10.2 9.9 9.7 7.1 5.1 4.0 3.7
Female 73.2 48.0 60.1 56.3 50.1 28.4 12.5
Day Labourers 18.3 20.0 18.2 19.7 15.5
Male 25.0 22.9 21.9 25.8 18.9
Female 7.8 9.6 6.5 5.3 7.2
Source: Labour Force Surveys, Bangladesh Bureau of Statistics.

The labour force with secondary education is the largest group, larger than the group with
primary education. The labour force with secondary education makes up the largest share. This
share was 17 per cent in 2000, which increased to 36 per cent in 2022. This is largely due to the
increase in the female labour force with secondary education. Among females, the labour force
with secondary education increased from 12 per cent in 2000 to 43 per cent in 2022. The share
of labour force with primary education has increased slightly from 23 per cent in 2010 to 26 in
2022 (Table 16.6).

Table 16. 6: Labour Force by Level of Education, 1999–2022 (% column total)

Level of Education 1999-2000 2010 2022
Total Male Female T M F T M F
No education 48.1 41.5 59.1 40.1 39.9 40.6 19.6 20.8 17.4
Primary 25.0 25.7 23.8 22.8 22.9 22.7 26.1 27.1 24.4
Secondary 16.6 19.5 12.0 29.5 28.6 31.4 35.9 31.9 43.3
Higher Secondary 3.7 4.0 3.0 8.3 8.9 7.3
Tertiary 3.2 4.5 1.1 3.5 4.2 2.0 9.1 10.3 6.9
Others 0.3 0.4 0.2 0.9 1.0 0.8
Source: Labour Force Surveys, Bangladesh Bureau of Statistics.

The share of the labour force with tertiary education has increased considerably. The share
of labour force with tertiary level of education has increased from 3.5 per cent in 2010 to 9 per
cent in 2022. Among the females, this increase is also substantial – from 2 per cent in 2010 to 7
per cent in 2022. (Table 16.6)

16.3 Critical Issues and Challenges of the Labour Market

1. Low employability of labour force is the biggest problem.

We restrict our analysis to the nonfarm labour market only. The nonfarm labour force is highly
heterogeneous in terms of human capital and their extent of employability. Hence, the challenges
for enhancing employability are also wide ranging. Based on education and training as well as the
structure of the occupations of industry and services in Bangladesh343, we can divide the labour
force into four groups.

343According to Bangladesh Standard of Classification of Occupations 2020, there are eight major groups
relevant for industry and service sectors. These groups can further be lumped into i) managers, ii)
professionals, iii) junior professionals and technicians, iv) sales and clerks, and v) plant operators and

White Paper on State of the Bangladesh Economy 268

 i. Primary group: Labour force with primary (or equivalent) and below primary
education, including no education, with and without formal training
ii. Secondary group: Labour force with junior secondary, secondary and higher
secondary education (or equivalent), with and without formal training
iii. Tertiary group: Labour force with tertiary education
iv. TVET group: Labour force with TVET diploma

i. Primary Group: Low education and inability to learn new things

This group is obviously the weakest segment of the labour force who are either early dropouts or
never lucky enough to go to school. This group makes up about 46 per cent of the labour force,
the largest among the four categories. In rural areas, rural nonfarm activities are mostly carried
out by this group344. While a small fraction of them have some formal training345, most of them
have learned their trades by “learning by doing” and informal apprenticeships. In manufacturing,
this low educated labour force mostly works as floor workers, helpers, and office assistants (e.g.,
cleaners, guards, etc.)346. Interestingly, the unemployment rate of this group has decreased from
3.2 per cent in 2010 to 1.4 per cent in 2022 (Table 16.7). This low unemployment is primarily due
to the fact that these workers cannot afford to remain unemployed looking for jobs for long. This
group hardly has access to decent jobs. The real wage of this group has declined in urban areas
between 2016/16-2022 (Table 16.8).

Table 16.7: Level of education and unemployment rate

Educational attainment Unemployment rate
2010 2022
No education - class V 3.2 1.4
Class VI-XII1 7.0 3.9
Tertiary 4.9 12.0
Others2 4.0 4.9
1diploma is considered in this category; 2 consists of non-equivalent religious education; Source: LFS
reports 2010 and 2022

Table 16.8: Level of education and unemployment rate

Educational Attainment National Urban Rural
2005 2010 2016-17 2022 2005 2010 2016-17 2022 2005 2010 2016-17 2022
No class passed 1002 1393 1354 1938 1239 1779 1783 1420 981 1302 1240 2005
Class 1-5 1441 1774 1450 2177 1775 2380 1916 2438 1326 1561 1320 2085
Class 5-10 1813 2048 1945 2508 2168 2426 2705 2753 1660 1881 1603 2385
SSC, HSC, equivalent 2418 3195 2462 3170 2433 4030 3043 3739 2407 2556 1992 2702
Graduate 3611 3996 3240 4324 4072 4720 3827 5198 2767 2860 2357 2875
Postgraduate 4851 4425 4347 5910 5772 5130 5275 7062 2210 2902 2538 3305

assemblers (floor workers). These groups have different levels of education, with some overlapping. For
example, the Primary Group is mostly the floor workers, Secondary Group is the technicians and sales
clerks, TVET Group is generally the technicians and junior professionals and Tertiary Groups are the
managers and professionals.
344 Vehicle drivers, sales workers, and service related workers belong to this category of labour force in

rural areas who make up about one-third of the rural nonfarm jobs and this composition has not changed
much over the years (Iqbal et al. 2024).
345 The requirement for enrolling in 360-hour training in government training centres (TTC, TSC) is class

VIII.
346 A recent BIDS study on light engineering (Iqbal et al. 2022) show that about 80 percent of workers in

the blue collar jobs (floor workers and technicians) have education of primary level or below. Note that
this blue collar jobs are about 91 percent of total jobs in this industry, according to LFS.

White Paper on State of the Bangladesh Economy 269

This group is the worst victim of acute learning deficiency at primary level. This group of
labour force with primary and below primary has been the victim of acute learning deficiency,
which has plagued the primary education system, leading to high dropouts and repetitions.
According to the National Student Assessment (NSA) conducted by the Ministry of Primary and
Mass Education (MoPME), in grade five, 25 per cent had learning competency in Bangla in 2011
which declined to 12 per cent in 2017. Similarly, in Math, 33 per cent had learning competency in
2011 which slipped to 17 per cent in 2017. With this level of competency level, this fraction of
labour force can only be employed in jobs where the requirements for reading and writing are
very low. As they are not able to follow any written instructions properly, the only method of
learning for them is through practical hands-on experiences, which limits the scope for upgrading
themselves.

There has been no targeted TVET programme for this group. The minimum qualification of
BTEB approved 360 hour courses is grade eight. This group is not the beneficiary of the
interventions run by the ASSET project of the government. ‘Reaching Out of School Children
(ROSC)’ implemented by the Ministry of Primary and Mass Education has to be geared towards a
more effective combination of general and vocational training.

ii. Secondary Group: the most critical mass of labour force with some technical
knowledge

This segment is the core of the labour force, making up about 44 per cent of the labour force. This
group makes up a large share of the crafts and plant workers and technicians in manufacturing
(Iqbal, 2022). The dominance of this group in the service sector is noteworthy347. One
characteristic of this group is that most of them have learned a trade, either by “learning by doing”
(i.e., experience) or formal training. This is the target group of the short courses (e.g., 360 hour
courses approved by BTEB). The graduates of both public and private Technical Schools and
Colleges (TSC) fall in this group. The unemployment rate of this group has dropped from 7 per
cent in 2010 to 3.9 per cent in 2022 (Table 16.7). The real wage of workers with 5-10 years of
education has increased very little over time and this has declined in the urban areas.

The labour force with the Madrasah stream is also large in this group, though LFS does not allow
us to separate this group as it is lumped with equivalent grades. Joblessness among the Madrasah
graduates was found to be as high as 75 per cent ((Behera, 2013)348.

There is limited supply of technical schools to cater to this large group. There are only 149
and 110 public TSC and TTC, respectively. Private investment in this sector is also thin. This
limited supply of technical schools forces secondary students to pursue general streams, resulting
in lower employability. Note that tracer studies suggest that graduates from these technical
schools have to wait for a shorter period for jobs and they earn more than the comparable groups
in general streams.

There are no demand side interventions (e.g., career counselling) for higher uptake and
image building. This group is ill informed about their career options. There is no career coaching
to make informed decisions –career counselling centres at the union level can be helpful where
GO-NGO partnerships can play critical roles. There is a need for social engineering for greater
social recognition of this technical and vocational stream.

347 In urban economy, sales workers in markets and shopping malls, junior managers and servers in
restaurants, technicians in mobile, AC, refrigerator repairing centres, service delivery persons in gig
economy are from this group of labour force.
348 Recent studies (Ahmed et al., 2022; Asadullah and Chaudhury, 2013) found that demand side factors

such as poverty was the primary factor behind the enrolment in madrasa stream.

White Paper on State of the Bangladesh Economy 270

 iii. Tertiary Group: oversupplied, mismatched, and ill prepared for market

This group consists of university and college graduates, including Madrasah stream349. The size
of this group was about 9 per cent of the labour force in 2022, which grew from about 4 per cent
in 2010. As discussed before, the structure of our industries allows only about 9 per cent of jobs
are white collar in nature, mostly managers and professionals (Table 16.9). While the share of
graduates in the service sector is higher, the opportunities are limited350. The unemployment rate
of this tertiary group has increased from 4.9 per cent in 2010 to 12 per cent in 2022. With this
increase in unemployment rate, it seems paradoxical that the tertiary group is the only group that
experienced an increase in real wages especially after 2016/17 (Table 16.8). New pay structure
in public sector announced in 2015 may have some role.

Table 16.9: Employment type by manual intensity (row %)

Sector Employment type?
Blue Collar White Collar
Industry 90.9 9.1
Service 76.8 23.2
Note: As per ILO, white collar refers to non-manual workers and blue collar to manual workers
Source: LFS 2022.

Over-supply of tertiary graduates is incompatible with the structure of industries and the
economy. Over the last 12 years, the tertiary graduates increased by about 2.5 folds, making up
about 9 per cent of the total labour force in 2022. This is largely due to an increase in tertiary
college graduates in the honors stream (Tables 16.10 and 16.11). Altogether, tertiary college
students increased from about 1.5 million in 2010 to about 2.7 million in 2023. This high number
of graduates is incompatible with the structure of industry and service sectors of the country,
which rely more on junior professionals and technicians (SSC/HSC passed, TVET graduates) than
professionals (university graduates) in most cases. The Labour Force Survey suggests that about
9 per cent of jobs in industries are white collar jobs.

Table 16.10: No. of tertiary colleges, 2010-2023

Tertiary colleges
Year Degree Honors Master's
freq % of total freq % of total freq % of total
2010 1,270 85.2 126 8.5 94 6.3
2011 1,270 82.1 172 11.1 105 6.8
2012 1,172 72.7 316 19.6 123 7.6
2013 1,190 70.9 364 21.7 124 7.4
2014 1,214 70.1 392 22.6 125 7.2
2015 1,178 67 445 25.3 136 7.7
2016 1,182 65 482 26.5 155 8.5
2017 1,126 60.5 568 30.5 168 9
2018 1,121 59.2 596 31.5 175 9.2
2019 1,088 57.2 634 33.3 180 9.5
2020 1,081 56.3 649 33.8 191 9.9
2021 1,048 54 695 35.8 198 10.2
2022 1,048 54 695 35.8 198 10.2
2023 1,048 54 695 35.8 198 10.2
Source: Bangladesh Education Statistics 2023, BANBEIS.

349 Currently, about 10.5 lac students are studying in 55 public (68 percent of students) and 116 private
(32 percent of students) universities. There are about 1941 tertiary level colleges, awarding degree,
honors, and master’s degrees. These colleges have about 41.8 lacs enrolled students.
350 In the service sector, civil administration, banks and other financial institutions, mobile operators,

health care providers, university and colleges, and media are the major employers of the graduates.

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 Table 16.11: Students in tertiary colleges, 2010-2023
Year Nos. of students in tertiary colleges
Degree colleges Honors colleges Master's colleges
Total % girls Total % girls Total % girls
2010 1,003,014 47.9 336,703 41.0 585,813 36.5
2011 1,133,832 49.4 429,769 44.3 826,807 42.6
2012 996,462 49.4 614,747 46.7 882,532 35.9
2013 1,052,932 50.5 698,044 46.4 869,409 39.2
2014 1,098,029 50.6 780,335 46.9 1,037,071 42.2
2015 1,103,355 50.7 869,887 46.9 1,078,460 39.3
2016 1,075,441 51.1 912,501 46.2 1,138,608 42.3
2017 963,881 52.3 1,067,007 47.1 1,192,248 44.9
2018 968,064 52.9 1,169,628 47.8 1,399,454 42.5
2019 928,361 53.8 1,228,195 47.5 1,447,207 44.3
2020 924,782 54.8 1,329,851 50.1 1,550,738 47.4
2021 868,118 54.3 1,382,014 49.9 1,652,530 48.0
2022 864,869 53.8 1,417,259 49.6 1,678,515 47.9
2023 935,082 53.7 1,492,137 49.9 1,753,992 49.0
Source: Bangladesh Education Statistics 2023, BANBEIS.

Graduates are ill prepared for the market with low technical knowledge. The graduates are
not only oversupplied, they are ill prepared for the market and have little skills, both hard and
soft, to offer. About 60 per cent of the public university students are in arts and social science, 24
per cent in commerce, and only 12 per cent are in STEM. The STEM enrolment is much lower for
the tertiary colleges (Iqbal, 2022a). The fact that the share of STEM graduates is low can merely
reflect the structure of the economy with low demand for them. That is, unless the economic
growth is propelled by high tech industries and services (e.g., ICT), the demand for STEM
graduates will remain low. It’s a “catch-22” situation, and this is why integration of education
policy with industrial policy is critical.

Industries are not getting workers with the right level of education (the vertical mismatch
is very high). A recent labour market study by BIDS suggests that smaller firms are getting
workers with less education than they want, and larger firms are getting workers with more
education than they need (Iqbal, 2022b). When jobs are in short supply and competition is high,
workers overinvest in education to signal the market. In the case of smaller firms, recruitment is
informal, and workers have other ways to signal their potential employers (e.g., private
networks). The social costs of over and under education are very large.

iv. TVET Group (diploma): undersupplied, underprepared and under-recognised

The share of labour force with TVET diploma is only about 0.69 per cent of the labour force, which
has increased from 0.14 per cent in 2010351. Diploma engineers, both civil and electrical, are the
backbone of any engineering firm. Unemployment rate for TVET was about 1 per cent in 2013
(ADB, 2016).

Quantity and quality of polytechnics are short in supply to meet current demand. Our
discussions with stakeholders suggest that there is a huge demand for 4-year diploma graduates
in the labour market and the public institutions cannot meet this demand. There are only 45
public polytechnic institutes and 5 monotechnic institutes in the country, offering diplomas to
only 42,900 students each year. The quality of these institutions is compromised by a lack of

351According to 2015 TVET census, there were about 17 lac TVET students, enrolled in four types of TVET
streams – 360 hour short courses (77%), SSC/Dakhil (voc.) (8%), HSC (voc)/Business Management (7%),
and diploma graduates (8%). Each year about 7.5 lacs students are enrolled in TVET system.

White Paper on State of the Bangladesh Economy 272

adequate classrooms, labs, and quality instructors. Tracer studies suggest that about one-third of
these diploma graduates go for further studies, implying that these polytechnics fall short of
making their students market-ready.

Shifting tertiary college students to the TVET stream is a major challenge. While the labour
market outcomes are better for TVET diplomas than the comparable group of generation stream,
the higher number of tertiary college graduates than TVET graduates suggests that there is a
market failure here primarily due to a lack of adequate information and social stigma.

Shifting a large portion of (potential) tertiary college students into the TVET stream has to start
from the secondary level. Greater enrolment in SSC (voc) and HSC (voc) is likely to result in lower
enrolment in tertiary colleges and higher enrolment in polytechnics. This requires a tectonic shift
in policy and massive public investment in TVET. While TVET institutions are more expensive to
build than general stream institutions352, innovations are required for low-cost solutions.

2. Development partner led skill development “projects” have fallen short of desired
impacts.

Tangible impacts are not visible at national level despite huge public investment. Almost
all development partners now have some skill development projects in their portfolio. The two
such large projects are Accelerating and Strengthening Skills for Economic Transformation
(ASSET) and Skills for Employment Investment Programme (SEIP), supported by credit from the
World Bank and Asian Development Bank, respectively. The former is implemented by the
Directorate of Technical Education (DTE) while the latter is by the Finance Division. The
involvement of the Finance Division in implementing a skill development project has raised
serious concerns about the commitment of the government. These two projects together cost
about whopping BDT 8 thousand crore, with a significant GoB contribution.

Apparently, this huge amount of investment has hardly had any national level impact. Note that
only 1.46 per cent of the labour force received any training in the last 12 months, according to
LFS 2022. In fact, this share was higher in 2016-17 – 1.7 per cent. The impact of these skill
development projects have also not been observed in skill composition of the international
migrants. There is no independent third party impact evaluation of these projects.

There is a duplication of training due to a lack of national level coordination. The Labour
Force Survey shows that the trainings are concentrated in a few fields - computer (33%), RMG
(16%), crop and non-crop agriculture (10%), driving and motor mechanics (8%), and health and
paramedical services (5%). This suggests that there is a serious overlapping of interventions by
government and NGOs. All of these implementers are working in silo, with little coordination
among them, resulting in oversupply of certain popular trainings, which are easier to implement.
The lessons learnt from the Sector-wide Approach (SWAp) of the primary education and health
sector can be applied to the TVET sector to enhance the efficiency of the use of resources and to
avoid duplications through better coordination.

16.4 Female Labour Force Participation: Breaking the Glass Ceiling?

Female labour force participation has increased from 36 per cent in 2010 to about 43 per cent in
2022, largely due to an increase in participation in agriculture. However, opportunities for
nonfarm occupations for females in both rural and urban areas have not been expanded over the
years, except for RMG. According to LFS, the share of female employees has dropped from 31 per
cent in 2016-17 to 18 per cent in 2022. These are the jobs with a monthly salary. This decrease is

352 The government’s budget for a Technical School and College (TSC) BDT 75 crore [BSS, 29 Aug 2023].

White Paper on State of the Bangladesh Economy 273

matched by an increase in self-employment, mostly home-based, indicating that females tend to
combine income generating activities more with household chores.

Gender parity in the labour market is a far cry. While degree colleges achieved gender parity
in 2011, honors colleges achieved this feat in 2020. The share of girls in both private and public
universities has also increased substantially over the last one decade. The share of female
graduates in the labour force increased from 2 per cent in 2010 to 7 per cent in 2022. However,
the labour market outcomes of female graduates are not encouraging. Their low presence in top
management and in the tech industry is disheartening (World Bank, 2022). While non-market
outcomes of female education are significant, i.e. empowerment, children’s education and health
(Ahmed and Iqbal, 2016), the investment in female education remains under rewarded if their
labour market outcomes are poor. Gender parity in education should be matched by gender parity
in the labour market too.

Structural barriers remain tall for nonfarm jobs. Apart from restrictive cultural norms
(Kabeer et al., 2021) and discrimination in the labour market (Sultan et al., 2016), a girl faces
numerous supply-side barriers at every step in her transition from schools to jobs. The number
of job opportunities a female HSC or tertiary college graduate has in rural areas is almost zero,
except for a few NGO jobs, which are also not often recruited locally. She has to go to district towns
or large cities for searching jobs and for interviews. There are hardly any girls’ hostels where she
can stay during a long job search. Even if she gets a job, housing for a single girl is an acute
problem. The problem also compounds more when she decides to have children and continues
her job. There are hardly any daycare facilities to take care of her children when she is at work353.
Unless the state takes some responsibilities, female labour force participation in the nonfarm
sector is likely to remain low.

16.5 Youth Unemployment: Mismatched Aspirations

The opportunity of demographic dividend has come with challenges of creating new jobs for the
growing number of youths. According to LFS, the youth (15-29) unemployment rate was 8 per cent,
compared to 3 per cent at the national level. This rate was 5 per cent in 2010 and has been
hovering around between 5 and 11 per cent for the last few decades. However, Murshid et al.
(2019) found a much higher unemployment rate among educated youths (18-35) – about 40 per
cent354.

Extended period of job search has created greater frustration. Graduate tracer studies indicate
that average job search period has increased (Table 16.12). Our consultation with the youths
suggests that the labour market could not catch up with the heightened aspiration of youths. Over
the last one decade or so, the number of first generation graduates increased substantially with
high hopes for upward mobility. The longing for public sector jobs has fuelled their aspiration. In
fact, the public sector job has become more lucrative in recent years, particularly after the new
pay scale in 2015, which made the salary structure of the public sector comparable with the
private sector at the entry level. Moreover, public jobs have become more socially desirable,
especially in the marriage market. The longing for pubic jobs has made the job search period
longer.

353 A recent study (Asian Center for Development, 2020) show that about 87.5% of the RMG factories
surveyed had child care facilities but only 11.7% mothers used it. The time to reach to factories from their
home is argued to be responsible for low use of day care centres. The study recommended establishment
of day care centres closer to the houses, not closer to the factories.
354 This was a Facebook based online survey and unemployment rate was defined by one week of

reference point.

White Paper on State of the Bangladesh Economy 274

Table 16.12: Summary of Tracer Studies
Tracer Studies
ADB CSE BIDS HEQEP WB CEDP BIDS CEDP I BIDS CEDP II DTE BIDS DTE EU TVET BANBEIS
TVET Diploma
University graduates College graduates TVET graduates
Year of survey 2018 2018 2017 2020 2023 2015 2020 2021-22
Tracing period 2013-18 2015-16 2013 2017 2018 2012-13 2018-19 2015-19
Sample description CSE/IT Graduates from Graduates Graduates from Graduates TVET TVET Diploma
graduates 82 from 35 54 colleges of from 61 graduates graduates from graduates
from 9 departments of colleges of NU NU colleges of NU 5 govt. TVET from 9
universities 36 universities institutes polytechnic
institutes
Sample size 1216 975 graduates 2,350 1,639 graduates 1,345 1305 1188 diploma 760 diploma
graduates graduates graduates diploma & & 604 other graduates
1905 other TVET
TVET graduates*
graduates*
Share of graduates in the labour LF: 90%; LF: 79%; LF: 65%; LF: 89%; LF: 91%; [Diploma] 30% of the LF: 84%;
market (Total) Employed: Employed: Employed: Employed: 24% Employed: LF: 69%; sample is Employed:
86% of LF 51% of LF 29% of LF of LF 71% of LF Employed: employed & 58% of LF
64% of LF 40% is NEET**
Share of graduates in the labour LF: 92%; LF: 81%; LF: 72%; LF: 94%; LF: 96%;
market (Male) Employed: Employed: Employed: Employed: 33% Employed:
89% of LF 54% of LF 35% of LF of LF 80% of LF
Share of graduates in the labour LF: 79%; LF: 69%; LF: 60%; LF: 83%; LF: 84%;
market (Female) Employed: Employed: Employed: Employed: 14% Employed:
74% of LF 36% of LF 23% of LF of LF 66% of LF
Share of graduates pursuing further 5.5% of the 15% of the 34% of the 7% of the [Diploma] 29% of the 16% of the
studies (Total) sample sample sample sample 31% of the sample sample
sample
Share of graduates pursuing further 14% of males 5% of males in
studies (Male) in the sample the sample
Share of graduates pursuing further 18% of females 9% of females in
studies (Female) in the sample the sample
Share of graduates in the labour 79% of LF 16% of LF 20% of LF 49% of LF [Diploma] 36% of LF
market with permanent jobs (Total) 46% of LF
Share of graduates in the labour 20% of LF 24% of LF 58% of LF
market with permanent jobs (Male)
Share of graduates in the labour 13% of LF 12% of LF 34% of LF
market with permanent jobs
(Female)

White Paper on State of the Bangladesh Economy 275

Share of graduates in labour market 7% of LF 13% of LF 4% of LF 22% of LF [Diploma] 22% of LF
with temporary jobs 18% of LF
Average monthly salary in BDT 38,780 BDT 28,652 BDT 14,283 BDT 15,272 BDT 15,974 [Diploma] About 44% 71% earned
permanent jobs (current; ( permanency (starting) (current; (current) BDT 12,130 earn less than 1 between
permanency not specified) permanency not lac annually; BDT 10,001-
not specified) specified) 38% earn 20,000
between 1-2 monthly***
lacs BDT
annually
Average monthly salary in BDT 10,042 BDT 7,305
temporary jobs (starting) (current)
Average waiting time before getting About 50% of About 50% of around 30 60% of the [Diploma] About 82% of
permanent jobs those who got those who got months graduates 6 months those who got
job, got it job, got it unemployed job, got it
within 6 within 18 for more within 6
months of months of than two months of
graduation graduation years of graduation
graduation

White Paper on State of the Bangladesh Economy 276

Note that completion of an intake of a BCS batch takes more than 3 years. While there is no
statistics of repeaters, anecdotal evidence suggests that this number is also very high. With
preparation time and repetition, a large number of tertiary graduates eying for public jobs remain
in the labour market for about 4-5 years until they abandon hope after a few attempts and settle
for less.

As mentioned before, white collar jobs in the private sector are limited and highly competitive.
As a result, a large section of graduates have no other options but to land on less desirable blue
collar jobs after a few years of graduation. The feeling of failure to climb up the social and
economic ladder has been found to be strong.

16.6 Labour Market Governance

The standard of labour market governance that include labour market institutions, laws, and
policies, covering minimum wage setting, workers’ safety, employment protection, mandatory
benefits, etc. are weak.

One of the most significant legislative frameworks for labour regulation in Bangladesh is the
Bangladesh Labour Act, first enacted in 2006 and later amended in 2013 and 2018. This law
covers various aspects of employment, such as working hours, wages, occupational health and
safety, and the right to form trade unions. Notably, the 2013 amendments were prompted by
international pressure following the collapse of Rana Plaza, a tragic accident that killed over 1,100
garment workers. The amendments demand strengthening workplace safety standards and
mandatory insurance for workers and allow simplified procedures for forming unions. While
buyers’ pressure has improved the social and environmental auditing for the export industries,
the incidence of malpractices of labour laws in other domestic market catering industries is
rampant. The labour rights and workplace conditions are worse in informal industries: the 2018
amendment does not adequately extend protections to these informal workers who lack job
security. Child labour issues in informal sectors have not been adequately addressed. The
Department of Inspection for Factories and Establishments (DIFE) responsible for monitoring
compliance, faces severe capacity constraints that limit its effectiveness. Their mechanism of
inspection and law enforcement are also weak.

Minimum wages are set based on sector productivity, not based on any absolute measure of
minimum requirements like poverty lines. There are a few issues in the economy where human
rights consideration should dominate the public policy decisions and setting the minimum wage
of the worker is surely one of them. The country should move towards a universal minimum wage
for industrial workers which can vary geographically with the cost of living.

One of the main criticisms of Bangladesh Labour Act is that the amendment still falls short of
creating an enabling environment for unionisation. While reducing the union threshold from 30%
to 20% of workers was a step forward, workers continue to face considerable obstacles in
forming unions to express their voice. Moreover, union rights in export-processing zones (EPZs)
are still limited. Employers often resist unionisation efforts in fear of political capture by the
federation of the unions. Shielding labour unions from political influences and local thugs has
been a major challenge. On other hand, labour leaders expressed concerns over physical abuse
and harassment of the unionists. Anti-union discriminations in workplace, lack of legal support
and weak leadership are also argued to be responsible for the absence or ineffectiveness of labour
unions355. A win-win institutional solution for both parties is critical for the industrial
development of the country.

Interestingly, consultation with labour leaders suggest that they are aware of the threat from AI and
355

want to be trained accordingly. The role of labour unions in AI era needs to be revisited.

White Paper on State of the Bangladesh Economy 277

Bangladesh Labour Act 2006 states that all industries that employ at least 50 workers must have
at least 10% apprentices. But there is hardly any enforcement of this law. There is also a non-
functional tripartite national advisory committee for apprenticeship.

16.7 Data Issues

The only source of data on labour force and employment is the Labour Force Survey (LFS)
conducted by BBS. While this survey is conducted with the technical support from ILO, this survey
is plagued by frequent changes in definitions, inconstant estimates of key indicators across
rounds, lack of many useful indicators of the labour market such as skill (hard and soft) and skill
mismatch. For example, till 2013, the structure of employment was classified into four
categories356, but from 2016-17, the category “day-labourer” has been dropped and added to the
category “employee”, making time series comparison impossible. Strong cyclical patterns in some
variables cast doubt about the quality of data. For example, the youth unemployment rate for
female was 9.8 in 2013, which increased to 15 per cent in 2016-17 and then slipped to 5.2 per
cent in 2022.357.

According to LFS, the female labour force participation rate has increased by about 5.5 percentage
points in 5 years between 2017 and 2022. There has been no change in definition. This increase
is largely due to an increase in rural female employment aged 15-29 in agriculture (both crop and
non-crop) who are “own account workers” (self-employed with no employees). Either our
understanding of this change is poor or measurement errors are high - in any case, we need to
probe this issue further.

The lack of data on foreign workers working in Bangladesh has been an issue of debate in recent
years. Survey of Manufacturing Industries (SMI) and Economic Census conducted by BBS should
take note of it.

Following ILO's definition, BBS defines employed persons as those engaged in any activity to
produce goods or provide services for pay or profit or own use consumption and unpaid family
work during the last seven days at least for one hour. While this definition is important for cross
country comparability, it has little practical value for policy or designing interventions. BBS can
generate alternate measures of unemployed based on different types and length of work. For
example, one category could be the persons engaged in producing goods and services for pay or
profit for at least i) 20 hours ii) 40 hours in the last seven days. Sri Lanka also uses similar
approach where the minimum engagement is 20 hours. The point should be discussed and
debated further.

ILO has recently introduced a new concept of defining unemployment. The idea is that some of
those who are outside of labour force want employment but they are not seeking or not available.
There are also some people who are seeking but not available. In order to accommodate these
categories, job gap is defined as following (Figure 16.1):

Job gap= unemployed (seeking & available) + potential labour force (seeking and not available
or available and not seeking) + want employment (but not seeking and not available)

356These four categories are: self-employment, employee, contributing family helper and day-labourer.
357Other shortcomings of LFS data are: i) the dataset do not come with a code book which makes
replication of various estimates impossible. For example, we do not know how to use the sample weights
or how to pool four quarters and adjust sampling weights to create a nationally representative sample for
that year. ii) Several variables have unusually large numbers of missing values. For example, an important
variable “EDU_04” has 115,749/349,927 missing values. iii) BSCO codes are very important categorize
employment. Out of 198,870 employed persons, the BSCO4 code was missing for 30,489. However, in the
final report, all BSCO04 are accounted for. Also, there are many erroneous entries of BSCO codes.

White Paper on State of the Bangladesh Economy 278

LFS measures the first two components but not the last one. BBS should add a few questions to
LFS and estimate job-gap.

Figure 16.1: Components of job-gap

Source: ILO (2024).

16.8 Conclusion and Way Forward

The labour market is plagued by three major problems. First, the employability of the labour force
is low due to poor foundational training in schools and lack of training for job-readiness. Second,
the labour market is subject to various kinds of mismatches – education system is producing more
graduates (e.g., tertiary college) than the market can absorb, and more arts and social science
graduates than the market demands. The imbalances in supply and demand in skill levels have
plagued the labour market, a frequent complaint of the employers. Third, the jobs created by the
public and private sectors are not enough to absorb the new entrants in the market. Given the
structure of the industry, opportunities for the tertiary graduates are very limited. In fact, there
is no statistics on how many decent jobs are created every year.
Based on our analysis, three major recommendations follow:

i. Massive public investment in TVET should be the priority

Substantial government investment is needed to expand the technical schools such as TSC and
TTC to the union level to increase the share of students in TVET stream. To this end, we need
indigenous low-cost solutions.

ii. Demand side interventions are also required

Although TVET education has a reputation for its high employability and decent payment, it fails
to attract good students. The image and social recognition of TVET graduates should be enhanced
through learning from well-designed pilot experiments358.

358A few innovative suggestions came out from our discussions with the youths and other stakeholders: i)
changing of the name of “polytechnic” and replacing it by a more “dignified” name; ii) Textbooks at the

White Paper on State of the Bangladesh Economy 279

 iii. Alignment of policies and strategies is critical for minimizing mismatches
There is no labour market strategy commensurate with the growth strategy of the country. In
fact, the long term plans (e.g., growth strategy) in the country are not consistent with the sectoral
plans (e.g., education policy, skill development policy), and various sectoral policies are often at
odd with each other. Apart from identifying a few priority sectors, there is no particular
government strategy for the industrial development and the corresponding human capital
development strategy. We don’t know how many STEM graduates we need in the next 5-10 years,
for example, nor do we have any clue on the number of TVET graduates which is consistent with
our growth aspiration. Lack of coherence in interconnected policies has resulted in various
mismatches in the labour market.

primary level can have a chapter on the prospects of TVET profession and its glory; iii) convincing
parents are more important than the students; iv) electric media has important role to play for greater
social recognition of TVET professionals.

White Paper on State of the Bangladesh Economy 280

References

ADB, 2016, “Bangladesh Looking Beyond Garments: Employment Diagnostic Study”, Manila,
Philippines
Ahmed, B. N., Sen, B., Ali, S. M. Z., & Islam, R. (2023). Follow-up Tracer Study on Graduates of
Tertiary-level Colleges [Project Report]. Bangladesh Institute of Development Studies
(BIDS).
Ahmed, M. and K. Iqbal, 2016, "Is There Any Threshold in the Relationship between Mother's
Education and Child Health? Evidence from Nigeria" Vol. 54 (3), Developing Economies,
Institute of Development Economies, Japan.
Asadullah, M. N., & Chaudhury, N. (2013). Peaceful coexistence? The role of religious schools and
NGOs in the growth of female secondary schooling in Bangladesh. The Journal of
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Asian Development Bank (Ed.). (2019). Bangladesh: Computer and software engineering tertiary
education in 2018. Asian Development Bank.
Asian Center for Development (2020). A Survey Report on the Garment Workers of Bangladesh
BANBEIS. (2022). Study on Diploma Graduates of Government Polytechnic Institute at Selected
Areas of Bangladesh [Research Report]. Bangladesh Bureau of Educational Information and
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Behera, A. (2013). Political Economy of Madrassa Education in Bangladesh: Genesis, Growth and
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Ramon Publishers, Dhaka.
DTE. (2021). TVET Graduate Tracer Study 2020 [Research Report]. Directorate of Technical
Education (DTE).
Iqbal, K., 2022a, “Managing the Skill Gap through Better Education, TVET and Training Strategies”,
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Iqbal, K., 2022b, “Research Findings of the Labor Market Studies for SEIP: Skill Demand, Supply and
Mismatches” BIDS
Iqbal, K., Md. N. F. Pabon, and T. Mahmood, 2022c, “Labor Market Studies for SEIP: Light Engineering
Sector”, BIDS
ILO (2024), The job gap: Measuring labor underutilization beyond unemployment, ILO.
Kabeer, Naila; Huq, Lopita; Rahaman, Muhammad Mahabub, 2021. “Material barriers, cultural
boundaries: A mixed-methods analysis of gender and labour market segmentation in
Bangladesh”, WIDER Working Paper, No. 2021/69, The United Nations University World
Institute for Development Economics Research (UNU-WIDER), Helsinki
Mahmud, M., Chowdhury, T. T., Adib, A., Nasrullah, Z. M., Bashar, Md. T. I., & Akram, R. (2021). Tracer
Study on Graduates of Tertiary-Level Colleges [Project Report]. Bangladesh Institute of
Development Studies (BIDS).
Mahmud, M., Iqbal, Z., Shahana, S., Islam, S., & Ibon, W. F. (2018). Tracer Study of Graduates of
Universities in Bangladesh [Research Report]. Bangladesh Institute of Development Studies
(BIDS).
Mondal, A. H., & Chowdhury, T. T. (2015). Tracer study on the graduates of technical and vocational
education and training in Bangladesh [Project Report]. Bangladesh Institute of Development
Studies (BIDS).
Murshid, K. A. S., Mahmood, T., & Shashi, N. A., 2019. “Employment and unemployment amongst
educated youth in Bangladesh: An exploratory analysis”. The Bangladesh Development
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Nakata, S., Chowdhury, A. R., Nagashima, Y., Rahman, M., Rahman, T., & Rahman, M. A. (2019).
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Sultan, M., Khondaker, S., & Sharmeen, N. (2016). “Evidence-based foundation of women’s economic
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Profile, Washington DC., USA

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Chapter XVII. The Unloved Remittance Warriors*

17.1 Overview

International short-term labour migration has made a significant positive impact on the
livelihood and well-being of a large number of Bangladeshis (World Bank, 2022; Ahmed et al.
2021; Raihan et al., 2017; Siddiqui et al. 2018; Siddiqui eds. 2022). In 2023, remittance was
equivalent to 3.3 per cent of the GDP of Bangladesh. It was 4.4 times the overseas development
assistance and as much as 7 times the foreign direct investment to the country (GoB, 2024).
Remittances constitute more than half of the country’s foreign reserve. In 2023, 1.3 million people
newly joined the labour force359 and international migration generated 1.3 million jobs. In 2020,
poverty headcounts of remittance-receiving households were 40 per cent lower than those
households that do not receive remittances (Shabab,2022). International migrant households are
more capable of withstanding external shocks such as COVID-19, or global financial crises
(Siddiqui, 2020). Nonetheless, studies have identified various forms of complexities in the
migration process that are making labour migration less and less rewarding for those who
migrate. This chapter probes why despite having an elaborate country-wide institutional
structure of governance, policies, laws, and rules, the labour migration process could not be
transformed into a well-managed system. It demonstrates that during the consecutive tenures of
the Awami League government, a strong convergence of interests of policymakers, senior
bureaucrats, and recruiting agencies has developed. This has not only made governance of
migration extremely challenging, but it also compromised the positive outcome of migration on
migrants, their household members, as well as on the local and national economies.

From 1976 to September 2024, 16,774,045 Bangladeshi workers migrated overseas for
employment; the highest (13,05,453) was in 2023 (BMET 2024). In 2023, 13% of the total flow
was constituted by women. There is yet to emerge any system to record the flow of return
migrants. During the same year, 90 per cent of Bangladeshi workers migrated to only 6 countries.
These were Saudi Arabia, Malaysia, Oman, UAE, Qatar, and Singapore. Saudi Arabia has been the
most important destination for female migrants as well. In 2023 the country accounted for 65%
of total female migrants (RMMRU 2023).

BMET classifies Bangladeshi migrant workers into four skill categories. These are professional,
skilled, semi-skilled, and less skilled360. Bangladeshi workers mostly participate in the semi and
less-skilled category. In 2023, of the total number of migrant workers, only 4% were
professionals, 25% were skilled, 21% semi-skilled and 50% belonged to the less skilled category.
In the same year, Bangladesh was the 8th largest remittance-receiving country in the world
(World Bank 2023) receiving BDT 2,387,100,000,000 (USD 21.9 billion)361. Saudi Arabia (15%),
UAE (17%), the USA (12%), UK (12%), and Kuwait (7%) were the other major remittance source
countries (RMMRU 2023). Since 2021 remittances experienced slower or negative growth.
Remittance data is not gender segregated.

*The chapter has been prepared by Dr Tasneem Arefa Siddiqui, Professor, Department of Political
Science, University of Dhaka and Founding Chair, Refugee and Migratory Movements Research Unit
(RMMRU).
359 Total Labour force is 73 million.
360 Doctors, engineers, architects, teachers, accountants, computer programmers, pharmacists, nurses,

foreman, diploma engineers, paramedic, salesmen are considered as professional workers. Mechanics,
welder, mason, electricians, painters, cooks, drivers, plumbers, garment workers and certified care givers
are considered as skilled workers. Farmers, gardeners, helpers in different professions such as garment
manufacturers and shops are considered as semi-skilled workers. Cleaners, domestic workers and menial
workers are considered as less skilled workers.
361 As per the exchange rate of 2023

White Paper on State of the Bangladesh Economy 282

17.2 Seven Key Challenges

Over the last decade, seven key challenges of migration governance have intensified. These are:
High cost of migration, non-transparent visa procurement, and worker recruitment process;
protection of female migrants; erosion of confidence in banks and slow growth in remittance
transfer; entrapment in the less and semi-skilled market; unstable country-specific labour market
and poor functionality of institutions.

High cost of migration

In theory, migration for work should be at no cost. However, migrants do incur costs and
Bangladeshi migrants pay the highest in South Asia. In 2018-19, in the Qatar-Bangladesh corridor,
the cost of migration was USD 4000 whereas it was USD 1000 for a Nepali migrant (4 times
higher); in the Bangladesh-Malaysia corridor the cost was USD 2900 but in the case of Nepal it
was USD 690 (4.2 times more) and in Bangladesh-Saudi Arabia corridor the cost was USD 3200
whereas for Nepal it was USD 760 which is again 4.2 times higher (Bossavie and Wang, 2021,
World Bank, 2022). The major costs include passport, training, recruiting agency fees, sub-agent
fees, airfare, medical and emigration clearance fees, contribution to WEWF, insurance, and
payment of speed money. The recruiting agencies in Bangladesh however identify two types of
charges that shore up the migration cost: visa purchase and Ikama fees, particularly in Saudi
Arabia. Nepali workers’ migration cost to Malaysia is equivalent to 3 months' wage whereas for
Bangladeshi it is equivalent to 7 months' wage. In the case of Saudi Arabia, the difference is
slightly less. A Nepali requires 6 months’ wage to recover the migration cost and a Bangladeshi
requires 9 months’ wage. BBS (2021) estimated a Bangladeshi male worker on average pays USD
5500362 to migrate. A migrant may have to work for 17 months just to recover that amount.

The cost, of course, varies on the basis of the type of visa, level of skill, and the gender of the
migrant. It is less if the worker is skilled or a female and when the employer is a company and not
an individual. BBS (2020) and Bartl (2022) find the cost of female migration is around USD 1100.
In Nepal, depending on the destination, the cost of female migration varies from USD 305-1145
(Kharel et al. 2023).

Non-transparent Recruitment Process

Recruiting agents derive their influence from their involvement with the political process. During
the tenure of the last government, four recruiting agents who were part of the Bangladesh-
Malaysia labour recruitment syndicate were members of parliament, including a retired general
of the army. Two of the four held important cabinet positions. Two more were key office bearers
of the Jubo League and another was a presidium member of the Awami League. Three others were
either city corporation commissioners or upazila chairmen. Their positions in the government
and the ruling party empowered them to set the terms of labour recruitment beyond the
boundary of relevant laws and policies. Experience of Government to Government (G2G)
agreement and syndication to migrate in Malaysia are two examples of non-transparent
recruitment during the last twelve years of Awami League government rule.

G2G Agreement: In 2012, the GoB and the Government of Malaysia signed a G2G agreement for
the recruitment of workers. Unethical practices led to the abandonment of the G2G agreement
(Wickramasekara, 2016). The agreement was amended in 2013 paving the way for G2G+
arrangement allowing private recruiting agencies to be a part of the recruitment process. Under
the previous G2G system, 13000 workers from Bangladesh secured employment in Malaysia by
paying as low as BDT 35,000 (USD 449) each. Under the G2G+ deal, the cost rose to BDT 300,000

362 In exchange rate of BDT to USD in 2020

White Paper on State of the Bangladesh Economy 283

(USD 3,846) and above363. The government took no action against the recruiting agencies
concerned, rather suspended a BMET official for the failure of the G2G arrangement.

Syndication of Malaysia’s labour market, 2012: Bangladesh and Malaysia signed a

Memorandum of Understanding (MoU) in 2012 to facilitate labour migration. In 2012, a syndicate
was jointly created by a Malaysian of Bangladeshi origin Dato Amin, and an influential member of
BAIRA. In the case of Bangladesh, the Dato influenced the Malaysian authorities and secured
permission to allow only 10 Bangladeshi recruiting agencies to send workers. His Bangladesh
counterpart also succeeded in convincing the government to accede to this syndication.
Subsequently, the Malaysian government suspended the MoU on grounds of gross irregularities
including high migration costs. The GoB has not conducted any investigation and the members of
the syndicate were not held to account.

Syndication of Malaysia’s labour market, 2021: In 2021, another MoU was signed between the
two countries. This time as well Dato Amin through his new enterprise Bestinet and its affiliate
Foreign Workers’ Centralised Management System (FWCMS) along with his Bangladeshi
counterpart created a ten-member syndicate. In the wake of a major protest of BAIRA members,
the number of participating recruiting agencies was increased from ten to twenty-five and
subsequently to 102. The syndication not only ensured that only the members would be able to
send workers, but it also created scope for the members to extract extra sums of money (BDT
152,000 per worker364) from non-syndicate member recruiting agencies to allow them to send
workers under the syndicate members’ license. Obviously, this sum was passed over to the
migrants raising the cost of migration to BDT 550,000 (USD 5046) on average. In this process the
syndicate embezzled almost USD 2 billion365 (BDT 238,992,770,000366). This amount is double of
the initial budget of MRT-06 and three fourth of the final construction cost. This time as well the
government did not take any measure to make the agencies accountable. After the interim
government took over power, the Anti-Corruption Commission filed cases against 4
parliamentarians for involvement in syndication. On October 24, the GoB asked Malaysian
authorities to arrest and extradite Dato Amin and Ruhul Amin to face charges of money
laundering, extortion, and trafficking of migrants367.

Invisibility of dalals and scope for fraudulence: As nearly all Bangladeshi recruiting agencies
have their offices in the capital city, they rely on ‘dalals’ (sub-agents) to source workers.368 For
decades, the government refused to recognise the role of sub-agents in the migration process.
Taking advantage of the lack of transparency in the system, a section of recruiting agencies and
subagents commit fraud and can avoid accountability by apportioning the responsibility for
wrongdoings on each other. A 5000 migrant household survey shows that 19% of the aspirant
migrants who paid partial costs (BDT194,000) failed to migrate abroad. If the financial loss of the
failed migrants is projected nationally over the last 10 years, then it would amount to BDT
283,070,638,000 (USD 2,596,978,330). This is close to the construction cost of Metro Rail MRT-
06369. The amended Overseas Employment and Migration Act (2023) has formalised the functions

363 As per the exchange rate of 2013

364 USD 1394 as per the exchange rate of 2023
365 The Coverage (2024, August 20). Bangladeshi & Malaysian Official RM8.9 Billion Scandal – Syndicate

Supplying Workers To Malaysia. Available at: https://www.thecoverage.my/6284/bangladeshi-

malaysian-official-rm8-9-billion-scandal-syndicate-supplying-workers-to-malaysia
366 As per the exchange rate of 25.11.2024
367 CNA. (2024, November 6). Bangladesh asks Malaysia to arrest and extradite 2 businessmen over alleged

migrant worker trafficking and extortion in Channel News Asia. Available at:
https://www.channelnewsasia.com/asia/malaysia-bestinet-aminul-islam-migrant-workers-bangladesh-
anwar-4729621
368 In the context of labour migration of Bangladesh, Sub agent can be defined as an agent who is

informally authorised by a recruiting agency to recruit workers at the grassroots on his/her behalf.
369 As per the exchange rate of 2019

White Paper on State of the Bangladesh Economy 284

of sub-agents (GoB, 2020), and currently, rules are being framed. The recruiting agencies
continue to oppose this move.

Erosion of confidence in banks and slow growth in remittance

From 2000 to 2009, the remittance flow to Bangladesh has grown exponentially (annually
between 12-37%). From 2011 to 2020, remittance flows have grown between 10-18% except for
the years 2013, 2016, and 2017 (Siddiqui, 2023). Since 2021, remittances have been increasing
at a slower pace, and in 2022, it experienced 3.53% negative growth. Even if a year of lag time is
added with migration and remittance flow, the growth rate is still slow.

The past government had identified international factors such as the Russia-Ukraine war, the
COVID-19 pandemic, inflation, and the adverse effect of global price hikes on the real income of
the migrants as causes for the slow growth of remittance. However, there are other explanations.
In monthly courtyard and marketplace meetings organised by RMMRU during 2019 in 12
districts, members of migrant households expressed their distrust of the banking system
following the political takeover of banks. Newspaper reports on siphoning off bank resources by
government patronised powerful quarters had eroded the confidence of migrants and members
of their families. Many reverted to the practice of hundi370. Some migrants even returned from
their countries of destination to withdraw their savings from banks. There are a host of other
factors that have contributed to the increase in hundi; such as differences in the exchange rate in
the formal and informal markets; the practice of under-invoicing of imports to evade taxes;
financing smuggling; and finally, the central bank’s policy of pursuing three exchange rates that
allegedly facilitated money laundering. The ineffectiveness of authorities in monitoring and
purchasing work visas by recruiting agencies at an exorbitant cost also contributed to hundi.

Over the last 10 years, 7,679,618 Bangladeshis migrated for work. If 80% of these migrants’ visas
were purchased in the countries of destination, on average at USD 2000, then the visa purchase
cost for those years (in 2023 exchange rate) stands at BDT 1,339,325,379,200 (USD
12,287,388,800). This amount is 4 times more than the construction cost of MRT-06. Those
involved in labour recruitment make payments to visa brokers by collecting potential remittances
of migrants’ in destination countries and making payments to their families in Bangladesh. This
resource therefore can be termed as lost remittances.

Protection of female migrants

Up to 2003, only men had access to the formal overseas labour market. There was either
government restriction or a ban on female labour migration. Once the restriction was lifted,
female migration from Bangladesh increased manifold. Compared to male migrants, female
migrants are from more disadvantaged backgrounds. Officially, to migrate to Saudi Arabia female
migrants should receive financial assistance. However, in reality, they have to pay around BDT
100000 (USD 1176) in processing migration (Neelim, 2022). Female migrants also face some
specific challenges like isolation, mental and physical abuse, and in some instances sexual abuse
(ADB, OECD, ILO, 2023). Lack of access to justice and untimely return are common. A section of
females faces incarceration, torture, and unnatural death in the countries of destination and
another section experiences forced return. The number of shelter homes in the countries of
destination is inadequate. The system of regular communication of female domestic workers with
embassy staff is yet to be institutionalised.

370 Round Table on remittances organised by Samakal and RMMRU

White Paper on State of the Bangladesh Economy 285

Instability in the country-specific labour market

A major shortcoming of overseas labour flow is its dependence on a single market at any given
time371. Countries that become the primary market for Bangladeshi workers for some years in a
row, abruptly either cease to take workers or drastically reduce the flow (Siddiqui, 2023). In
2008, around 132,000 Bangladeshis migrated to Saudi Arabia. In 2009, the figure sharply
dropped to 14,660, and in 2010 to 7,069. The country imposed a restriction on the migration of
male workers from Bangladesh in 2010 for the next six years and only women could migrate.
Again, male migration rebounded in 2016 (RMMRU 2013). In 2022 as many as 612,000 workers
went to Saudi Arabia.

In 1996, 32 per cent of Bangladeshi workers went to Malaysia, making it the second-largest
destination country. In 1997, 1998 and 1999 the flow drastically dropped to 1.24%, 0.21% and
0% respectively. Again, in 2023, more than 351,000 (27 per cent of the total migration flow)
workers migrated to Malaysia before its government imposed a ban on migration from
Bangladesh in 2024. A similar trend is visible in cases of Qatar and Bahrain as well. The efforts to
access new labour markets have met with limited success. After several years of ban in 2023, the
Maldives announced the reopening of its market to Bangladeshi workers. However, within
months the ban was re-imposed. In the same year, Oman and Bahrain imposed a ban on issuing
work visas to Bangladeshis.

This instability of the labour market to a great extent is caused by malpractice in the procurement
of visas. Some recruiting agencies procure visas without proper assessment of the capacity of the
employers372. In many instances, the embassy staff fails to conduct or is deterred from conducting
proper background checks of the employing firm. Accountability capacities are weak373. There is
a strong case to blacklist recruiting agencies and outsourcing companies of destination countries
who engage in unethical practices. The effort to access the Romanian labour market suffered as
the country decided to close its consulate in Dhaka in October 2023 allegedly due to unethical
influences of a section of recruiting agencies over the screening process374.

Trapped in the less and semi-skilled market

BMET has 110 Technical Training Centers (TTC) which provide training on 55 vocations. 46 TTCs
offer language training375. Unfortunately, there is little evidence of success in accessing overseas
employment for those in receipt of training from the TTCs. Challenges to accessing the skilled
labour market are manifold. The lack of employability overseas of TTC trainees (Iqbal and Matin,
2024) deters potential migrants from acquiring skills. Most importantly, recruiting agencies are
not interested in promoting skilled migration. This is because they can extract more profit and
avoid accountability by processing the migration of unskilled workers376.

The absence of projection of vocations that are in demand in major destination countries and
periodic updating of the curricula is another contributory factor. Almost half the positions of the
trainers and principals of TTCs currently remain vacant and the holding of Training of the
Trainers (ToTs)377 is irregular. Moreover, most of the training does not meet the standard of

371 Bayron and Mahmud (2023, November 28) ‘Dui bochore sthayibhabe deshe fireche char lakh cheshotti
hazar obhibashi’ in The Daily Star, available at: https://bangla.thedailystar.net/news/bangladesh/news-
536731
372 Dr. Nurul Islam, Former Director, BMET, MoEWOE on the BCSM workshop held on 5 th September 2024
373 Abul Kalam, Former, Joint Secretary, BMET, MoEWOE on the BCSM workshop held on 5th September

2024
374 Abul Kalam, same as 14
375 Japanese, English, Arabic, Korean and Cantonese language.
376 Interview of Salim Reza, Former Secretary, MoEWOE 20 October 2024
377 Abul Kalam, same as 14

White Paper on State of the Bangladesh Economy 286

international certifying organisations378. Except for a few instances, there is also no system of
equivalence of Bangladeshi certificates with those of major labour-receiving countries. Prior
learning certificates are only provided to those returned migrants who have an SSC degree, 91
per cent of the returned migrants cannot avail this opportunity as they do not possess SSC and
above education. The three-month-long training of BMET is not recognised even by the National
Skill Development Authority (NSDA) of Bangladesh. The training centres are constructed under
the development budget; however, little resources are allocated under the annual revenue budget
to employ and train personnel, purchase training equipment, etc. The newly established training
centres are currently providing one-third of their targeted training379. The recent increase in the
number of TTCs in 40 new upazilas spending BDT 16670000000 (USD 140313015)380 was done
without any standard feasibility study.

Elaborate laws and institutions: poor functionality

To govern international labour migration, an elaborate country-wide institutional structure is in

place. It includes the Ministries of Expatriates’ Welfare and Overseas Employment (MoEWOE),
Foreign Affairs (MoFA) and Home Affairs (MoHA) Bangladesh Bank, BMET, DEMOs, TTCs, WEWB,
and Probashi Kallyan Bank. A number of policies, laws, and rules are also in operation381. BMET is
the line agency of the Ministry of EWOE. It has been responsible for market exploration and
employment creation, immigration clearance, skills and awareness-raising training, and
management of the Wage Earners’ Welfare Fund (WEWF). In 2011 its institutional coherence was
compromised. Instead of turning BMET into a department with several directorates, the Wage
Earners’ Welfare Board (WEWB) was created to manage the WEWF. A significant functional
overlapping exists between BMET and WEWB which are governed under two separate laws, the
Overseas Employment and Migration Act (OEMA) 2013 and the Wage Earners’ Welfare Board
(WEWB) Act, 2018. Pre-departure briefing, social protection measures, and managing welfare
desks at the airports are assigned to both bodies. This generates tension between the two
organisations. Functional overlapping also exists between the ministry and BMET. The ministry
uses its authority to overrule BMET decisions on recruitment clearance. TIB has documented
corruption at different stages of processing recruitment (starting from issuance, cancellation, or
suspension of the licenses) and payment of death and other compensations. (Khoda and Akram,
2017)

Unprecedented growth of recruiting agencies: Under rules 4, 6, and 11 of the 2019 Rule on
Recruiting Agencies, BMET issues, renews, and suspends licenses to private recruiting agencies.
Over the last ten years, political considerations and corruption played a dominant role in the high
growth in the issuance of recruiting licenses. From 1976 to 2015, the government issued licenses
to 935 recruiting agencies (RMMRU, 2016). Annually 20 to 30 new agencies would receive
licenses while licenses of some errant agencies were cancelled. From 2018 to 2023, 1185 new
licenses were issued. In 2022 and 2023, 800 licenses were issued.

Corruption digitalised: The case of privatisation of BMET smart cards and other digital services
is another example of corruption that led to the imposition of unnecessary expenses on the
migrants. In the past, BMET provided smart cards to migrants, in which passport and

378 Tovesood, City and Guild, DNVGL.

379 Islam, S. (2024, October 26). Lokkhomatrar ek-tritiyangsho proshikkhono dite parche na BMET. Dhaka:
Banikbarta. Available at: https://bonikbarta.com/bangladesh/2iDGb3yaXCVs4ar4
380 As per the exchange rate of 25.11.2024
381 These are- Overseas Employment and Migrants Act 2013; Overseas Employment Policy 2016; Overseas

Employment and Migrants Management Rules, 2017; WEWB Act, 2018; Recruiting Agencies (License and
Conduct) Rules, 2019; Overseas Employment and Migrants (Classification of Recruiting Agents) Rules,
2020; WEWB Rules, 2023; Overseas Employment and Migrants (Amendment) Act, 2023; Overseas
Employment and Migrants (Recruiting Agent and Sub-Agent License, Registration and Conduct) Rules
(Draft).

White Paper on State of the Bangladesh Economy 287

employment-related information were stored. On 8 May 2021, the task was handed over to a
private company Ami Probashi Ltd that launched the Ami Probashi app. The company partnered
with the ICT Division of GoB and BRAC. The group is charging each departing migrant BDT 300
for registration, BDT 100 for downloading clearance/smart card, BDT 100 for Pre-departure
Orientation certificate, BDT 100 for housekeeping certificate, BDT 100 for enrolment card, and
BDT 100 for general certificate. A cursory calculation shows that through this arrangement the
private service provider collected BDT 262,99,65,000 (USD 22,136,672)382 from the poor
migrants. More importantly, under this arrangement, the personal data of the aspirant migrants
got transferred to private hands without the consent of the individuals concerned. The then
Secretary of the ministry was reportedly transferred to another ministry for his objection to this
unnecessary project383.

Unfair use of migrants’ subscription: The Wage Earners’ Welfare Fund (WEWF) was created in
1990 mostly with the subscription of departing migrant workers. The staff salary, market
exploration tours, and other expenses of the WEWB are borne by the WEWF instead of being
sourced from the revenue budget. The question remains if this is a fair use of the fund resources.
Over the years, the Board has increased the migrants’ subscription in phases to a staggering
amount of BDT 3500. There is no public disclosure about the amount generated, and avenues of
investments of the fund. A general complaint of migrant households is the delay in payment of
compensation and scholarships and the demand for speed money. Accountability measures such
as public hearings in the parliament on labour migration are virtually absent. The function of the
parliamentary standing committee is not adequate. Representation of migrants in WEWB is
ineffective. Statutory bodies such as the Comptroller and Auditor General and other bodies such
as the Anti-Corruption Commission and National Human Rights Commission are yet to consider
the misconduct against the migrants as one of their core areas of work.

Poor performance of PKB: The Probashi Kallyan Bank was created to provide loans to the
departing migrants and help the reintegration process of the returned migrants. The bank was
set up following a prime ministerial announcement in 2011 with an initial capital of BDT 95
crores from WEWF and 5 crores as a government contribution. It is managed by a Board
comprising representatives of different ministries with little knowledge of banking. Thus far due
to weakness in planning, inefficient staff (as a result of an initial flawed recruitment procedure),
poor resource base, and its inability to establish formal connectivity with other scheduled banks,
the PKB could provide loans to a limited number of migrants.

Foreign missions and labour attaches: Labour Attaches (LAs) provide services to migrants who
are mostly less skilled and face various kinds of exploitations in their countries of destination.
Out of the 30 posts of LAs 8 are based in countries that are not major destinations of semi and
less-skilled labour migrants (Australia, Russia, Spain, Switzerland, Japan, South Africa, Mauritius,
and Hong Kong). DEMO and BMET officials who deal with migrants cannot serve as labour
attaches as the posts have been reserved for administration cadre officers only (Abrar et al. 2014).

Earning the highest and receiving the lowest: International labour migration is the highest net
foreign exchange earning sector of Bangladesh. The allocation of the annual budget for this
ministry is very low. From 2010-11 to 2023-24, the average allocation for the MoEWOE was .08%
of the total national budget.

17.3 Way Forward

Bangladesh has progressed significantly in framing laws and policies to govern labour migration.
Nonetheless, implementation of those remains poor. The key challenges that have intensified in

382 As per exchange rate of 25.11.2024

383 Interview of Salim Reza, former Secretary of the MoEWOE on 5 September 2024

White Paper on State of the Bangladesh Economy 288

labour migration governance over the last ten years are multi-dimensional. Institutional
weakness is one of them. It shows that a number of institutions for managing labour migration
are operational, yet there is functional overlapping. Increasing the number of TTCs, establishing
a separate bank for the migrants, and creating WEWB without ensuring allocation from the
national budget, all indicate interventions without proper planning and feasibility exercises of the
previous government.

Transparency challenges arise when a powerful group of recruiting agents linked with the ruling
party use their position in parliament to influence policy decisions in their favour that bypass fair
and open competition. In the case of syndication, it led to siphoning of USD 2 billion.
Unprecedented growth of recruiting agencies also manifests the involvement of policymakers in
corrupt practices. The unwillingness of the government to regularise the sub-agents, posting LAs
in places where labour migration does not take place, high cost of migration and syndication of
labour markets are some other outcomes generated by the convergence of common interests of
policymakers, senior bureaucrats, and recruiting agencies. Payment for visa trading may have
caused BDT 1.3 trillion in lost remittance. The slower growth of remittance flows since 2021 is
also a result of the erosion of confidence of the migrants in the banking sector after the takeover
and consequent defaulting on loans by the powerful business group connected with the ruling
party. Female migrants mostly participate as domestic workers. The need for a longer-term policy
for targeted skill development for them is still absent and measures for their protection in the
country of destination are also inadequate. Both policy and administrative reforms are required
to streamline labour migration.

Policy

Following the recommendation of the parliamentary standing committee on EWOE of 2009 a

dedicated cadre service for the ministry should be introduced so that the knowledge and
experience gained by the officials are retained and utilised within the ministry. BMET should be
transformed into a department with several directorates. Resources of WEWF should be spent
only on direct benefits/services to the migrants. The current arrangement of drawing salary and
other benefits of WEWB officials from WEWF should be replaced by an allocation from the
revenue budget. The WEWB should annually publicly disclose updated information on the WEWF.

To enhance the efficiency of the PKB, it should revert back to the original criteria for selection of
Chairman of the Board which allows experienced retired bankers to hold the position. People
with knowledge of bank management should be placed on the PKB Board by reducing the number
of bureaucrats. The PKB should immediately increase its coverage through networking with other
banks for disbursing migration and reintegration loans. An assessment of the financial viability
of the bank should be conducted.

The rules that are being framed to implement the Overseas Employment and Migrants
(Amendment) Act, 2023, should include specific criteria for the selection of countries/cities for
the establishment of the office of LAs. The positions of LAs from countries that do not host labour
migrants should be transferred to those countries that require more personnel. The monopoly of
administrative cadre in appointment of LAs should be rescinded allowing officials of BMET and
DEMOs to serve as LAs. The provisions on regularisation of sub-agents under the Overseas
Employment and Migrants (Amendment) Act, 2023 should be implemented and necessary rules
for regularisation of sub-agents should be framed without further delay.

To avoid conflict of interest, the government must ensure those in recruiting businesses refrain
from engaging in business when elected to parliament. The government should demonstrate its
commitment to the labour migration sector through adequate allocation in the national budget.
At least 1 per cent of the annual national budget or 5 per cent equivalent of annual remittance
flow should be allocated to this sector.

White Paper on State of the Bangladesh Economy 289

Administrative

Accountability measures such as public hearings in parliament and regular functions of

parliamentary standing committees have to be ensured. Criteria for representation of migrants
in PKB and WEWB have to be set and followed. Provision for representation of CSOs in BMET
arbitration should be introduced. Overseas Employment and Migrants (Classification of
Recruiting Agents) Rules, 2020, should be implemented. Licenses issued to immediate family
members of a recruiting agent should be revoked. To bring the number of recruiting agencies to
a rational level, the licenses of non-performing agencies and those who have committed fraud
should be cancelled. The recent spike in the issuance of recruiting licenses should be investigated
to ensure the accountability of decision-makers. Prosecution and punishment of the key actors
and associates for syndication to Malaysia in 2012 and 2021 should be prioritised. The confidence
of migrants in the banking sector needs to be restored through the dissemination of information
on the measures undertaken to stabilise the sector.

To reduce the cost of migration, the government should place the issue of visa trading in
multilateral forums as well as in bilateral negotiations. Strict restrictions should be imposed on
recruiting agencies against their unnecessary increase in the price of visas to keep away other
South Asian competitors. In BMET arbitration and local mediations, the compensation amount
for the premature return of migrants should be set five times higher than the government-
determined cost. Skills development should be seen as the most important pathway for accessing
decent work. The training of TTCs should be reorganised with adequate resource allocation from
the revenue budget.

To ensure employment of women beyond domestic work, skills training of women should be
diversified. Following the Philippines best practice model, a system of regular monitoring by the
embassy staff and setting up of shelter homes as per need has to be established. In case of
suspicion of unnatural death, a second autopsy in Bangladesh should be introduced. To ensure
reliable and regular data, BBS should include a migration module in the population census. An
integrated data management system should be installed by BMET that includes return migration.

White Paper on State of the Bangladesh Economy 290

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Chapter XVIII. Environment and Climate Change: A Disaster in Making*

18.1 A Mixed Bag of Successes and Failures

The state of environment in the country has generally been deteriorating, despite glimmer of
hope in a few aspects: (a) at least 224 manufacturing units have achieved highest global standard
ratings (Leadership in Energy and Environmental Design, LEED384) by adopting pro-
environmental measures (Awal, M. A.et al., 2021); (b) considering stern conservation measures
by imposing a moratorium in harvesting Hilsha fish (Hilsha Illisha) during peak spawning season
and providing modest compensation for the open water fishermen for not harvesting Hilsha
initiated a reversal of declining of Hilsha availability (Ahmad,B., et al., 2024); (c) limiting air
pollution from brick kiln operations by gradually imposing regulatory and policy measures; (d)
promoting community forestry by means of acknowledging co-management of road-side forestry,
etc. The GOB has finally adopted the National Conservation Strategy paper, which paves the way
to ensure sustainability of natural resource base.

Only recently, the GOB has acknowledged the invention of biodegradable plastic material from
jute fibre and allowed the concerned scientist (Dr MA Khan) to utilize a fund to produce jute-
based biodegradable plastic bags. The invention has created an opportunity to replace widely
used plastic bags and perhaps can significantly reduce plastic pollution of water bodies and land
(Pavel, S., & Supinit, V.,2017). However, despite imposing an official ban on the production and
use of polythene bags by enacting Bangladesh Conservation Act 2002, such polythene and
polypropylene (non-degradable) bags had been widely used and dumped on open areas, which
not only had polluted land and water bodies, also had aggravated urban drainage congestion by
choking drainage outlets. The past regimes simply ignored the gross and public violation of the
Act and did not even used the vibrant media to discourage the open dumping of such a polluting
substance385.

On the contrary, the nation witnessed the following noteworthy pervasive environmental issues:
(a) a proliferation of plastic waste disposal throughout the country, completely disregarding
the national ban imposed on paper some 22 years ago;
(b) the rampant use of bindi net to catch the smallest of fish fries, despite a ban on the
production, sale and subsequent use of such nets that threaten fish biodiversity (the ban
was imposed in April, 2013);
(c) unabated bioaccumulation of carcinogen poly-chlorinated biphinols (PCBs) in the small fish
species in rivers close to Dhaka city due to unrestricted dumping of waste transformer oil
from power distribution sub-sector;
(d) poor state of environmental impact assessment (EIA), especially in cases where GOB
institutions are proponents and the custodian pays little attention regarding potential
environmental concerns (gross examples being (i) poor EIA involving Rampal power plant,
(ii) disregard of environmental concerns involving the road deep inside a haor in Nikli,
which is obstructing haor drainage and aggravating floods on the edges of the haors;
(e) Dhaka regained its status as the worst polluted city on earth, owing to the degrading air
quality standards; and

*The chapter has been prepared by Ms Sharmind Neelormi, Professor, Department of Economics,
Jahangirnagar University, with contribution from Professor A K Enamul Haque, Deputy Vice Chancellor,
UCSI University, Bangladesh Branch and Director, Economic Research Group, Dhaka.
384 As of July 11, 2024, 88 factories achieved Platinum LEED-certification and 122 units achieved Gold

LEED-certification. Among these, 59 out of top 100 highest rated LEED certified factories in the world
represent Bangladesh!
385 The current regime imposed a second ban starting 1 October, 2025, which apparently allowed down

the usage, but could not eliminate the use to a great extent.

White Paper on State of the Bangladesh Economy 293

 (f) the canopy cover of the remaining forest areas has further declined, despite a planned
management approach adopted by the Bangladesh Forest Department (BFD).

The snippets presented above suggest that Bangladesh has certainly taken a few environmental
steps in the right direction, then lost its track and stepped into oblivion.

18.2 Managing Urban Air Quality: The Reversal of Misfortune

BY the turn of century, Bangladesh apparently turned the table and defied its capital’s race with
Mexico City to become the number 1 most polluted city. Deteriorating air quality was managed
by replacing two-stroke engines to four-stroke engines in tri-wheelers on December 31, 2002 (i.e,
baby-taxis), further restricting air pollution by replacing diesel as fuel to condensed natural gas
(CNG). Tax incentives were given, along with support to establish road-side CNG-fuelling stations
in the early 2000s. By the first 10 years of incentivization in restricting air pollution, while about
90 per cent of the polluting tri-wheelers were withdrawn from the country’s streets (100 per cent
from Dhaka city), Dhaka was no longer regarded as one of the most polluting cities on earth
(Begum, B., & Hopke, K.,2014).

Simultaneously, long chimneys were introduced with strong regulatory enforcement by the
Department of Environment (DOE) in brick fields, which also contributed to the improvement in
air quality (Kholikuzzaman, M., 2020). However, the tremendous growth in transportation sector,
especially in urban centres across the country has resulted into unabated burning of fossil fuels,
which has culminated into emission of carbonaceous gases, NOx, PM 10386 and the notorious
PM2.5 – the latter being the primary cause of air pollution related deaths in urban centres
(Majumder, A. K.,2024.)

However, by 2022, Dhaka has regained its status as the most polluting city. Despite the fact that
the much talked about metro-rail has started its operation in Dhaka’s one out of six designated
routes, the sheer number of polluting vehicles and continuous emissions while waiting in
prolonged traffic congestions are the root causes of much deteriorated air quality in Dhaka. Much
of the success in containing air pollution were eliminated for several reasons: a) high growth of
vehicles in the city, b) rising price of CNG for vehicles and so many vehicle owners lost interest in
conversion to CNG, c) rationing of time for CNG refilling in vehicles, and d) construction activities
due to significant growth in economic activities. However, most cities have better air quality than
Dhaka, Chattogram and Narayangonj.

18.3 Towards Cleaner Transportation: The Role of Hybrid and Electric Vehicles

Many believe that the introduction of hybrid cars with batteries, and eventually battery-run
electric vehicles (EVs), will lead to cleaner transportation. A combination of metro-rails and EVs
could help reduce the consumption of liquid petroleum fuels, ultimately decreasing air pollution
in the coming decades. However, oil prices in international markets, the ease of refuelling with
liquid petroleum fuels, and citizens’ refuelling behaviour will determine whether this belief
becomes a reality.

Additionally, with the introduction of battery-run EVs, a new and potentially hazardous outcome
must be addressed if adequate guidelines and management measures are not implemented
(Hasan, M. R., & Mustafi, N. N. 2022). The disposal of used batteries from EVs, if done improperly
and without sufficient guidelines, could worsen soil and water pollution. While incentive
structures are being designed to promote less polluting EVs, a disincentive structure is also

386Gaseous particulate matters (PM) smaller than 10 micron (i.e, 10 -10m), which easily get into human
lungs, cause immediate deterioration of lung performance, and trigger respiratory diseases. PM2.5 are the
worst air polluters.

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necessary to restrict pollution from spent EV batteries. A battery recycling centre, along with an
enforceable protocol, must be established for the future handling of exhausted batteries from EVs.
However, it is also true that current effort to recycle used car batteries (lead acid batteries) is not
working properly due to clandestine market for used batteries that exists in the country. As such
a thorough analysis is required to make informed decisions.

18.4 Balancing Economic Growth with Environmental Responsibility

Over the past four decades the country saw a significant growth in ready made garment (RMG)
industries. Not only obnoxious and horrifying incidents such as demolition of Rana Plaza came to
the fore, incidents of inferno such as the one in Sitakunda Upazila due to spread of fire from an
ozone godown had to be witnessed – both the incidents were responsible for loss of human lives.
There is no denying the fact that, because of sheer pressure from importing buyer communities,
the factories have taken steps towards achieving high LEED rankings in recent years. Having
thousands of RMG (ready-made garment) factories certified externally by LEED is an unwise
strategy. Instead, Bangladesh should collaborate with researchers to establish local certification
institutions. This approach would not only save a significant amount of foreign exchange each
year but also create jobs within the country.

The RMG sector and textile industries frequently handle large quantities of hazardous chemicals
for dyeing and fabric treatment. For instance, a specific denim-producing facility in Kaligonj
utilises over 700 tons of chemical per day. Transporting such large volumes of chemicals from the
port to the factories poses significant challenges and necessitates the establishment of
appropriate guidelines. An accident involving these chemicals could put the lives of thousands at
risk (Tahmid, M., 2022).

Similarly, the RMG sector is continuously polluting rivers and canals. The Bongshi River in Tangail
has been rendered lifeless due to pollution from RMG industries (Chowdhury N.J., et al., 2022).
Dyeing, fabric washing, and garment and sweater factories fall into the Orange B category under
the Environment Rule 1997, which mandates an Initial Environment Examination (IEE).
Depending on the IEE results, they may also need to complete an Environmental Impact
Assessment (EIA). However, there are no known cases of RMG or textile factories undergoing this
scrutiny, nor are reports publicly available. This constitutes a violation of the regulations, and the
Department of Environment has been largely inactive in this regard (Kabir, S. Z., & Rabbi, F. 2018).
Moreover, despite numerous studies showing that Effluent Treatment Plants (ETPs) alone are
ineffective in controlling environmental pollution, the Department of Environment has insisted
on their implementation. This has imposed a considerable financial burden on industries,
resulting in lakhs of taka in debt, while the need for Centralized Effluent Treatment Plants
(CETPs) remains largely unaddressed to effectively reduce pollution. Ironically, the tannery
factories moved to Savar in a brand new estate by the government a few years ago without an
operational CETP, leading to pollution of the previously clean Dhaleswari River.

The inaction of the Department of Environment in enforcing its own regulations is perplexing.
This may be linked to potential kickbacks received by DOE officials or to the political influence of
the tannery and RMG associations, which controlled nearly half of the parliament in Bangladesh
until recently.

18.5 Challenges and Controversies in the Environmental Impact Assessment Process

Environmental Impact Assessments (EIA) became mandatory under the Environment Rules of
1997 to mitigate environmental pollution, making EIA certification a significant concern for
industrial entrepreneurs. Additionally, these entities are required to renew their Environmental
Clearance Certificates (ECC) annually. However, the application of this process is not consistent
across the board (Shakil, S., & Ananya, T. 2015).

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There have been allegations that the EIA process is often overlooked during project formulation,
even in instances where EIA was conducted. In many cases, the associated documents are not
made available for public review, nor are proper public hearings conducted as mandated by the
rules. Furthermore, private investors have raised concerns about lengthy processing times and
arbitrary decision-making, which have created opportunities for corruption.

The Environment Rules of 1997 is equally applicable to all private and public projects and
investments. Yet, there are cases when EIA approval was given to public projects without proper
public scrutiny until a CSO argued about it. For example, the EIA for Rampal coal-powered
power plant was revised several times before being accepted due to the presence of an expert
body formed by an advocacy group.

Similarly, a 29.73-kilometer road constructed to facilitate communication in three upazilas in

the haor region of Kishoreganj (Itna, Mithamoin, and Astagram) has been wreaking havoc in
the area, causing untimely flooding and damaging paddy crops on thousands of hectares of land
in both local and upstream regions. The road, constructed between 2016 and 2020 at a cost of
৳874.08 crore, impeded the flow of upstream water into the rivers through the haor. Local road
construction falls under the Orange-B category of the Environmental Rule of 1997, which requires
the completion of an Initial Environmental Examination. Yet, no Initial Environmental
Examination (IEE) was completed for this construction, as confirmed by the concerned
official from the DoE. The former Prime Minister formally opened the Itna-Mithamoin-Austagram
road, an all-weather road in Kishoreganj, to traffic. While exchanging views with local people, the
former Prime Minister stated that the road was a gift from former President Abdul Hamid in Mujib
Borsho (Mujib Year).

The Hazaribag tanneries were relocated to Dhaka due to concerns over pollution in the
Buriganga, as mandated by court orders. The government allocated a new tannery estate in
Savar for this purpose. Ironically, no Environmental Impact Assessment (EIA) was conducted
for the construction of the new estate, which is located by the Dhaleswari River and falls under
the Red category in the Environment Rules of 1997. According to these rules, such estates are
required to obtain an Environmental Clearance Certificate (ECC) annually; however, no such
steps have been taken.

During public consultations with the White Paper Committee in Sylhet and Rajshahi, local people
raised the concerns about establishing hi-tech parks in wetlands. The Environmental Assessment
of Sylhet Hi Tech Part originally reads,” The proposed project site is situated on the eastern side of
Sylhet ….” It is a Khash Land and The Ministry of Land gave their concurrence to handover these
162.83 acres of land to Bangladesh Hi-Tech Park Authority for establishing the proposed Sylhet
Electronics City (SEC). The transferring process has been made under section 10 of “Non-
Agricultural Khas Land Settlement Policy, 1995”. There is no dispute over the land and no legal
impediments to use the land for developing the proposed SEC. … The site is almost 15 feet lower than
the Sylhet – Bholagonj road. It usually remains under water for 3 to 4 months during the rainy
season but also have the possibility of happening flash flood during rainy season ...” The description
clearly avoided defining the area as ‘wetland’ nor it explained this connection of this low-lying
land with the adjacent haors and beels whereas local people were complaining about it.

There were also allegations of malpractice within the Department of Environment regarding EIA
clearances. TIB reported that a few EIA-specialist firms and consultants have “connections” with
DOE officials who are in charge of EIA certification. The quality of many EIA reports is also in
question as most of the reports are copy-paste from other documents. The notion among DOE
officials that government offices may evade the requirement for proper environmental clearances
for their projects is a clear violation of the Environment Act and Environment Rules.

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Due to the construction of roads in floodplains without adequate environmental analysis, the
incidence of flooding in the region is increasing. Many people believe that these roads, which
obstruct the drainage of rainwater, have deteriorated flooding in nearby areas. This has led to
substantial damage to both public and private property, causing significant hardship for millions
of individuals.

Government identified 13 Ecologically Critical Area (ECAs) since 1999 and 4 of them were
declared as ECAs since 2009. ideally, ECA-related decisions are to be taken only by the
Environmental Committee (EC), which is chaired by the Prime Minister. Unfortunately, there had
been only two meetings of the EC over the past two decades! The highest-level political masters
use rhetorics regarding environmental issues and often spoke on popular issues and promoted
conservation measures including giving national environmental prizes in ceremonies. Most of
these were to appease the common people and were simply part of rituals and rhetorics.

Clearly, the actions of the government and the provisions under the Act do not align with one
another. Such selective implementation of the law and rules contradicts the principles of justice
and fairness in society. This has led to the suffering of millions, yet government organisations and
ministries remain unaccountable. The blatant violations of the rules by government officials and
political leaders create anarchy and chaos. They must be held responsible for their inactions.
Many have labelled this as a 'greenwashing' practice by the government.

18.6 Declining Peoples’ Awareness regarding Environmental Conservation

People’s awareness regarding environment has not changed much over several decades of DOE’s
existence. For example, the local media often reports regarding mob killing a tiger in Shaymnagar
Upazila, and a dolphin along the Ganges or Dhanu river. Had public awareness been found to be
high regarding environmental conservation, such news would not have circulated in the media.
Awareness-level among environmental specialists is also questionable. Following due EIA
procedure, the Chattogram to Cox’s Bazar train line was established recently by the past regime.
In October 2024, a Chattogram-Cox’s Bazar commuter train hit an elephant, because the rail line
passed through an elephant habitat. The EIA report suggested establishing a “safe passage” for
elephants using an overpass but the planning was not enough. This indicates a very weak quality
of EIA report. Critics argue that the overpass should have been for the train and not for the
elephants.

18.7 The Forest without the Trees

Bangladesh officially claims that 11% of its land area are under forest cover (FAOStat) and that
has 2.6 million hectares of forest areas although it has nearly 17% of land designated as forest
land. This means nearly 6% of the total land or 35% of designated forest land were either
deforested naturally over time or were denuded through human interventions. A few of these
areas are now designated as ECAs. Unfortunately, ECAs remain under the DOE for its management
purposes. DOE’s management role is in conflict with its regulatory mandate. As a regulator, DOE
is expected to monitor and enforce its rules, however, as an implementing agency it cannot rule
against itself and hence it does not enforce it. Critics would argue that there is a vested interest
within DOE that led to this.

According to official records, BFD experienced average annual loss of 2,600 hectares of primary
forest between 1990 and 2015. One may argue, there have been a reversal of deforestation rate
in BFD managed forest areas. However, other than in the Sundarban and in the remaining sal
forest, all the other forest areas have shrunk significantly in terms of canopy cover, so much so
that further deforestation cannot even occur (Majumder, D. 2021)! Now the country has official
forest lands, without forest canopy (Global Forest Watch).

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However, one must not forget the state of alternate greening process in the villages. During the
afforestation month (1st June till 30th June: Jatiyo Bonayon Mash), common rural people have taken
the onus on their shoulders and continued afforestation along the rural roads. This has become
an annual ritual and Bangladeshi villages are found to be greener than ever before if satellite- and
drone-imageries are taken into analyses. People value living trees, often compare such assets with
bank accounts which provide for emergency cash when in need. The incentive package offered by
the BFD enticed the villagers to collectively establish road-side plantations, which portray the
villages greener than in the past (Begum, M., 2021).

Since 1989, Bangladesh has implemented a moratorium on tree cutting in its forested areas.
Consequently, there is a need to shift the focus of the Forest Department from forest management
to wildlife management, which could attract tourists and generate income. Many countries have
rebranded their Forest Departments as Departments of Parks to promote better care for both
terrestrial and aquatic animals.

18.8 Groundwater Depletion: Whither Compromising with Food Security of Future

Generations

There have been scientific reports that are based on 38 years of groundwater (GW) hydrological
data claiming that GW in about two thirds of the irrigated areas across the country has either
been depleted or been marginally depleted(M A Mojid, et al.,2019). The gradual drawdown of
aquifer systems is scientifically proven in certain areas. The result of GW depletion indicates that
GW has been mining out without sufficient replenishment and the food security of future
generations is being undermined (M Shamsuddoha et al.,2022). Other than imposition of a
minimum distance rule between two adjacent irrigation tubewells, there is no systematic
allocation protocol involving GW resources of the country. There is also inter-agency
disagreement regarding the definition of various critically important aspects of the resource base.
The concerned ministry has issued an order to implement the water act and for that, the same
office order asked BWDB to initiate a plan for the establishment of a coordinating agency/organ
involving ground water allocation at various governance tiers. A draft organogram is produced
and shared with the BWDB. The result is being awaited since December 2020. A directorate on
GW monitoring, allocation and management needs to be established to help the nation use such
critically important resources justifiably.

18.9 Overall Understanding regarding Environmental Management

One may become complacent that the country has done well in some environmental issues.
However, the reality leaves enough reasons to indicate management failures, despite a few
achievements. The ministry in charge is put in an apparent dilemma in recent years. Since 2018,
the ministry is officially given the charge of leading the country on climate change issues.
However, the already overburdened institution was given the additional workload, without
actually increasing its strength in terms of both human resources and finance (relative to overall
budgetary allocation). Since climate change is relatively a new problem to deal with and there is
a dearth of expertise, the ministry has been caught unprepared to devise policies and providing
technical advice to other allied ministries. Whereas the mere inclusion of the new topic opened
up plenty of opportunities for the officials to take part in international meetings and events, while
neglecting their core business: environmental management.

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Mainstreaming Climate Change-only sizzle, but no steak

18.10 Climate Change and Bangladesh

It is a known fact that Bangladesh is one of the most vulnerable countries in the world (Eckstein,
D., Künzel, V., & Schäfer, L., 2021). By this, it means that it is also the most affected country due to
global warming (Cardoso, E.,2024) and hence it needs to arrange for adaptation to climate related
disasters. The NAP 2022 of the Government of Bangladesh is the most recent document that has
chalked out detailed plan for adaptation.

18.11 NAP – an Ambitious Initiative amid Concerns of Transparency and Effectiveness

National Adaptation Plan (NAP) stipulates around 220 billion dollars in adaptation activities for
Bangladesh (MOEFCC, 2022). This is mostly to mitigate climate threats that will cause suffering
to millions of people in Bangladesh. Government of Bangladesh established $480 million
Bangladesh Climate Change Trust Fund (BCCTF) under the MoEFCC in 2009-10 from its own
resources to finance climate related projects.

According to NAP documents, it undertook 800 projects focussing on adaptation, mitigation and
climate change research. Some of the key projects include a) construction of 231.40 km of
embankments, b) 590.6 km of excavation and re-excavation of canals, c) construction of 1,43,463
cubic meter of reservoir construction, d) construction of 14 school-cum-cyclone shelters, e) 17
water supply system, f) 12 pond sand filters; g) training of 14,205 volunteers for cyclone
preparedness, h) production of 19,428 tons of stress tolerant seeds; i) construction of 8529
climate resilient houses, j) establishment of 12900 floating vegetable bed in 210 villages, k) 20
solar irrigation pumps, l) planting of 71.15 million trees; m) 2451 solar water purification plants,
n) 3 rubber dams and reconstruction of 2 spars; o) installation of 7,901 biogas plants plus 13
community biogas plants, and p) 2 eco parks reconstruction.

The list is impressive but there is a need for independent audit. Many have been arguing that this
is the story of a cunning fox and a foolish crocodile. Many of the projects were not entirely new
and the fund was distributed to hundreds of NGOs who did not have any past record of working
on these issues – mostly patronised by ruling party MPs or powerful government officials in their
own constituencies or thana. Many have been labelling the trust fund as a Mistrust fund because
of its opaque nature.

Heat Wave, Dengue, etc.

Despite the global attention drawn by the Bangladeshi government, it appears that they are ill-
prepared for heat waves, a significant climate stressor. The increase in average temperature is
well-documented, with data showing that between 1990 and 2020, the average annual
temperature was approximately 0.8°C higher than in the 1960-1990 period (MoFCC,2024).
Furthermore, the period from 2011 to 2020 experienced a much faster rise in temperatures
compared to previous decades. In 2024, Bangladesh recorded its first daytime high exceeding
40°C, leading to heat stress and fatalities.

As temperatures continue to increase, vector-borne diseases, including dengue and malaria, are
on the rise. In 2024, dengue cases extended beyond their typical peak months of April to June for
the first time. Incidents of dengue have been reported across the entire country, yet Bangladesh
remains ill-prepared to address this growing health concern.

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To address these challenges, healthcare facilities nationwide need to be adequately prepared, and
healthcare workers should receive training on effective responses. It is also essential to raise
public awareness about strategies for preventing mosquito bites. While many in Bangladesh are
familiar with using mosquito nets—unlike in some African countries—the rise in dengue cases
indicates a significant failure in public awareness campaigns (Chowdhury, M. A., et al., 2022).
Currently, the responsibility largely falls on municipalities and anti-mosquito spraying initiatives.
A coordinated effort between the Department of Health, the Department of Environment, and
local municipalities is crucial for a more effective response.

18.12 Climate Variability on Rainfall Patterns and Flooding in Bangladesh

In contrast to the temperature trends in Bangladesh, rainfall patterns exhibit significant temporal
and spatial variability, which is also influenced by global warming. This variability suggests that
both the average rainfall in a given area and the duration of the rainy season—reflected in the
mean and variance of rainfall—are likely to change. Such shifts can have significant effects on
flooding patterns, including both riverine and flash floods within the country. Alterations in
rainfall patterns will heighten the risks associated with agricultural production, ultimately
impacting the livelihoods and food security of the Bangladeshi population.

Basak et al. (2013) in their analysis of rainfall data, demonstrated that for a large majority of
weather stations in Bangladesh, total rainfall exhibited an increasing trend during the monsoon
and post-monsoon seasons, while a decreasing trend was observed in winter, and pre-monsoon
rainfall showed no significant change (Shahid, S. 2010). As a result, Aman season crops are at risk.
This year many districts in Bangladesh experienced flooding even in late September—a departure
from previous patterns—due to heavy rain in the catchment areas of rivers (Chowdhury M R.,
2022). The failure of the government to predict and prepare people against such a disaster
highlights the level of unpreparedness in Bangladesh due to climate variability.

Cloudbursts occurred several times during the late monsoon of 2024, suddenly flooding
downstream areas in Parshuram (Feni), Cumilla, Cox’s Bazar, Lalmonirhat-Thakurgaon, and
lately in Sherpur districts from late August to late September 2024. Additionally, the breach of
the embankment on the Gomati River exemplifies our weaknesses in flood infrastructure. Most
adaptation strategies failed to consider strengthening existing embankments. Consequently,
despite spending millions of dollars on embankment construction through the Bangladesh
Climate Change Trust Fund, the Gomati River embankment was not included as a case for
adaptation. This situation reflects the corruption that has plagued the allocation and distribution
of resources under the BCCTF.

18.13 Threats of Sea Level Rise and Coastal Vulnerability in Bangladesh

Sea level rise is expected to pose a serious threat to coastal Bangladesh if our polders are not
adequately maintained. Furthermore, the National Adaptation Plan (NAP) 2022 predicts that
many inner-coastal districts are unprotected by polders because they did not previously face
significant threats. However, with rising sea levels, districts such as Faridpur, Chandpur, Pirojpur,
Shariatpur, Gopalganj, and others may be at risk of inundation due to tidal surges.

Additionally, some argue that not all of these changes can be attributed to climate change.
Regardless of the debate surrounding the extent of sea level rise in the Bengal delta, it has made
a significant physical impact. For instance, the South Talpatti island, a small landmass, has
recently disappeared in the Bay of Bengal, which many consider a clear sign of impending threats.
There has been no sighting of the island, even during the winter seasonal ebb tide, which may
serve as evidence of what could be in store due to climate change-induced sea level rise in the
near future.

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Islanders living along the coast report that peak tides, even during the November-December
timeframe, have been hitting the shoreline at heights never previously experienced (G Tiwari et
al., 2022). In the absence of systematic data and thorough analyses, the anecdotal evidence
provided by local residents, along with the disappearance of South Talpatti island, strongly
suggests that sea level rise has already begun to impact the coastal zone of Bangladesh.

These circumstances indicate that Bangladesh must negotiate vigorously to secure additional
funds for improving its adaptation goals. In 2021-22, Bangladesh spent nearly $2.96 billion on
adaptation, according to MOEFCC (2022); however, the level of unpreparedness during the floods
of 2024 raises serious questions about the effectiveness of many of these expenditures, and
suggests potential embezzlement of funds.

18.14 Trends Observed concerning Climate Change Policymaking

Rhetorics, not integrated actions

There is no doubt that Bangladesh has earned global respect within the climate change policy
arena due to its longstanding leadership at the science-policy interface. The concepts of
"community-based adaptation (CBA)" and its more recent iteration, "locally led adaptation
(LLA)," emerged from the experimentation with micro-scale adaptive measures in Bangladesh.
The country has been among the first developing nations to (a) create a National Adaptation
Action Plan (NAPA) and an adaptation strategy known as the "Bangladesh Climate Change
Strategy and Action Plan (BCCSAP); (b) establish a dedicated fund, the "Bangladesh Climate
Change Trust Fund (BCCTF)," using its own resources; (c) spearhead the formation of an
international forum for the most vulnerable countries, known as the "Most Vulnerable Forum
(MVF); (d) present an analysis of national investments in climate-sensitive sectors; and (e)
integrate climate change concerns into the design and development of all projects, culminating in
the publication of a manual in the form of a revised Development Project Proposal (DPP) (GED,
2013).

However, most of such trailblazing initiatives have largely remained as unfulfilled sweet dreams
due to inability of the past regime to blend policies with firm actions, and also the gross failure to
prepare institutions to steer with adequate preparation, inter-agency coordination and financing
(Islam, S.,2020). Despite the laudable early steps considered by the earlier regimes, it has largely
seen as rhetoric to build a case for more adaptation funds (Bhuiyan, S., 2015). The Delta Plan
2100 was unrealistic in nature based on no clear scientific evidence, the Mujib Climate Prosperity
Plan (2022-2041) was drafted as a part of the election propaganda. Most of these documents are
found to be discrete documents, without having to establish synergies and coordination
mechanisms.

However, most of such trailblazing initiatives have largely remained as unfulfilled sweet dreams
due to inability of the past regime to blend policies with firm actions, and also the gross failure to
prepare institutions to steer with adequate preparation, inter-agency coordination and financing.
Despite the laudable early steps considered by the earlier regimes, it has largely seen as rhetoric
to build a case for more adaptation funds. The Delta Plan 2100 was unrealistic in nature based on
no clear scientific evidence; the Mujib Climate Prosperity Plan (2022-2041) was drafted as a part
of the election propaganda. Most of these documents are found to be discrete documents, without
having to establish synergies and coordination mechanisms.

The Table 18.1 below summarises the status of various Plans/Action Plans which have been
pronounced on climate change in recent decades:

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Table 18.1 Policy and Strategy regarding Climate Change and their Implementation status
Instrument Year of Current status
pronouncement
NAPA (action 2005 Currently abandoned. Only one idea of NAPA was implemented
plan) through a project. Mitigation was not considered.
BCCSAP (action 2009 None of the 77 odd action plan items of the holistic document
plan) was fully implemented. MOEFCC has failed to engage other
stakeholders. Even the most-relevant ministries/agencies
hasn’t show real interests in implementing an action plan item.
Efforts made to update/revise the plan (2019-date), the draft is
being reviewed by the MOEFCC. Apparently, the draft has not
been accepted due to poor quality (revealed in the consultation
with the WPC).
CCGAP (Climate 2013, The updated plan has come up with six sectoral activities
Change Gender Updated in 2023 without prioritisation and identifying any timeframe for action.
Action The first CCGAP in 2013 and the updated one 2024, both lack
Plan)(BCTF & synergy with other plans/ strategies. There have been no
UN Women, custodian to uphold the CCGAP to be materialised in action.
2024)
Bangladesh 2018 A perspective plan for the current century, where climate
Delta Plan 2100 change issues and adaptation featured in a major way. The
(a plan) Ministry of Planning (MOP) is the proponent, and followed a
consultative process. However, it lacks inter-institutional
coordination. There is a lack of buy-in, while the human
resources challenges are still existing (Bakshi, R. K., & Aktar, S.
(2023).
NAP (2023- 2022 The itemised adaptation costs appear unjustified, did not follow
2050), a national any specific methodological rigour.
plan for Lacks coordinated efforts involving different stakeholders, duly
adaptation identified in the Plan. Early days of implementation. However,
lack of inter-agency buy-in may result in unfulfillment of the
national adaptation dream.
Mujib Climate 2022 A 20-year plan with discrete ideas involving both adaptation
Prosperity Plan and mitigation. The MOEFCC took the burden of developing this
(2022-2041) national plan. It neither came along as a holistic climate plan,
nor as a national prosperity plan. The Plan highlighted the wish-
list of the past regime and threw gross numbers as costs of
implementation of plan elements. However, such number
appear unrealistic, both in terms of benchmark costing and also
in terms of overall institutional efforts towards financing the
plan. It is a Plan without adequate institutional arrangement.

The regime and its loyal bureaucracy have begun to assert that actions related to climate change
were primarily achieved through the country’s fiscal processes, regardless of the planning
approach (Rahman, S., et al.2013). At the governance level, there is a prevailing belief that climate
change initiatives are being effectively implemented, leading to a sense of complacency. Targets
have been overstated, particularly regarding the mobilisation of climate finance from domestic
resources. While the estimated financial mobilisation target was over $90 billion between 2022
and 2030, with much of this expected to come from international sources, Bangladesh managed
to secure endorsement for projects387 worth less than $0.5 billion from the Green Climate Fund
(GCF) between 2015 and 2024. Additionally, development partners withdrew from the
Bangladesh Climate Change Resilience Fund (BCCRF) within four years of its initiation in 2009.

387The real mobilization has been less than 25% out of the committed amount till date, while actual
mobilization of finance hasn’t yet started of a single mitigation project worth US$256 million from the
GCF sources, endorsed by GCF Board in 2022. The total value of the project is estimated at US$340.5
million.

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18.15 Failed Integration of Climate Concerns at Planning Levels

The Government of Bangladesh (GOB) officially implemented only one idea out of many from
NAPA, while it was already a dream beginning for many LDCs, SIDS and African Countries! Then
came the second hype around BCCSAP (MOEF, 2009), again a pathfinder for many, which could
not be mainstreamed involving relevant actors.

To facilitate the process of implementing BCCSAP, the Ministry of Planning (MOP) took an
initiative to integrate climate change in all national (project-led) activities and revised its
Development Project Proforma (DPP). However, MOEF never took a systematic initiative to build
capacity of GOB officials and retain such capacities in various line ministries. As a result, the
planning cells of various ministries could not integrate climate change, generally could not follow
the instructions in the revised DPP (MOP, 2014), and generally/cursorily used to mention that
“climate change would not affect the project significantly”. Therefore, in one hand, national
documents used to mention that a large majority of the sectors would be vulnerable388, while in
the other hand the national development efforts generally identified that no such adverse impact
would be anticipated and no remedial measures could be accommodated in the design of the
development project. There is no national benchmark till date that would guide sectoral design
team regarding the necessary allowance for accommodating/mainstreaming climate change
adaptation in daily practices.

Given the push for SDGs, the government, for the first time, began to accept climate change as a
major barrier to its development efforts. As such, a section was introduced in the 6th Five Year
Plan (6th FYP), where actions and their cross-linkages with business-as-usual activities involving
other ministries and their technical organs were clearly highlighted. However, it was perhaps a
strategy to fool others as the said section was independent and had no linkage with other sections
although it recognised that climate change is a cross-sectoral issue. As such, the chapter as it is
being interesting but had no consequences on the allocation of resources.

In a similar vein, climate change was once again incorporated into the 7th Five-Year Plan (FYP),
fostering a sense of satisfaction that "Bangladesh has done almost everything." Additionally, an
analysis of national investments in climate-sensitive projects indicated that "about 21 per cent of
all investments under the annual development plan are linked to climate change," which provided
ample justification for complacency, suggesting that Bangladesh has made adequate progress in
addressing climate change, if not sufficient. This sense of complacency may explain why the
Ministry of Environment, Forest and Climate Change (MOEFCC) initiated an unrealistic planning
process to develop the MCPP, aiming to impress the Prime Minister during Mujib Year. The plan
promised to create a resilient Bangladesh by 2041.

Bangladesh is one of the signatories of the Paris Agreement (COP#21, 2015). To meet the globally
agreed objective of limiting surface temperature to "well below 2 degrees" Celsius by 2100
(relative to 1990 levels), Bangladesh, like other developing and developed countries, submitted
its Nationally Determined Contribution (NDC). The revised NDC outlines a voluntary commitment
to reduce emissions by 6.73 per cent using domestic financing, which could be increased to a 15
per cent reduction below business-as-usual levels by 2030, contingent upon the availability of
international support. Additionally, Bangladesh Bank is providing financial resources to promote
energy efficiency in industrial and related sectors. However, key policy instruments are still
lacking to effectively achieve the voluntary emissions reduction target in the context of rising
emissions from the growing economy (Hossain, M., 2018).

388Communicated through the pronouncement of Second and Third National Communication to UNFCCC,
and Biennial Updated Report presented to UNFCCC, the 6th and the 7th Five Year Plans, BCCSAP, NAP, the
Delta Plan, etc.

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18.16 Climate Financing: The Achilles Heel that Could not be Guarded

Bangladesh has struggled to access many global climate funds due to its inability to support
applications with scientific evidence. This means that, when seeking these funds, the government
must present research-based evidence demonstrating that its mitigation activities are robust
enough to gain acceptance from expert review teams. In addition, Bangladesh drafted national
policies ahead of many international directives. Consequently, while many funds are available
when considered an additional need beyond national goals, Bangladesh faced the opposite
situation, making it difficult to prove the principle of additionality as required under international
agreements on climate change.

Most of the funds that Bangladesh received, such as from the Global Environment Facility (GEF),
were intended to prepare the country for accessing funding. However, this effort has failed for
several reasons (Rahman, M. M., 2023). First, knowledge regarding climate finance was not
integrated into the higher education system, resulting in a lack of green experts in Bangladesh.
Second, those who received training were primarily NGO activists or government officials.
Government officials frequently transferred to other departments caused the knowledge to be
'lost,' while NGO workers used their experience to raise awareness but often lacked the ability to
convert that knowledge into actionable outcomes at home or during COP meetings. As such,
financing has remained a major stumbling block. Recently, two of the national organisations – the
PKSF and the IDCOL became the focal points for disbursement of GCF and we are yet to see
evidences of their success in terms of developing resilience and mitigating emissions.

The story of a not-so-trustworthy fund manager

One of the most frustrating aspects of the climate financing discourse is the existence of the
Climate Trust (CT) and its current state of financing. The CT was established to channel climate
change funding from Bangladesh’s own resources. However, its initial efforts to mobilise the first
year’s tranche of 700 crore (approximately US$90 million in 2009) sparked controversy and
public outcry across the country. Shortly thereafter, government financing began to dwindle.

While Bangladesh has seen a significant increase in overall national budgetary expenditure
between 2009 and 2024, climate financing has remained stagnant over the past eight years,
currently standing at 100 crore (equivalent to US$8.3 million). This marks a dramatic drop of
1,100 per cent compared to the 2009 level. These figures suggest a declining willingness on the
part of the government to allocate its own funding for climate change initiatives through its
established Trust Fund.

Stakeholders in climate change, including representatives from government institutions, are

sceptical about the Climate Trust (CT) and its ability to mobilise finances justifiably (Yasmin,
S.,2018). Allegations have been made regarding the selection of projects for which the current
minimal funding is being allocated. Compounding the issue, it is reported that one-third of the
annual allocation of just US$8.3 million is categorised as "excess availability" by the CT and is
placed in "fixed deposits" to accumulate interest. This implies that the cost of inaction in
adaptation is officially deemed cheaper than the potential gains from interest earnings. Hopefully,
Bangladesh will be able to invest more in the future with the CT’s growing "saved fund," even as
the "anticipated need for adaptation" significantly increases due to years of accumulated inaction.

The fixed deposits are primarily held in Padma Bank, among a few others. BCCTF officials
estimate about 1400 crore BDT (including principal and interest) is kept in these banks as fixed
deposits, with the expectation that the funds are secure. Recently, this bank is under investigation

White Paper on State of the Bangladesh Economy 304

the Anti-Corruption Commission for embezzlement of funds389. Since its inception, the BCCTF has
managed approximately 4000 crore BDT (both disbursed and deposited in banks).

Since 2019, a review of completed projects by the BCCTF shows that approximately 55% of the
budget was allocated for the installation of solar streetlights, about 20% for greenhouse gas
(GHG) emission reduction and environmental development, and the remaining 25% aimed at
adaptation efforts. This allocation has faced criticism from participants during consultations, as
well as from the BCCTF itself. Transparency International Bangladesh (TIB) reported that around
54.40% of the approved funding for seven mitigation projects funded by the BCCTF was
misappropriated due to various irregularities and instances of corruption (TIB, 2020).

With the quality of fund usage under scrutiny (Pervin, M., et al., 2019), there has been a gradual
decline in confidence regarding the government's ability to manage these resources effectively.
This has led to donor fatigue, resulting in the withdrawal of support from the Bangladesh Climate
Change Resilience Fund (BCCRF) by various donor organisations. This situation highlights that
transparency and governance are critical issues that Bangladesh must address if it hopes to regain
access to these vital funds.

Accessing International Climate Fund

Financing has remained a major stumbling block. No land scape financing information is
available. Information on climate finance in ODAs or any bilateral or multilateral finance is not
available with ERD.

Green Climate Fund (GCF)

The Green Climate Fund (GCF) is the largest window for accessing designated global climate fund
which is bounded by the principles of Paris Agreement, mandated to support developing
countries raise and realise their National Determined Contributions (NDC) ambitions towards
low-emissions, climate resilient pathways. The process of accessing the fund from GCF is
completely country driven; and there is no Cap/ floor/ ceiling for funding requirements of a
country. The National Designated Authority (NDA) for GCF in Bangladesh is ERD; two institutions
could secure the accreditation of GCF as DAE (PKSF and IDCOL).

Bangladesh have secured Nine projects from Green Climate Fund (GCF), where total GCF
Financing is 441.2 million US. Given that GCF follows a country driven process, Bangladesh is one
of the most successful countries to receive endorsement of projects from the Green Climate Fund
(GCF) and could succeed in securing its largest project from GCF for Mitigation (about fifty-eight
per cent of total investment size of GCF projects in Bangladesh). Despite the fact that the country’s
need for adaptation is paramount, she received an overwhelming majority of GCF financing for
mitigation – a result which is counter intuitive!

Bangladesh applied (Direct Access Entity: PKSF) for less than 10 million grants from GCF
addressing FLOOD (SAP008: Extended Community Climate Change project -Flood) which
followed the community based Adaptation (CBA) approach and could secure a project worth 13.3
million (of which 3.3 million is co-financing as loan).

The prevailing trend in adaptation financing testifies Bangladesh’s inadequate preparation.

While flood appears at the headlines of global media along with the country’s name more
often than other topics, the country placed a very modest request of US$9.9 million for a
flood-related adaptation project to GCF. The national preparation was so poor that the

https://www.thedailystar.net/news/bangladesh/news/acc-summons-ex-padma-bank-chairman-
389

embezzlement-charges-3735256

White Paper on State of the Bangladesh Economy 305

proponents and the National Designated Authority could not find a holistic ground to
accommodate the multi-faceted hazard such as flood and the only sub-component they found
to place was focusing on supply of tube wells at certain heights in a few selected flood
vulnerable areas of the country. The price tag was unacceptably poor, the issue could have
been solved any given day with own financing, and the coverage was unacceptably poor! The
climate financing completely has lost its focus, where greater institutional preparation and
analysis is necessary.

Though GCF does not have a country Cap for financing, however, Bangladesh Needs to carefully
design its country pipeline taking into account the issue of quality (going for projects with
sustainable solution which might be beyond the country’s capacity) versus quantity (no of
projects). Programme based approach can be designed with a longer term vision.

Climate Change relevant budgetary promises without any reference on

benchmarks/thresholds

Finance Division of Bangladesh Government has been publishing Climate Budget since 2017-18.
Till 2024-2025 FY, 25 ministries have published their respective climate budget (attribution of
climate change and related budgetary allocation). Ministries insert their respective climate
budget in IBAS++ system. Some of the Ministries/ Departments have their own procedure of
allocating a portion of their allocation addressing CC (i.e., LGIs). This part is mostly done with
arbitrary hypothetical assessment of climate attribution without proper knowledge base, without
identifying climate threshold. There has been clear idea on CC designated programs (CC rationale
is not clear though), however, there has little knowledge on additionally. This understanding
drives to the discussion on ‘Additionality’ and ‘Full Cost’, which have been a major issue in
accessing international climate finance.

There have been hardly any Knowledge Driven Exercise to devise Climate Change Budget in
Bangladesh.

The Need for Transparency, Governance, and Local Expertise

There are few takeaways from the discussion presented above. First, both environmental and
climate change consequences are heavy on Bangladesh. Corruption, inaction, nepotism and also
policy mismatch deprived Bangladesh of accessing funds from global sources. This is despite the
fact that many of the international donor communities consider Bangladesh as one of the most
vulnerable countries from climate change in the world.

Mishandling the climate trust fund is an indication that Bangladesh needs to develop
transparency in terms of using public funds. Political patronage of contractors, linkages of many
NGOs to the family and relatives of the politicians and also of bureaucrats pushed Bangladesh to
misuse public funds (Bae, S. M.et al.,2022).

With more focus given on climate change in the global arena and even with name change of the
Ministry of Environment and Forests as the Ministry of Environment, Forest and Climate Change,
environment became a foster child and received less attention from the DoE. As such, Bangladesh
lost its rivers and hills to encroachers, water is polluted and ground water depleted.

The misuse of trust fund led many to question ability of the government to handle them well and
many donors lost interest to contribute to the BCCRF – a fund targeted to build resilience into its
economy. Some calls it as mistrust fund.

Bangladesh very quickly adopted all the international agreements without a homegrown analysis
with local experts. Most of the actions following an agreement were drafted with finance from

White Paper on State of the Bangladesh Economy 306

international sources like UNDP, WB, JICA and others. This meant that even the government
positions on climate and environment issues were technically drafted by foreigners or their
consultant. Bangladesh must develop its own set of experts who would regularly advice the
Ministries of the strategy of the country rather than being drafted by donors.

White Paper on State of the Bangladesh Economy 307

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 D. INSTITUTIONAL

White Paper on State of the Bangladesh Economy 310

Chapter XIX. Mega Concerns of Megaprojects*

19.1: Context, Concerns and Questions

There is no doubt that public infrastructure system that includes transport links, power and
energy, telecommunications, digital networks, water and sanitation, and social services, such as
health and education, serves as the foundation for economic development of any country. This is
more so for countries such as Bangladesh which are at the take off stage of development. Over the
recent past years, the government of the day made significant investments in public
infrastructure projects (PIPs), embracing various sectors of the economy. As part of this,
formidable resources were spent for implementation of a number of largescale projects,
popularly known as megaprojects390, which were expected to contribute to Bangladesh’s socio-
economic development and improve the delivery of various public services.391

However, there are serious questions as regards the quality of governance of implementation of
many such PIPs, their justification, viability, costing and financing, returns, and implementation
governance. Because of the scale of the resources deployed, the megaprojects have come under
particular scrutiny in this backdrop. Based on an in-depth review and scrutiny of a selected set of
such projects392, this chapter makes an attempt to investigate the attendant concerns and suggest
corrective measures to ensure that such investments generate good value for money. The above
concerns are also informed by the fact that the entire ADP of Bangladesh, that includes
expenditure on megaprojects, is underwritten by borrowed money, either domestic or external
or both393. Indeed, almost all the megaprojects had significant external finance components. If
expected returns are not ensured, not only will the public be deprived of their expected benefits
and returns, but also the country could fall into debt trap which is often coterminous with middle-
income trap394.

Thus, the present chapter takes a critical look at the following concerns and issues: quality of
feasibility studies of the megaprojects; terms and conditions of loans; sequencing and phasing of
project related activities; implementation anomalies including procurement process; time and
cost escalation and their implications for estimates of returns on investment. Based on this
analysis, the chapter proposes a set of recommendations for actions.

*The chapter has been prepared by Professor Mustafizur Rahman, Distinguished Fellow, Centre for Policy
Dialogue (CPD).
390 According to General Economics Division (GED), projects which have financial involvement of more

than BDT 10,000.00 crores are defined as megaprojects. There are 29 such megaprojects whose total
budgeted amount is around BDT 780,000 crore (equivalent to about USD 87.0 billion, taking average
exchange rate over the duration of individual projects).
391 There is no doubt that some of these megaprojects will contribute to Bangladesh’s socio-economic

development. Also, these projects have stimulated growth of a number of domestic industries including
construction materials, rods and cement and others. Human capacity building and technology transfer
were some of the other positive externalities. However, no plan was put in place to take advantage of such
expertise, and for making use of this in a strategic way.
392 The findings are based on in-depth study of relevant project documents (feasibility studies,

development project proposals-DPPs, and revised DPPs), extensive discussion with officials of IMED
(Implementation, Monitoring and Evaluation Department-IMED- of the Planning Commission) and KIIs
with concerned stakeholders. Insights were drawn from relevant literature and reports by investigative
journalists.
393 Public and Publicly Guaranteed (PPG) debt, domestic and external.
394 In view of completion of the grace period (when only interest has to be paid) and start of repayment

period (when both interest and principal amounts are to be paid) of a number of megaprojects , the debt
servicing pressure is set to rise over the next few years. These concerns have been analysed and dealt
with in an in-depth way in the White Paper Chapter 2.

White Paper on State of the Bangladesh Economy 311

Table 19.1: Selected Megaprojects: Cost Escalation and Terms of Borrowings
Figure in
Figure in crore BDT Terms and Conditions
crore BDT
% increase
Grace/
from Share of Repay-
Initial Loan Signing Interest rate/ Service Repay-
Project Final Cost initial external ment
Estimated cost amount date Charge (%) ment
estimated loan Start
Period
cost
Padma Multipurpose Bridge Project 10,161.75 32,605.52 220.87% N/A N/A N/A N/A N/A N/A
14-Oct-16 2.0/2.0 5/15 2022
Multi Lane Road Tunnel under the river Karnaphuli 8,446.64 10,689.71 26.56% 6,070.01 56.78%
14-Oct-16 2.0/2.0 5/15 2022
20-Feb-13 1.0 10/30 2024
29-Jun-16 1.0 10/30 2027
Dhaka Mass Rapid Transit Development Project 21,985.07 33,471.99 52.25% 19,718.47 58.91% 14-Jun-18 1.0 FEF: 0.20 10/20 2029
12-Aug-20 0.65, FEF: 0.20 10/20 2031
29-Mar-22 0.70, FEF: 0.20 10/20 2033
Padma Bridge Rail Link Project 34,988.86 39,246.80 12.17% 21,036.69 53.60% 27-Apr-18 2.0/0.5 5/15 2024
SOFR+0. 6%+Adj% ,
21-Jun-17 5/20 2023
Comt 0.15
21-Jun-17 2.0 5/20 2023
Dohazari to Cox's Bazar Railway Track 1,852.35 18,034.48 873.60% 13,115.41 72.72% 23-May- 6 Months EURIBOR
5/20 2025
19 +0.6, Comt 0.15%
SOFR+Margin, Comt
25-Jun-23 5/20 2029
0.15%
Payra Deep Sea Port 1,128.43 4,374.47 287.66% N/A N/A
16-Jun-14 1.0 10/30 2025
29-Jun-16 1.0 10/30 2027
29-Jun-17 0.01, FEF-0.20 10/20 2028
Matarbari Ultra Super Critical Coal Fired Power Project 35,984.46 56,693.90 57.55% 47,945.03 84.57%
14-Jun-18 1, FEF-0.20 10/20 2029
30-Jun-19 0.9, FEF-0.20 10/20 2030
22-Nov-21 0.65, FEF-0.20 10/20 2032
Total (7 Megaprojects) 114,547.56 195,116.87 70.34%
Maitree Super Thermal Power Project 16,000.00 - 14,000.00 87.50%
15-Nov-13 LIBOR+(1 to 3) % 5/5 2019
Rooppur Nuclear Power Plant 113,092.91 91,040.00 80.50%
26-Jul-16 LIBOR+ 1.75 10/20 2027
Source: Based on relevant Project documents, IMED and ERD.

White Paper on State of the Bangladesh Economy 312

Table 19.1 provides some key information about a number of megaprojects which were
completed over the recent past years,395 or are currently in the process of completion. A number
of common features are discernible from the table: (a) almost all projects are underwritten by
significant external borrowings; (b) there has been notable cost escalation in case of majority of
the projects in the course of their implementation; (c) terms of borrowings of the projects are
rather stringent, as distinct from the ones which Bangladesh had traditionally received396; (d)
repayment periods of a number of megaprojects have either started or are set to start in the near
term future. This will entail a significant rise in the country’s debt servicing obligations.

19.2: Megaprojects with Mega Concerns

This section flags some serious concerns that are revealed from a close scrutiny of relevant
documents, consultation with government officials, FGDs, KIIs and review of relevant literature
and media reports.

Some Disquieting General Patterns in Project Implementation

IMED carries out regular evaluation of implementation of projects, on a selective basis, including
the megaprojects 397. Over the years, IMED reports have identified a number of weaknesses that
afflict the implementation of PIPs. A review of project documents, and insights from FGD and KIIs
substantiate the IMED observations. However, in most cases these observations, comments and
suggestions which were made year after year, was not followed up with concrete actions.
Accountability was not established, and there was no systematic and transparent mechanism for
follow-up actions to address the problems398.

The concerns in this backdrop may be grouped under three phases: (a) Project preparation and
approval phase; (b) Project implementation phase; and (c) Post implementation phase. These are
generic in nature which informed all PIPs including mega-PIPs (Box 19.1)

Box 19.1: Anomalies in Various Phases of Project Implementation

Project Preparation and Approval Phase

• Weak quality of feasibility studies
• Not following a comprehensive work plan when projects are implemented
• Not taking primary approval for land acquisition from concerned district administration with
adequate lead time prior to implementing the project which led to time and cost escalation
• Not adhering to the financial ceiling stated in the government’s own medium-term budgetary
framework (MTBF) while selecting the projects
• Not collecting baseline data of the concerned projects properly
• Not formulating an appropriate exit plan of the project
• Inaccurate assessment of the market needs associated with the projects
• Influencing implementation of “pet projects” of vested groups
• Inordinate delays in processing and approval of projects by involved ministries and international
funding agencies.
• Not developing alternative scenarios

395 These were selected on the basis of their importance for the economy and by keeping in the purview of
sectoral diversity, and with a view to identify the diverse range of anomalies afflicting the megaprojects.
396 When Bangladesh was a low-income country (LIC), prior to its middle-income graduation (in 2015),

most loans were incurred on highly concessional terms.

397 IMED, because of its various institutional and capacity constraints, is able to undertake monitoring and

evaluation of only a select set of projects.

398 Reports prepared by the Office of the Controller and Auditor General (OCAG) also pointed out many

financial anomalies, with similar outcomes.

White Paper on State of the Bangladesh Economy 313

 Project Implementation Phase
• Multiple project revisions and cost revisions during the project implementation life cycle
• Not implementing project according to the work schedule and procurement plan mentioned in the
DPP
• Coordination failure involving the various project implementation agencies at the field level
• Weak state of transparency and accountability in project management
• Not holding Project Implementation Committee and Steering Committee meetings on a regular basis
• Knowingly allowing sub-contracting by the principal contractor which undermined both quality of
implementation and accountability
• Frequent requests on the part of concerned contracting agencies to extend project completion
timeline which led to time overrun and cost overrun
• Fragmentation of implementation responsibility involving concerned government organisations
and agencies

Post-Implementation Phase
• Not submitting Project Completion Report (PCR) to the IMED within the stipulated three months period
following project completion
• Lack of adequate budgetary allocation for maintenance of the project following project completion
• Lack of proper preservation and supervision of the infrastructure and related equipments used in a
project
• Absence of the required skilled human resources for managing PIP implementation which leads to
signing of long-term service agreements with foreign contractors
• Not having a system in place for assessment of returns for the megaprojects following a stipulated
period, and juxtaposing the results with those in the DPPs and RDPPs

Source: Based on review of various documents and the study by Rahman and Farabi (2023).

Feasibility Studies Not up to the Mark

A common feature of almost all megaprojects is that these had to be revised multiple times. Poor
quality of feasibility studies was a key reason for many of the attendant anomalies. Concerned
Ministries often did not have the required expertise to assess feasibility studies and veracity of
returns estimates carried out for complex megaprojects. Frequent course corrections in project
design led to time escalation as also cost escalation399. It was found that subsequent procurement
process (as per revised stipulations in the RDPPs) was not carried out as rigorously as in case of
the initial ones. An example is the Matarbari 1200 MW Ultra Super Critical Electricity Plant, but
this was a common phenomenon400 (Ali, 2021).

A study finds that about 86.4% of projects experienced either time or cost escalation or both
(Iqbal et al., 2023). The consequent time overrun, and cost overrun undermined the viability of
the projects401.

399 Project Appraisal is a general practice which involves a comprehensive analysis of a project’s various
aspects: Economic, Financial, Technical, Social, Management and Environmental factors. However, when
projects were significantly revised, this exercise was not carried out by independent experts and with due
rigour.
400 Final estimated cost of the Matarbari project was BDT 35,984 crore. This was subsequently revised

upward to BDT 52,388 crore (by 45.6%). It was found only afterwards that the initial estimates as
regards the length of the approach channel was significantly lower than what was required, 14.3
kilometre as against 3.0 kilometre. Also, capacity of transmission lines had to be increased significantly.
Estimates of width and depth also proved to be faulty (Ali, 2021).
401 Indeed, the need for mid-course corrections emerges as a pattern for almost all megaprojects. Initial

‘low’ estimates of project implementation are subsequently pushed up significantly, with procurement
process lacking proper scrutiny in the subsequent process of implementation, in the rush to complete the
projects. In the end, all these resulted in returns from investment being significantly reduced and viability
of project being seriously undermined.

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Time Overrun and Cost Overrun

Figure 19.1: The Vicious Cycle of Cost and Time Overruns402

Significant time and cost overruns are common features of Bangladesh’s megaproject
implementation scenario. The first seven projects mentioned in Table 1 show a staggering cost
escalation of BDT 80,569.3 crore or by 70.3 % between the first DPP and the last revised DPP403.
Since, some of the projects are yet to be completed, in all likelihood, the project expenditures are
expected to escalate further when final cost figures will be available. No doubt, sometimes, there
are valid reasons for, at least part of the cost escalation404. One caveat though. If such significant
changes in the project design had to be made (oftentimes immediately following initiation of the
project), then these should have been anticipated earlier405.

402 Time and cost escalation estimates are based on latest revised DPPs. In actuality, the figures may rise if
these go up further in the process of implementation of the ongoing (incomplete) projects.
403 A report published in the Share Biz estimates that in case of 10 megaprojects, the projected expenditure

increased by BDT 91,451 crore (or by more than 65% of the original cost).
404 For example, in case of Padma bridge, the provision for rail link was added later; in case of Dhaka-Mawa-

Bhanga link, a second project was added later; and in case of the Cox’s Bazar-Dohajzri Rail link, the initial
project was significantly revised. Whenever, revisions were carried out, new components were included,
oftentimes without proper justification. For example, in case of the Padma Bridge, an allocation of BDT
127.0 crore was made for the component ‘Approach Roads’ (including toll plaza and public facilities) in the
2010 proposal. Subsequently, in October 2015, the previously mentioned component was renamed
‘Approach Roads, Servicer Area, and Selected Bridge End Facilities, ESST (Engineering Support and Safety
Term)’ and an allocation of BDT 2,109.0 crore was made for this revised component.
405 For example, Dohazari to Cox’s Bazar rail connectivity project was revised a short time after the initial

DPP was formulated. The project cost was revised from BDT 1,852.3 crore to BDT 18,034.5 crore, an
increase of whopping 847%. This also begs the question as to why the costly initial feasibility study was
undertaken in the first place. Indeed, as a result, the rates of return of the project had come down

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 To recall, there are many provisions, regulations and standard operating procedures (SoPs) in
place in Bangladesh to ensure that good governance is maintained at the various stages of project
implementation406. However, a review of documents, FGDs, KIIs indicates that the relevant
provisions were often not followed in many instances. While some external partners tended to
insist on following the stipulated provisions,407 others were not as scrupulous. In case of a number
of projects, these guidelines could not be followed also because of specific terms of the concerned
loans (e.g. single country bidding which was the case with Chinese supported loans for Padma
Rail Link Project and Karnaphuli Tunnel as also projects under Indian Lines of Credits-LOCs).

Questionable Estimates of Returns

Table 19.2: Estimates of Financial and Economic Returns

Figures in crore BDT IRR (in %) BCR NPV
Project Financ Econo Financ Econo
Name DPP 1st RDPP 2nd RDPP 3rd RDPP ial mic ial mic Financial Economic
Padma
Multipurp
ose Bridge
Project 10,161.8 20,507.2 30,193.4 32,605.5 5.8 22.0 - 2.1:1 - 2,268m USD
Multi
Lane Road
Tunnel
under the
river
Karnaphul
i 8,446.6 10,374.4 10,689.7 - 6.2 12.5 1.05:1 1.5:1 35.0m USD 302.5m USD
Dhaka
Mass
Rapid
Transit
Developm
ent BDT 647.0 BDT 13628.4
Project 21,985.1 21,985.1 33,472.0 - 1.8 13.4 1.17:1 4.52:1 crore crore
Padma
Bridge
Rail Link 1.005: BDT 304.0 BDT 3156.2
Project 34,988.9 39,246.8 - - 15.2 16.6 1 1.16:1 crore crore
Dohazari
to Cox’s
Bazar via
Ramu and
Ramu to
Ghundum
near BDT 114.0 BDT 955.8
Myanmar 1,852.3 18,034.5 - - 16.3 26.5 1.07:1 1.44:1 crore crore
Source: Based on Feasibility Studies, DPPs, Revised DPPs of concerned projects, IMED.

significantly: Benefit cost ratio from 1.44:1 to 1.09:1 and Economic IRR from 26.49% to 16.43% (at 15%
Discount rate).
406 For example, the Bridges Division which has been in charge of implementing such projects as the Padma

Bridge, Karnaphuli tunnel, Ashulia Elevated Express, Dhaka Elevated Expressway (PPP) etc. have many
regulations and provisions in place to ensure good governance in implementation of projects under its
purview. Contract modality is supposed to follow international guidelines stipulated under FIDIC
(International Federation of Consulting Engineers) and the PPRs are supposed to be developed in
compliance with FIDIC including tender notification, tender evaluation and work orders and Engineering
and Procurement Contract (EPC). In case of complex projects, pre-Feasibility studies are to be carried out
to assess viability of the projects. There are also provisions for wide-ranging consultations and
Independent Tender Evaluation Committees.
407 The saga with the World Bank as regards the Padma Bridge is a well-known case in point.

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Estimates of returns on investment as regards projects in general, and megaprojects in particular,
are critically important from the perspective of justification of a project408. However, these
sometimes tended to be not carried out with the rigour that the task demands. For example,
although construction cost of Karnaphuli river tunnel escalated by 26.5% between the DPP
(2015) and RDPP (2022), there was no change in the original estimates of financial analysis- the
benefit cost ratio (Financial: 1.05:1; Economic: 1.5:1) and IRR (Financial: 6.19%; Economic:
12.45%) as also estimates of the NPV remained unchanged409.

The way cost-benefit analysis was carried out for long-term projects is also questionable and
merits serious review and reconsideration. Cost estimates were done at constant prices, while
benefit estimates were carried out on the basis of nominal prices. Oftentimes, returns were
estimated without consideration of the time lag in the generation of benefits.

High Construction Cost

Table 19.3: Construction Costs of Per-Kilometre Four-Lane Urban Arterial Road

Country Bangladesh China India Pakistan Indonesia Philippines Turkey
Cost 6.35 3.90 1.45 2.95 2.15 1.15 1.70
(In million.
USD)
Note: Costs include those related to traffic-controlled intersections
Source: Asia Infrastructure Investment Bank (AIIB) (2019).

Construction costs in Bangladesh were higher while quality of construction tended to be lower.
For example, as is borne out by Table 19.3, per kilometre four-lane urban arterial road in
Bangladesh was found to be 4.4 times higher than India, and 2.15 times higher than that of
Pakistan. Per kilometre cost of construction of the Rangpur – Hatikumrul four-lane transport link
has been estimated to be USD 6.47 million per kilometre; corresponding cost for the Dhaka-
Sylhet Highway was estimated at USD 7.06 million per kilometre (Rahman, 2022). Per kilometre
cost of Dhaka-Mawa-Bhanga four-lane Highway Project was set at BDT 113.7 crore 410(Ali, 2021).
Whenever these discrepancies were pointed out in the past, a number of reasons were often cited
as contributing factors: high cost of land acquisition in Bangladesh; the need to import a large
part of the machineries and equipments; the high import tariffs; the special demands arising from
construction in flood plains environment. However, various IMED reports, reporting by
investigative journalists, and close scrutiny of project documents including feasibility reports,
DPPs and revised DPPs indicate that such large discrepancies cannot be explained and

408 While some of the positive (and negative) externalities are not easy to capture, there are
methodologies to incorporate these in the estimates.
409 In case of Padma Bridge as well, the estimates of returns (EIRR: 22%; FIRR: 5.8%; BCR: 2.1:1; NPV: USD

2,268.0 million) remained the same in the DPP (July, 2007: estimated cost of BDT 10,161.75 crore), first
RDPD (December, 2010: BDT 20,507.20 crore), Second RDPP (October 2015: BDT 28,793.38 crore) and the
third RDPP (April 2023: BDT 32,605.51 crore), although there were significant changes in design, not to
speak of high cost escalations. It is also found that the estimates of returns (FRR and ERR, and BCR) tend to
vary widely in the feasibility studies carried out by different agencies. For example, in case of Padma
Multipurpose bridge, (as reported in the DPP) JICA Feasibility Study (this being carried out in 2015)
estimated FIRR as 10.28% vs ADB’s 5.83%; for EIRR the JICA estimate was 14.80%; while according to
ADB’s feasibility study (2006), this was 17.6%. The estimates of Economic Benefit Cost Ratio in the two FSs
were 1.38:1 and 1.92:1 respectively. Net Present value (economic) was reported as BDT 10,771.01 million
and BDT 45,885.0 million respectively. On the other hand, the DPP figures (carried out in 2007), as have
been mentioned above, varied significantly from these. Greater transparency about these numbers and the
assumptions underlying the estimates and the reasons for the discrepancies will, no doubt, lead to
improved governance, particularly in view of assessing viability of megaprojects.
410 It was also found that, in estimating costs, the high unit price of earlier similar projects was sometimes

taken as reference point without proper scrutiny and justification.

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substantiated fully even after considering these factors and factoring in the distinctive
features411of construction in the Bangladesh context.

The Dhaka-Chattogram Highway Project could serve as yet another case study in view of the
above412. IMED report as regards the project noted the following: (a) quality of feasibility study
of the project was not up to the mark. The highway lacks separate lanes for slow moving vehicles.
There was no proper underpass or footbridge for road crossings; (b) the DPP had serious
shortcomings that caused subsequent amendments resulting in cost and time escalation; (c)
bitumen used for construction was not of right specification; (d) initial design of the project did
not anticipate large maintenance work for the first ten years. However, soon after construction,
the R&HD proposed a BDT 739.0 crore project for repair and maintenance, which in part was
necessitated by wrong forecast about traffic (traffic was estimated to rise by 6% per annum; the
initial estimate was 16,485 vehicles /day, it actually rose to 32,000/day in 2018; (e) load
estimation was inaccurate; (f) PDs were changed 12 times in the course of construction of the
highway which led to delays in construction and cost escalation.

While many such observations were made time after time, often by the IMED itself, for projects
after projects, the state of affairs continued to remain more or less the same413.

Non-competitive Bidding Process

Analysis of E-Government Procurement (EGP) data carried out by the TIB indicates that, top 5%
of companies were awarded 307 contracts with a value of 68% of the total contracted amount.
TIB’s analyses of the bidding/tendering records, based on analysis of the EGP data, showed that
almost one-fifth of the project contracts (between 2012-2023) were of single-bid nature
(amounting to more than BDT 60 thousand crore). Megaproject contracts are not done through
EGP-often complexity of contract is mentioned as the key reason (TIB, 2023). There is a need to
bring greater transparency in project biddings and procurement. Tenders were often designed in
a way that only a few selected companies are able to submit bids, leading to the possibility of
collusive behaviour in pre-submission phase, as revealed by KIIs414.

Corrupt Practices

A TIB report which reviewed 48 projects found that a staggering amount of more than BDT 50
thousand crore (or 40.0% of the allocations going to the RHD over the past 15 years) was
misappropriated through various forms of manipulation415 (The Daily Star, 2024). A review of

411 For the Dhaka-Mawa-Jessore rail link, the per kilometre cost was set at BDT 207.3 crore. At the time
(2016), this kilometre-wise cost was the highest in the world, according to investigative journalists. To
note, at the time, the per kilometre cost of high-speed rail in India (Mumbai- Ahmedabad) was estimated at
BDT 118.0 crore and in China at BDT 73-75 crore. Compared to Delhi and Mumbai, per kilometre costs of
construction of metro line in Bangladesh were found to be 2-3 times higher.
412 The project was approved by ECNEC in 2008. Physical work was undertaken in 2010, and the project

was planned to be completed in 2012. It was actually completed with a five-year delay with cost
escalation from BDT 2,168.4 crore to BDT 3,439.2 crore (IMED, 2019).
413 To be true, some actions are taken to address a number of attendant concerns. However, many of the

embedded problems remained unaddressed.

414 The current system of ± 10% range as regards tender price (which is invariably leaked out and is taken

advantage of by contractors) also led to collusive behaviour on the part of potential bidders. Insider
information problem remained endemic.
415 These included –cost escalation (to the tune of 25% to 30%), collusion among politicians, middleman

and contractors, sub-standard delivery of outputs and compromised standards, and a host of other
irregularities. Renting of licenses from principal contractors, purchasing of work order from contractors
and obtaining sub-contracts unlawfully, collusion among competing bidders etc. were widespread
practices.

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project documents shows that major cost escalation took place because of land acquisition. It
appears that once the project plans are known, land prices get pushed up and by the time RDPPs
are put into effect, land acquisition costs tend to go up significantly416. Insider knowledge allows
vested groups to take advantage of this. For example, the land acquisition cost of Dohazari to Cox’s
Bazar Rail Track and the Multi-Lane Road under Karnaphuli Tunnel increased by 12 times and
4.7 times respectively, from the initial DPP to the last revised DPP.

Problems of Phasing, Sequencing and Pacing

Oftentimes projects turned out to be less viable than was originally envisaged because of lack of
proper sequencing, pacing and phasing. For example, in case of Karnaphuli tunnel, the projected
vehicular movement was estimated based on a number of assumptions which included setting up
of the Chinese Special Economic Zone in Anowara417. The SEZ was expected to generate enough
traffic for the Chattogram and Matarbari seaports, using the tunnel. This was expected to make
the project viable418. When the SEZ was not established, the vehicular projection proved to be
unjustified, putting under question the viability of the project itself419.

Similarly, the economic viability of Padma bridge and rail link was critically dependent on
translating these transport corridors into economic corridors. For this to happen, establishment of
the 17 special economic zones in southern Bangladesh and largescale investments in the
economies of the southern districts were planned; Sub-regional cooperation with India, Nepal
and Bhutan, by taking advantage of BBIN-MVA and other initiatives were expected to play a key
role in this. However, while the rail link project has been completed, the other planned activities
are yet to be launched420. This obviously undermines the returns envisaged under the project,
undermining its viability.

Concerns Regarding Suppliers’ Credit

In recent years, a number of megaprojects were (and are being) implemented with suppliers’
credit. However, often this type of credit tended to be pushed by interested parties (companies,
countries), although these were not aligned with national priorities as spelt out in plan and
strategic documents. Terms and conditions of such loans also tended to be more onerous. For
example, construction of Padma rail link and Karnaphuli tunnel projects, financed by Chinese
credit, came with a number of conditions which pushed project costs up421. Interest rates of some
of these loans were on unfavourable LIBOR/SOFR terms422.

416 As is known, land is acquired by the government at three times the prevailing market price. This creates
enticing opportunities for unscrupulous land speculators, often political operators and politically
connected people, to go for speculative purchase of land.
417 On the other side of the river Karnaphuli.
418 The projection as regards number of vehicles using the tunnel was 20,719, while the actual number at

present is about 4,600 (The Business Standard, 2024).

419 This resulted in a situation where income from the tolls is even lower than the cost of maintenance of

the tunnel!
420 Yet another example is the Rooppur Nuclear Power Plant. The transmission lines to evacuate the power

are yet to be in place although the plant is expected to be in running condition soon.
421 Conditionality of high percentage of procurement from the providing country, restricted vendor

selection (often single country) and highly limited tendering process. This is also applicable for Indian lines
of credit (LoCs).
422 For a number of such megaprojects, the interest rates (e.g. for Dohazari-Cox’s bazar rail line and

Rooppur Nuclear Plant) were negotiated at LIBOR/SOFR. Because of the wide fluctuations in LIBOR/SOFR,
over the last few years, there is a significant degree of uncertainty about interests to be paid when these
are incurred on flexible terms.

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Lack of Transparency and Accountability

A key reason that fuels corruption in megaproject implementation is the wide-ranging lack of
transparency as regards the way feasibility studies are carried out and project plans and
documents are prepared. These can be accessed only by a fortunate few. Feasibility studies and
DPPs of megaprojects are not made publicly available. Open source would have allowed proper
scrutiny by independent experts and interested public in general as regards justification of
projects, costing and cost allocation, cost escalation, viability, and estimation of returns.

19.3: Going Forward

Taking cue from the findings presented in the preceding sections, the following suggestions are
made.

Undertake More Rigorous IRR, CBR and NPV Estimations

As was noted, there are several questions as regards the veracity of estimation of returns on
investment and CBRs. This needs to be done in a more rigorous manner since the implications
could be highly consequential for the economy from the point of view of spending taxpayers’
money and debt repayment obligations. This also had important significance for tariffs to be fixed
for the services delivered (e.g. toll rates, energy prices, and prices of utilities), debt servicing and
debt carrying capacity of the country. Such practices also undermine the cause of good
governance, accountability and transparency in mega-PIP implementation. These concerns need
to be addressed with due urgency.

It is critically important to re-estimate the returns when projects are subsequently revised and
costs go up, to assess whether the concerned project no longer remained viable. At the feasibility
study stage, sensitivity analysis should be carried out to understand the implications of cost
escalation for expected benefits in order to assess financial and economic viability of the project.
A review of project documents including DPPs and Revised DPPs indicates that in case of majority
of megaprojects, this was not done423. Going forward, when projects are revised, re-estimation of
the initial economic and financial returns and cost-benefit ratios should be made mandatory in
order to have a clearer understanding of the viability of particular projects. A good way to go
forward could be to compare with cost estimates of neighbouring countries and justify, in a
concrete manner, the reasons for deviations and cost escalation424.

Strengthen the Procurement System

As was noted, there are number of concerns regarding procurement and bidding processes. A
tiered system (depending on the contracted amount), allowing greater flexibility in bid
submission, needs to be considered to encourage more competition in the bidding process425. A
strategy needs to be developed for creating opportunities for a more competitive bidding process
through proper division of labour and apportioning of job orders. The E-procurement system

423 The pattern that emerges to justify projects on the basis of initial lower budget and the high estimates
of returns, and then go for approval of cost escalation (time extension for initiation/ completion of
projects serving as a good excuse), without revisiting the initial return estimates which, in all likelihood,
would have been on the lower side.
424 That time overrun and cost overrun can be avoided has been proven by the fact of the recent

renovation work of metro station with far lower cost and far less time than were projected under the
previous government.
425 As was noted earlier, in many cases the jobs awarded to original contractors was subsequently sub-

contracted to others (often involving multiple layers) who carried out the actual work. This significantly
raised the costs and undermined the quality of the work that actually got done.

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needs to be further strengthened towards this, and the provisions should be strictly enforced426.
There should be measures in place to guard against collusive behaviour among potential bidders.

Carry Out Proper Impact Assessment

There should be a regular system of impact assessment, following a certain period after
completion of megaprojects. Actual returns should be compared with those projections in the
feasibility studies to draw insights as regards lessons and learnings. Although introduction of
Result-based Management (RBM) was mentioned in several budget speeches, this was not
appropriately followed up. This should be done now.

Bolster IMED Capacity

IMED faces various constraints in carrying out its mandated responsibilities. The ongoing
decentralisation of IMED functions needs to be strengthened further, with adequate human
capacity and financial support towards more effective monitoring and evaluation works. Internal
monitoring and assessment capacity of major spending Ministries also need to be strengthened.
Lab testing capacity and professional development programmes need to be strengthened.
Policymakers may think of strengthening IMED’s autonomy and independence. The EPMIS tool
for real-time monitoring by the IMED should be operationalised, with adequate human resources
and due urgency. Also, a move from manual submission to e-submission through Project Planning
System (PPS) needs to be put in place at the earliest427.

Carry Out Rigorous Debt Stress Test

One lesson with regard to going forward in view of large-scale projects is to undertake debt stress
test, from a macro perspective, to avoid any likelihood of unsustainable debt servicing obligations
in future. As has been the case, as regards some projects, because of delayed implementation,
repayment had already started even before project completion, resulting in onerous debt
servicing burden. Some development partners financing a major part of the costs of implementing
various megaprojects 428 tended to not consider the country’s debt-carrying capacity in a proper
manner. While this remains a question, Bangladesh’s concerned institutions should do it on their
own. Bangladesh’s middle-income graduation and the consequent predominance of non-
concessional loans need also to be taken into cognisance in this connection.

Consider the Impact of BDT Depreciation

All the estimates of financial analysis (NPV, cost-benefit ratio, IRRs) need to be re-assessed in
view of the recent significant depreciation of the BDT (since the time these calculations were
carried out in the first place). This will give a more accurate picture of returns on investment.
National capacity building to carry out project feasibility studies and impact assessment exercises
ought to receive priority. For example, while implementing megaprojects in the railway sector,
coordination between construction, preparing human resources, acquiring carriages and
locomotives etc. was found to be lacking, which delayed operationalisation of the projects. This
also reduced the viability of projects.

A large number of ministries and agencies are involved in the implementation of megaprojects.
When this is not well-coordinated, viability of the projects is reduced. In view of this, there is a

426 As regards the Sustainable Public Procurement Policy, while the guidelines have been prepared, act and
rules are yet to be formulated. These need to be done with due urgency.
427 Also, IMED’s existing evaluation format (A, B, C) should be revised to make it more meaningful.
428 Almost all megaprojects except the Padma Bridge have significant share of foreign loans.

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need to give emphasis on better coordination among all involved agents, by ensuring proper
accountability.

Make Project Documents Public

All project documents including feasibility studies, DPPs, RDPs and impact assessment studies
should be made public and posted on website of relevant organisations and the IMED429. These
projects are being implemented with taxpayers’ money, and the present generation and the next
generations will have to repay the debts. So, they have a right to know about project details. For
large-scale projects, there should be a system of public consultations and opportunities for closer
scrutiny by relevant experts (beyond the government-sponsored ones). IMED should carry out
independent assessment of project implementation, not selectively, but of all large-scale projects.
If required, independent experts should be hired for this. These reports should be subject to
public discussion and scrutiny. This would also have allowed for undertaking cross-country
comparisons early on.

Strengthen Borrowings Negotiating Capacity

In all likelihood, Bangladesh will continue to incur external borrowings to underwrite its various
projects under the ADP, including the megaprojects. Negotiating complex borrowings will call for
strengthening of institutional and professional capacities of concerned institutions including the
ERD. Following Bangladesh’s middle-income graduation, with the attendant greater complexity
of debt negotiations, this task has gained in importance430. This will be more so if Bangladesh
decides to renegotiate repayment of debts incurred on account of some of the megaprojects.

Due caution must be exercised in view of the volatility at LIBOR/SOFR in recent past years. In
which currency to negotiate the loans also merits closer attention since exchange rates of some
of the currencies tend to be more volatile than others. Currency depreciation and exchange rate
hedging will also become important.

Ensure Knowledge Transfer

While knowledge-sharing is mentioned in all the megaproject documents, this is not seriously
pursued. This results in many projects being managed by foreign implementing agencies
following project completion, adding to running costs. Megaprojects should have specific
components for this, with time-bound outcomes.

Megaprojects and Debt Management

Megaprojects, underwritten by significant amount of external resources, will need to be

completed as per loan conditions. However, in view of the likely repayment pressure, several
steps may be taken: (a) Take measures to complete the projects as per schedule since time and
cost escalation will raise debt burden. Cost estimates for future works should be carefully
reviewed to bring the projected expenditure down431; (b) In case of implementing additional
components, cost estimates of earlier components should not serve as reference points for project

429 These were not available in the past even by resorting to right to information (RTI) act.
430 ERD has developed a formula to calculate degree of concessionality of loans (whether a loan is
concessional or not). Loans exceeding the threshold of 25.0% is considered to be non-concessional. This
needs to inform debt negotiation and done connection applied. Some of the loans (e.g. Rooppur nuclear
power plant) has been negotiated at SOFR plus interest rates.
431 Under the Interim Government, concerned authorities have significantly brought down the

expenditures projected earlier for residual work, for a number of projects under implementation
including energy, metro rail project, and construction of bridges.

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cost estimation432; (c) The Interim Government may consider opening consultations with
bilateral and multilateral partners (underwriting megaprojects) for deferment of repayments and
extension of grace period and repayment period.

Consider OECD Framework for Project Implementation as Reference Point

The OECD framework for good governance in project implementation, with its 10 pillars and 47
indicators, could serve as a good reference point to develop a customised framework for
Bangladesh to design, track and monitor implementation and ensure good governance in
implementation of PIPs, including megaprojects. This will help put in place a cost-effective,
accountable and transparent PIP implementation that guarantees good value for money433.

Concluding Remarks

Megaprojects, as also other projects, are implemented with taxpayers’ money. While many such
projects are necessary for Bangladesh’s current and future development, due diligence must be
exercised to ensure good value for money in their implementation. The preceding sections have
revealed many anomalies which will call for urgent attention on the part of the Interim
Government.

432For example, before going for metro rail extension, there should be a thorough review of the proposal,
feasibility study and cost estimates associated with earlier phase of the metro rail project. Cost
comparison with similar projects in neighbouring countries may also be considered.
433 A system of community monitoring of projects (which was earlier tested on the ground by the
planning commission on a pilot basis) may also be considered in this connection.

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References

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White Paper on State of the Bangladesh Economy 325

Chapter XX. The Malignancy of Illicit Financial Outflows*

20.1 Rationale of the Exercise and Magnitude of Concern

Over the recent past years, illicit financial outflows have emerged as an alarmingly growing
phenomenon in Bangladesh, a malignant tumour that was devouring a significant part of the
country’s economy and wealth434. Such outflows constituted a complex web of shadow economy
that thrived on criminal activities of diverse nature and drew sustenance from an unholy alliance
of sections of corrupt politicians, businessmen, financial players, middlemen, government
officials, influence peddlers and wheeler-dealers of different types. By taking their ill-gotten
resources out of the country, through various illicit channels, these people did enormous harm to
the country’s economy and undermined its development potentials. They worked in connivance
with and corrupted the country’s executive, legislative, financial, legal, and other institutions,
undermined domestic investment and revenue mobilisation efforts, depleted forex reserves,
weakened the country’s macroeconomic management, and did serious damage to the cause of
good governance in all spheres.435

In the backdrop of the above, this chapter makes an attempt to understand the magnitude of the
laundered money from Bangladesh, identify sources and channels of illicit outflows, propose
measures to bring back the stolen wealth, and suggest ways to confront the attendant challenges
in going forward.

20.2 Origin and Magnitude of the Illicit Outflows

While the exact magnitude of illicit outflows is not easy to capture, for understandable reasons, a
review of relevant documents and consultations with concerned stakeholders provide some
indication about the magnitude of laundered money, origin of ill-gotten finances, channels of illicit
outflows, and the diverse range of assets in which these are then invested overseas436.

Origin and Forms of Illicit Outflows

Illicit financial outflows from Bangladesh originated in various forms- mostly through illegal but
sometimes also legal activities. A large part of laundered money was accumulated within the
country through a range of illegal and criminal activities e.g. bribe and corruption, financial
crimes, trade-mispricing, stealing of bank money and non-repayment of loans, rent seeking,

* The chapter has been prepared by Professor Mustafizur Rahman, Distinguished Fellow, Centre for Policy
Dialogue (CPD).
434 A recent survey among economists carried out by a local newspaper found that 42% of the respondents

felt that checking corruption and money laundering was the foremost concern, while the second-placed
inflation was mentioned by 25% (The Business Standard)
435 There is a demand on the part of the broad public to take proactive measures to attack the sources of

illicit money, bring the perpetrators to justice, and bring the stolen assets back to the country. Indeed, illicit
financial outflows have emerged as a global concern. As may also be recalled, SDG 16.4 sets the target to
‘significantly reduce illicit financial outflows, strengthen the recovery and return of stolen assets’.
436 As is known, in Bangladesh, BDT is convertible for purposes of current account (for undertaking trade

in goods and services) but not capital account, excepting in some selected cases. Since 2013, the Bangladesh
Bank took the decision for allowing (highly) limited capital account convertibility and gave permission for
investment abroad, in a case-by-case manner. However, till now, the amount of such legal transfers has
been quite insignificant: 17 companies, to the tune of about USD 70.0 million. Businesses are allowed to
send up to USD 30 thousand from export proceeds for office maintenance. Exporters are allowed to retain
a share of foreign currencies earned in forex accounts, for business purposes. Citizens can take up to USD
12 thousand each year for tourism and some defined amount for education and health purposes
(Bangladesh Bank, n, d.).

White Paper on State of the Bangladesh Economy 326

misuse of political power and influence peddling, over-costing of projects, share market scams,
exploitation of migrant workers, tax dodging, drugs and human trafficking, and a host of other
means. These sometimes also originate in earnings from legally earned sources (e.g. earnings
from business and professional activities carried out in the country; sales proceeds including
from the sale of inherited property), which are then taken out of the country through illicit
channels. These resources also include those that were supposed to be repatriated to the country
but are not (e.g. through export under-invoicing, remittance repatriation through informal
channels). These resources can also originate in illegal activities and deals within the country for
which payments are made abroad. While previously a large part of the ill-gotten money
originating in the country tended to be invested in the domestic economy, forming a sizeable
shadow economy, in more recent times, taking the money out of the country and keeping it
abroad, in financial and non financial assets, was considered to be a more secure way of
guaranteeing a safe haven for the ill-gotten money.

Magnitude of Illicit Flows

Attempts have been made by various entities such as Global Financial Integrity Reports (GFIRs),
Tax Justice Network and others to come up with an idea about the magnitude of illegal financial
outflows, both on global scale, and across countries. For example, successive Global Financial
Integrity Reports (GFIRs), based on a range of assumptions, and by deploying various analytical
tools, have attempted to estimate the amount of annual illicit financial outflows from various
countries including Bangladesh. An attempt has been made here to estimate the amount of illicit
financial outflows from Bangladesh between 2009 and 2023, based on GFIR data, and under
certain assumptions437. These estimates indicate that the amount of illicit outflows during this
period was in the range of about USD 234.0 billion, at an average annual outflow of about USD
16.0 billion (equivalent to about 180 thousand crore taka, on average, annually). This average
amount was equivalent to 3.4% of Bangladesh’s current GDP. In other words, this was about one-
fifth of forex earnings from export of goods and services and remittance flows to Bangladesh in
FY2023-24, and about 11.2% of the national savings. In other words, the amount of illicit
outflows, on average, was more than twice the net flows of foreign aid and FDI flows over the
corresponding period. This significantly high amount of illicit financial outflows estimated for
Bangladesh is not an outlier though. The United Nations Office on Drugs and Crime (UNODC)
estimates illicit financial outflows to be equivalent to about 2-5% of annual global GDP (or USD
800 billion-2000 billion). If taxed (at 25%) this would have generated revenues equivalent to
about 9.8% of total tax earnings (taking FY 2022-23 as the reference year)438.

Illicit financial outflows from Bangladesh were found to be destined to, or routed primarily
through UAE, UK, Canada, USA, Hong Kong, Malaysia, Singapore, India, as also a number of tax
havens. By remaining anonymous, individuals can use the laundered money to buy real estate or
funnel the funds through business operations. Global literature survey indicates that an
increasing amount of stolen money was being converted to real estate, business enterprises and
commercial activities of various kinds. Many corrupt Bangladeshis have taken advantage of this.
The indicative amount of illicit financial outflows from Bangladesh is also corroborated by a host
of other information: 532 property owners of Bangladeshi origin had real estate worth USD 375.0

437 The GFIR methodology is not above criticism. However, in absence of better data source we have used
this as the basis of our estimation.
438 We have taken the trend growth rate based on GFIR reports (2009-2013, 2015) and extrapolated this

up to 2023. The trade data has been taken from the IMF dataset. Bangladesh’s EPB stopped sending export-
import data to ComTrade since 2015, perhaps in view of the estimates of trade-mispricing that GFIR came
up with based on trade data provided by Bangladesh (and by comparing this with mirror data). We have
also normalised for the inflated export figures (that has been revealed in recent times). We have used the
GFIR coefficient of trade and non-trade (based on BoP leakage) illicit outflows to arrive at total outflows.
GFIR uses the share of trade and non-trade-based illicit outflows as 77:23.

White Paper on State of the Bangladesh Economy 327

million in Dubai (EU Tax Observatory, 2024). 459 Bangladeshis owned a total of 972 residential
properties in Dubai worth about USD 315.0 million439(Centre for Advanced Defence Studies-
C4ADS report, n, d). It has been estimated that USD 47-100 billion worth of money was washed
or laundered into Canada (2018) as a haven to conceal harmful and illegal financial activities (End
Snow Washing, n, d.). Till March 2024, Malaysian Second Homeowners of Bangladeshi origin
numbered more than 3,600440. Estimate of offshore financial wealth held by Bangladeshis was
about USD 8.15 billion in 2021 (EU Tax Observatory Report, 2023). Bangladesh currently ranks
52 among 141 in the Financial Secrecy Index441 (Tax Justice Network, 2023).

The deposited amount of Bangladeshis in Swiss banks increased from about BDT 8,988 crore in
2008 to BDT 31,238 crore in 2013. Since 2014, in the backdrop of the Swiss Bank’s policy shift to
disclose certain information about deposit holders, this amount has come down in recent years442.
There was hardly any effort from the Bangladesh side to get more information from the Swiss
authorities so that grounds could be created to investigate concerned individuals and entities
who have kept money illegally in Swiss banks. The decline indicates that concerned account
holders may have shifted their money to other less hazardous destinations or converted it to
other assets.

20.3 Channels and Process of Illicit Outflows

Illegal money originating in Bangladesh appears to have gone through two stages. In the earlier
stage, such financial resources constituted a significant part of the domestic economy in the form
of a shadow economy. In the later stage, a large part of such resources was transferred overseas
through various illicit channels. Bangladesh Financial Intelligence Unit (BFIU), other concerned
agencies and KIIs have identified a number of ways in which money is laundered: trade-based
money laundering; cash-based money laundering; laundering through the banking, financial and
insurance sectors; hundi/hawala channels; courier and carrier; electronic payment; payment
through debit and credit cards; bearer instruments; misuse of bank guarantee, correspondent
account, and brokerage account; gold smuggling; online betting; via capital market
intermediaries. Trade-Based Money Laundering (TBML) remains a key channel for laundering
money. This involves the illicit transfer of financial resources by falsifying the declared value of
goods on customs invoices. What also transpires from KIIs is that there is a close nexus between
import under-invoicing and hundi/hawala operators443.

439 To recall, Al- Jazeera has, in recent past, made a report on an ex-Minister residing in London whose
wealth was estimated to be about USD 675.0 million. Bangladesh Bank Governor stated that an estimated
USD 16.7 billion was spirited out of Bangladesh following illegal bank takeovers (The Daily Star, 2024).
440 Bangladesh’s position was fifth.
441 The index measures how intensively a country’s tax and financial systems serve as a tool for individuals

to hide their finances from the rule of law.

442 The Financial Express, 2024
443 Often, the shell companies set up abroad work as intermediaries, both for sending lower-priced

invoices and sending back the under-invoiced amount. Hundi/hawala channels are used for purposes of
sending the balance amount. An array of ways including short shipment, over shipment, and phantom
shipment are found to be deployed as tools for illicit outflows.

White Paper on State of the Bangladesh Economy 328

Figure 20.1: Main IFF types by nature of capital and mode of transactions

4
Laundering
Proceeds of
ILLEGAL Criminal Activities

LEGAL
Abuse of Power

Capital origin
3 Market/Regulatory Abuse
(e.g. Trade mispricing)

1 ILLICIT

Nature of Transaction ILLICIT

2
Tax Abuse

Source: Adapted from Cobham (2014).

Money laundering involves a complex web of activities. The money, originating primarily in illegal
activities, is then transferred abroad through illicit channels (Figure 20.1).

Process of Money Laundering

Laundering of money typically unfolds in three distinct stages: placement, layering, and
integration.

• Placement refers to the initial introduction of illicit funds into the financial system444.
• Layering involves strategic separation of these illicit funds from their sources445.
• Integration is the final stage, wherein the laundered money is returned to the original
beneficiary in a manner that appears legitimate446.

444 At this stage, involved players mobilise the ‘dirty money’ and convert this into forms that can be
deposited into banks or other financial institutions by transferring the money abroad in various forms
including through hundi/hawala and trade mispricing.
445 This is often achieved through a series of financial transactions that obscure the money's origin such

as transferring funds to offshore accounts controlled by shell companies. Complex arrangements such as
loans between shell companies and use of false invoices further complicate the money trail at this stage.
446 At this point, the funds can be utilized for various purposes, including acquisition of luxury assets or

investments in legitimate businesses.

White Paper on State of the Bangladesh Economy 329

Figure 20.2: Cycle of Money Laundering

Source: United Nations Office on Drugs and Crime (UNODC).

A veritable industry has developed in major centres of money laundering that include
hundi/hawala, invoice consultants, agents and aggregators, specialised consultants to help set up
shell banks and shell companies, investment consultants, legal experts and lawyers. The
Hundi/Hawalas provide door-to-door service which banks and exchange houses are not able to
do so.

Trade-Based Money Laundering

Trade misinvoicing remains a major route of illicit financial outflows from Bangladesh, through
both over and under-invoicing in cases of both exports and imports.

White Paper on State of the Bangladesh Economy 330

Figure 20.3: Four Main Types of Trade Misinvoicing

Import Under Invoicing Import Over Invoicing

▪ To transfer funds overseas by bypassing
▪ To reduce payments on account of CDs, capital controls and keep the money in
AIT, VAT and RD at import stage hard currency consumption and for
investment abroad
▪ To escape regulatory requirements that ▪ To reduce income tax obligations.
apply to higher-value imports

Illicit Financial Inflow Trade Misinvoicing Illicit Financial

Outflow

Export Over Invoicing Export Under Invoicing

▪ To take advantage of export ▪ To transfer funds abroad by bypassing
subsidies and incentives capital controls and to keep in hard currency
for consumption and investment abroad

▪ To evade income tax

Source: Adapted from GFI Report 2021.

Offshore accounts and companies and enterprises in tax havens that are owned by Bangladeshis
are found to be used for purposes of TBML, using multiple layers.

Hundi-Hawala Channels

Figure 20.4: Money Laundering Through Hundi/Hawala Channels

Source: Based on Mechanism of Hundi Business (Thinking Aloud, SANEM).

White Paper on State of the Bangladesh Economy 331

The Hundi/Hawala market is a complex system, developed over the years, with a complex web of
players and transactions, both in country and overseas. A simplified version of how this works is
presented in Figure 4. Settlement of the illicit outflows with remittances generated overseas is a
key mechanism that features prominently in all these transactions, with remitter households in
Bangladesh being paid the equivalent amount in BDT (with a premium)447. Illegal operators and
aggregators in host countries collect remittance earnings and transfer money to designated
accounts overseas and to accounts of hundi/hawala syndicates in Bangladesh. Some mobile
financial services were also found to be involved in this chain. This ends up with an equivalent
amount being transferred to beneficiary accounts in Bangladesh.

In recent times, there have been reports of large-scale capital flight through hundi/hawala
mechanisms via the medium of offshore financial hubs (Dubai, Panama, Singapore etc.), in
offshore accounts or trusts set up by high-net-worth people individuals448. Ownership is often
multilayered, making detection extremely difficult.449 Layers of entities are created between
laundered money and the ultimate beneficiary to avoid detection. Often destinations with lax
banking regulations are used (Panama, Cayman Island, Channel Islands); sometimes citizenship
is purchased through investment programmes (St. Lucia, Malta, Vanuatu). Some countries pursue
don’t ask don’t tell policies to attract FDI which facilitates the transfer of ill-gotten money to, and
investment in, those countries450. The overseas subsidiary business houses are now moneyed and
mature enough to go for largescale investment in real sectors and setting up industries. Tax
advantage makes destinations such as Singapore, Dubai and Hong Kong popular destinations.451

Other forms of Money Laundering

Money is also laundered by unregistered foreign workers in Bangladesh, who dodge tax payments
and transfer money (often in the form of cash) to host or other countries. Legally earned money
such as proceeds from sale of real estate and other assets are also transferred through illicit
channels. Double taxation also induces such transfers.

20.4 Measures to Address the Problem

Generation of ill-gotten money must be attacked by improving quality of governance,

strengthening institutions and instituting a culture of zero tolerance against corruption. Measures
will need to be put in place to curb and eliminate identified channels of outflows. Investigative
actions and legal measures will need to be undertaken to bring back the stolen wealth. In this
backdrop, strengthening and empowerment of concerned institutions, regulatory reforms, legal
enforcement, coordination involving concerned agencies, and cross-agency, cross-country
cooperation will play a crucially important role. Some concrete measures are proposed below in
view of the above.

447 To note, a large part of remitters and migrant workers does not participate in these illegal transactions
(where there is also an element of risks involved), but many others do.
448 As may be revealed, several Bangladeshi citizen’s names featured in the Panama Papers and other

leaked documents.
449 For example, in one case a scion of a powerful businessman who owned highly expensive real estate in

London was the ‘beneficiary’ through two different shell companies that were registered in the British
Virgin Islands and Isle of Man.
450 Sometimes, money is transferred through shell banks set up by collaborators in host countries with lax

regulations, licenses are bought, and swift connections are obtained. Sometimes, the overseas buyer opens
an L/C favouring the overseas office of the Bangladeshi business house (in a different name). This business
house, in turn, opens a mirror L/C, albeit at a lower price, favouring their own office in Bangladesh. After
the shipment, the overseas buyer transfers the fund at the actual sales price to the office of Bangladeshi
business house abroad. The under-invoiced export amount is sent to Bangladesh. The difference is kept
overseas.
451 The Daily Star, 2024

White Paper on State of the Bangladesh Economy 332

Address Trade Mispricing

TBML constitutes a significant part of illicit financial outflows from Bangladesh. There is a need
to criminalise trade misinvoicing, with high penalties to deter violations and improve
coordination among various concerned government agencies. Strengthening the capacity of
customs officials, transfer pricing cell (TPC)452 at the NBR and AML focal points in banks, must be
given priority. Access to realtime prices of commodities must be ensured. The use of risk
assessment tools must be strengthened by investing in advanced IT and data technologies, such
as GF Trade system, to enable customs to identify and flag potentially fraudulent invoices in
realtime. Globally, use of AI and blockchain technology in detecting mispricing and fraudulent
practices are on the rise; Bangladesh should be prepared to make use of those tools. To forestall
over-invoicing in imports, special care should be taken in case of imports of goods on which
import duties tend to be either zero or very low, such as capital machineries 453.

Predominance of manual analysis undermines efficiency of concerned anti-money laundering

entities. Bangladesh may consider setting up an independent Trade Transparency Unit to Combat
TBML, as is the case in some countries.454

Take Measures to Recover Stolen Wealth

There is a growing demand from all quarters that the Interim Government takes energetic steps
to bring back the stolen money. It is not easy to establish the chain of connections involving ill-
gotten money, money laundered from the country and the ultimate beneficiary in destination
country, which will be needed to ensure return of the stolen assets to Bangladesh455. ACC will
have to submit charge sheet against the concerned person. It will need to send MLAR to various
possible destination countries seeking information456. The cases will need to be successfully
presented in Bangladeshi courts. Competent Bangladeshi authorities will have to send formal
request letters to destination countries to seize, freeze and sequester wealth of Bangladeshi
nationals, as per their relevant laws. For example, Canadian anti-money laundering laws have
specific guidelines in such cases (Government of Canada, n, d.). Bangladesh then acquires the legal
power to lodge and pursue the cases in destination countries. This will call for hiring of competent
lawyers/firms specialising in these matters. Sometimes this is done on recovered money sharing
basis.

452 A number of initiatives has been undertaken in recent times to strengthen the TPC including
strengthening of its database and training of officials. The TPC has also initiated audits of selected MNCs.
(Hossain, 2024).
453 Such over-invoicing creates problems for other importers who indicate the actual price in their L/Cs

since NBR officials take the former price as a reference point.

454 NBR had earlier formulated a strategy document to identify illicit assets overseas and financial

outflows (in March 2015). This should now be put into action.
455 Large groups which laundered money have well-established offices overseas but with concealed

ownership (primarily in Dubai, London, New York, Hong Kong, and Singapore). It is convenient because
most owners live in big western cities. Transactions are often done in the name of offshore companies in
Tax-Free Havens (Cayman Island, Isle of Man, Panama). The layering of ownership is arranged by
Specialised Law Firms whereby they register several Nominee Offshore Companies across Tax Havens
around the world. This makes it difficult to pin down the actual beneficiary. In the complex structure, one
owns the other below it in a layering of even four to five layers. Quite often, family assets and wealth are
separately managed. Separate banks, offshore entities and lawyers are deployed to manage personal and
family wealth, whereas another group looks after corporate business.
456 ACC has, in very recent past, sent 71 such requests to 11 countries and has, as yet received 27

responses (Hossain, 2024).

White Paper on State of the Bangladesh Economy 333

Figure 20.5: Asset Recovery Process in Brief

Conviction in national courts on grounds of illegal earnings and money

Conviction
laundering

Identification: Tracing of assets originating from laundered money, through

intelligence work, forensic Investigation and other means
Tracing
Securing evidence for court and administrative processes overseas, through
unravelling the layers and connecting the assets to the beneficiary person

Case Filing in Proof of Dual Criminality: Initiation of Court Case in Destination Country
External
Proof of guilt
Jurisdiction

Securing the assets: Getting seizure or restraints order obtained from overseas
Freezing courts to stop movement, transfer or liquidation of assets

Criminal/Civil Case: Obtaining Conviction-based (CB) or Non-conviction based

(NCB) confiscation orders from courts or competent authorities
Confiscation

UNCAC /Destination Jurisdiction: Obtaining order of repatriation

Asset Recovery Enforcing the order of repatriation; Ensuring return of assets (liquidation of
immovable assets)
Source: Adapted from NBR (2015).

Tax authorities will also need to be included in the asset recovery process. Stolen asset recovery
involves several stages as depicted in Figure 5: (a) forensic audit and establishment of criminal
responsibility and amount of liability; (b) criminal accountability through the judicial system and
establishment of guilt of money laundering; (c) filing of cases in destination countries for recovery
of assets procured through money laundered, directly or through intermediate channels.

Strengthen Concerned Institutional Capacity

Bangladesh has a number of laws and regulations in place to deal with money laundering and
return of confiscated property. It has in place the Money Laundering Prevention Act which
criminalises laundering of money and authorises confiscations of laundered assets. It has also
signed mutual legal assistance treaties with some countries457. BFIU has signed MoUs with 81
foreign counterparts and is a member of some anti-money laundering bodies such as Financial
Action Task Force (FATF), Asia Pacific Group (APG) and Egmond Group. It can choose to expand
this network458. However, no energetic step was taken to make use of those. Even when concerns
were raised by involved institutions, actions in many cases depended on signals from high-ups.
Political considerations largely influenced work of BFIU, ACC, NBR and other institutions.
Intelligence agencies did have a wealth of information about stolen wealth. However, absence of

457 However, agreements are yet to be signed with some important countries e.g. Switzerland, Australia,
Canada, Malaysia.
458 Bangladesh Financial Intelligence Unit, n, d.

White Paper on State of the Bangladesh Economy 334

active initiatives and follow-ups was the norm of the day459. True, BFIU did take some actions, but
mainly against small time operators460. In case of none of the widely reported large bank scams,
STRs were submitted to the BFIU and no concrete action was taken461.

Recovery of stolen assets is also emerging as a global agenda, and it is fast gaining traction in view
of the demand for establishing global economic good governance. StAR has helped recover about
USD 2.0 billion of stolen assets since its launch in 2007. Philippines, Malaysia, Nigeria and several
other developing countries have been able to recover significant amounts of stolen assets, often
stowed away in jurisdictions across the world (StAR, n, d.)

Concerned analysts in BFIU/ACC often lack adequate training in strategic analysis in the use of
advanced analytical tools462. Framework, ACC lacks the authority to arrest suspects or search
premises during inquiries, which allows offenders to evade capture and destroy evidence.
Customs Risk Management Commissionerate (CRMC) must be strengthened, and Automated Risk
Management Systems (ARMs) and other systems must be put in place463. Policymakers may think
of taking the STR analysis wing outside of the Bangladesh Bank to allow it to function
independently, as in India464. Bangladesh should not wait for development partners to underwrite
such necessary investments.

Put in Place an Independent Prosecution Body

Weak prosecution capacity and succumbing to political pressure have constrained the work of
follow-up actions by ACC, BFIU, CID and other institutions. In view of this, an Independent
Prosecution body needs to be put in place with proper mandate to undertake follow-up actions.

459 There are only a few cases of stolen assets (4 cases worth USD 4.0 million) which were returned,
recovered (worth USD 3.5 million) and confiscated or frozen (3 cases worth USD 3.6 million).
460 The BFIU has a detailed set of instructions for the various banks and financial institutions and others

to forestall trade-based money laundering and the red flags that need to be informed to the BFIU. In
recent years, the number of suspicious reports including STRs, and SARs has seen a significant rise (9,769
and 4,337 respectively in FY 2022-23, a rise by two-thirds compared to before). This took place in view of
the rise in new forms of fraudulent activities such as online gambling/betting FX/Crypto trading, and
digital hundi. In FY 2022-23, the BFIU passed 133 intelligence reports on to the CID (85), ACC (33), NBR
(10), and others (5). One gets some idea about the scale of operation in the hundi/hawala channels from
the BFIU data. During 2022-23, BFIU had taken action against 5,766 MFS agents and IMFS distributors
who were involved in illegal activities. Licences of 5,005 agents were cancelled by respective MFS
operators on request from BFIU. BFIU had suspended transactions of 16,525 MFS accounts suspected of
involvement in hundi activities. While BFIU has detailed TBML guidelines and detailed KYC requirements
to forestall trade mispricing, there is scope for further improvement. While confirmed L/Cs are relatively
secure, b/b L/Cs such as against contracts whereby buyers nominate suppliers have greater risks of
collusion and banks need to exercise more caution in in such cases.
461 The fact of more than 11 thousand Bangladeshi business entities being registered in Dubai and halving

of remittance flow from Saudi Arabia in FY 2022-23 (in spite of about 1.5 million migrant workers going to
the country) should have raised red flags. The Bangladesh Bank, however, did nothing most likely because
of political signals. These need to be looked at very closely.
462 Indeed, all relevant agencies are under-resourced: financially and human resource-wise as also in terms

of logistics and modern technological tools needed for effective investigation. These need to be addressed
with due urgency.
463 These are more upgraded compared the current Royalty Range System (RRS).
464 While BFIU sends cases to various agencies including CID, ACC and others, there is no systematic

feedback loop as regards the proceedings and outcomes of cases, which could help track the cases and
improve quality of investigation.

White Paper on State of the Bangladesh Economy 335

Deepen Cross-Country Cooperation

A report by the Intergovernmental Group on Financing for Development states that challenges of
illicit financial flows have increased in scope and complexity and need to be tackled through close
bilateral and international cooperation UN Economic and Social Council, 2024). Bangladesh has
acceded to the UN Convention Against Corruption (UNCAC) in 2007. Bangladesh is part of the
Stolen Asset Recovery (StAR), a partnership between the WB and UNODC which is geared to take
measures to deal with transfer of corrupt funds to safe havens.

As was noted earlier, sometimes, lodging cases in civil courts is a relatively quicker way to get
results465. Bangladesh should formally apply to join the OECD Convention on Mutual
Administrative Assistance in tax matters (commonly known as MAAC)466 and adopt Common
Reporting Standard which is a system of automatic exchange of information.
Law enforcement support (e.g. assistance provided by the Interpol) will need to be sought where
needed collaboration deepened467. Destination countries will need to be urged to change national
regulations to make repatriation of stolen assets less difficult468.

Make Necessary Changes in Existing Regulations

Illicit transfers also take place because of regulations that need to be revisited and revised: money
earned through freelancing and BPO activities cannot be legally repatriated to Bangladesh
(because of absence of gateways such as PayPal). Double taxation avoidance, transfer of sales of
proceeds from sale of inherited property by Bangladeshi citizens living abroad, and visa fees to
be sent overseas to employers of migrant workers abroad are some of the areas that call for
a closer look. Some existing regulations may need to be reviewed in this connection of migrant
workers.

Vigorously Pursue Interim Government’s Ongoing Initiatives

In a welcome move, the Interim Government has set up an Asset Recovery Committee to be led
by the governor of Bangladesh Bank to work towards recovering the stolen money. It has also
decided to discard the provision that allowed the whitening of black money. It was also decided
that the provision of submission of wealth statements by government officials will henceforth be
enforced. All these steps are in the right direction.

465 Asset recovery information can also be used for purposes of tax recovery. In most cases, whilst asset
recovery involves criminal cases, tax recovery involves civil cases. Several steps are involved in this
connection: evidence collection from foreign sources and authentication, ascertaining taxable income and
tax amount, and steps to recover taxes payable on stolen assets (with applicable fine) based on tax
agreements/ universal convention, through voluntary or enforced compliance.
466 Previously, attempts to join MAAC were deliberately stalled to avoid any cross-border exchange of tax

information detrimental to the interests of those involved in the illicit financial outflow. WB can assist
Bangladesh tax authorities in this regard.
467 As is to be noted, a member of UK parliament, Phil Brickell (MP) has urged the country’s regulators

(Financial Conduct Authority-FCA and Solicitors Regulation Authorities-SRA) to investigate whether UK

companies, state agents, lawyers and lenders followed anti-money laundering rules when helping a
Bangladeshi Minister under investigation for alleged corruption. Members of the all-party parliamentary
group on anti-corruption and responsible tax met in October to discuss how to assist Bangladesh in tracking
UK assets linked to people under investigation by Bangladesh authorities. Concerned Bangladeshi agencies
need to take advantage of such initiatives.
468 For example, foreigners can buy property in Dubai without needing a residence visa in designated free-

hold areas. Registration fee is low (at 4.0% of property value) and there are no property taxes or capital
gains taxes on real estate ownership.

White Paper on State of the Bangladesh Economy 336

Unshackled from political pressure, ACC is now taking a number of measures to recover stolen
assets from abroad469. The Interim Government is collaborating with the WB, IMF, FBI, Swiss
government and UNODC to help identify and recover stolen assets470. Bangladesh currently has
Customs Cooperation Agreement only with three countries. It needs to have agreements with
UAE, India, China, EU, USA, and Singapore to deal with TBML. ACC may also need to seek support
from overseas legal experts and firms specialising in stolen asset recovery.

20.5 Concluding Remarks

Money laundering from Bangladesh through illicit financial channels had thrived and flourished
in an environment of political indulgence and patronage, institutionalised corruption, legal
impunity and overall lack of good governance in economic management. Getting rid of this curse
will call for an uncompromising political will to address the problem head on. This will entail
restoration of accountability and good governance in economic management, enforcement of
legal provisions, zero tolerance against corruption and corrupt practices, institutional
strengthening, interagency coordination and greater collaboration with destination countries to
bring back the stolen wealth to where it belongs, to Bangladesh.

469 ACC is, at present, being reconstituted. An Anti-corruption Reforms Committee has been set up to look
at concerned issues and suggest concrete actions.
470 NikkeiAsia, 2024

White Paper on State of the Bangladesh Economy 337

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Chapter XXI. Institutional Decline Stalling National Development*

21.1 Introduction

Bangladesh has made significant progress in economic and social outcomes over the past five
decades. However, its institutional development has lagged, with governance, public
administration, and the rule of law remaining weak and underdeveloped — ranking among the
lowest globally. This institutional fragility is evident in various international assessments
highlighting deficiencies in effectiveness and reliability. Global indices show that the quality of
institutions in Bangladesh has remained quite poor. Table 21.1 shows that in all six areas of
institutional quality indicators, ranked on a 0-100 percentile scale, Bangladesh’s percentile
ranking remained less than 30. This table also compares institutional quality between
Bangladesh, India, and Vietnam. Bangladesh consistently scores lower than India and Vietnam,
reflecting weaker institutional performance. For instance, Bangladesh's Political Stability score is
13.21, notably lower than Vietnam's 45.75 and India’s 24.53. Similarly, in Government
Effectiveness and Control of Corruption, Bangladesh’s scores of 23.11 and 15.57 are substantially
lower than India’s (63.21 and 44.34) and Vietnam’s (59.43 and 45.75). These figures highlight
Bangladesh’s need for significant institutional reforms to match the governance standards of its
regional counterparts.

Table 21.1: Quality of institutions in Bangladesh in 2022

Indices Bangladesh India Vietnam
Voice and Accountability 28.02 49.28 13.53
Political Stability 13.21 24.53 45.75
Government Effectiveness 23.11 63.21 59.43
Regulatory Quality 17.92 50.94 36.32
Rule of Law 29.72 55.19 47.64
Control of Corruption 15.57 44.34 45.75
Note: Percentile rank among 214 countries. Ranges from 0 (lowest) to 100 (highest) rank.
Source: World Governance Indicators.

21.2 Manifestations of Systematic Institutional Failures in Bangladesh

Systematic failure within political institutions

Systematic failure within Bangladesh's political institutions during Sheikh Hasina's regime over
the past decade has been evident in several critical ways. These failures have impacted
democratic governance, accountability, and the efficacy of institutions central to maintaining
political stability and ensuring citizen rights. Here are some key manifestations:

1. Weakening of democratic processes and electoral integrity:

• Erosion of free and fair elections471: The election cycles of 2014, 2018, and 2024 were
marked by allegations of widespread irregularities, including voter intimidation, ballot
stuffing, and a lack of access for opposition parties. In the 2014 election, a boycott by the
Bangladesh Nationalist Party (BNP) led to uncontested seats and reduced voter turnout,
which eroded the legitimacy of the election process and that continued in the following
two elections. In 2011, a longstanding requirement mandating that general elections be
conducted under the supervision of non-partisan caretaker governments was

*The chapter has been prepared by Dr Selim Raihan, Professor, Department of Economics, University of
Dhaka and Executive Director, South Asian Network on Economic Modeling (SANEM).
471 “Overcoming Bangladesh's electoral integrity deficit: time for political compromise and dialogue”:

https://www.idea.int/news/overcoming-bangladeshs-electoral-integrity-deficit-time-political-
compromise-and-dialogue

White Paper on State of the Bangladesh Economy 340

 abolished.472 This change resulted in significant irregularities during the general elections
held in 2014, 2018, and 2024. The quality of Electoral Process index from the Quality of
Government dataset declined from 9 in 2009 to 4 in 2021.473
• Control over the Election Commission474: Although the Election Commission is
constitutionally mandated to operate independently, its actions were increasingly aligned
with the ruling party's interests. Allegations of the commission's lack of neutrality,
inadequate oversight, and partisan favouritism undermined public confidence in its
ability to conduct impartial elections.

2. Politicisation of the Judiciary:

• Influence over judicial appointments475: Under the Sheikh Hasina regime, there were
several accusations regarding the fact that judicial appointments were given keeping in
view loyalty rather than merit considerations. It spoiled the independence of the
judiciary.
• Weakening of judicial autonomy476: Decisions in several high-profile cases, especially
those involving political opposition members or dissenters, raised concerns about the
judiciary's impartiality. The judiciary has often been perceived as favouring government
narratives in politically sensitive cases, diminishing its role as a neutral arbiter in the
democratic system.

3. Constraining freedom of expression and press freedom:

• Digital Security Act (DSA)477: The DSA has been criticised since 2018 for acting to
suppress free speech and succeeding in creating a climate of fear among journalists, rights
activists, and citizens at large. Under the pretext of national security, the DSA was used to
target those critical of the government; many journalists and activists faced arrest,
harassment, and legal action. The Freedom of Expression and Belief index from the
Quality of Government dataset declined from 9 in 2009 to 6 in 2021.478
• Suppression of media and intimidation of journalists479: Under pressure on the media not
to publish reports adverse to the government, major newspapers and channels were
forced to operate under restraint. Through administrative pressures and intimidation, the
government resisted critical journalism.

472 “Bangladesh ends caretaker government arrangement”: https://www.bbc.com/news/world-south-

asia-13973576
473 https://www.gu.se/en/quality-government/qog-data
474 “The alterations we need in our Election Commission”:

https://www.thedailystar.net/opinion/views/news/the-alterations-we-need-our-election-commission-
3691126
475 “Politics and Independence of the Judiciary in Bangladesh”:

https://www.ide.go.jp/library/English/Publish/Reports/Rb/2018/pdf/2017_2_40_003.pdf
476 “Can the judiciary be free from politicisation?”:

https://www.thedailystar.net/opinion/views/news/can-the-judiciary-be-free-politicisation-3442131
477 “How Bangladesh’s Digital Security Act Is Creating a Culture of Fear”:

https://carnegieendowment.org/research/2021/12/how-bangladeshs-digital-security-act-is-creating-a-
culture-of-fear?lang=en
478 https://www.gu.se/en/quality-government/qog-data
479 “Bangladesh: IPI urges government to respect press freedom, independent journalism”:

https://ipi.media/bangladesh-ipi-urges-government-to-respect-press-freedom-independent-journalism/

White Paper on State of the Bangladesh Economy 341

4. Curtailment of civil society and political opposition:
• Repression of opposition parties480: Leaders and activists from opposition parties faced
harassment, arrests, and even violence. Key opposition leaders were imprisoned or
disqualified from elections due to legal challenges perceived as politically motivated.
• Constraints on civil society organisations481: Civil society in Bangladesh, particularly
organisations critical of the government, faced extensive restrictions. Laws limiting
foreign funding for NGOs and increased surveillance of their activities curtailed their
operational freedom, impacting advocacy on human rights, governance, and
accountability.

5. Weakening of accountability mechanisms:

• Corruption and nepotism482: Corruption became so pervasive that symptoms of
systematic failure in all the key public institutions, but most particularly those concerned
with the rule of law, public finances, and governance, came to the fore. The ACC is
entrusted with the responsibility to investigate cases of corruption, but it was accused of
practising selectivity, often targeting opposition figures instead of investigating high-
profile cases linked to members of the ruling party. The percentile ranking of Voice and
Accountability index from the World Governance Indicators dataset declined from 38.4 in
2009 to 28 in 2022.483
• Ineffective implementation of the Right to Information (RTI) Act484: Upon the adoption of
Bangladesh's Right to Information (RTI) Act in 2009, many considered it the most
revolutionary law of the land. But since its inception, no large-scale scandals have been
unearthed through the use of this Act.
• Partisan control over law enforcement485: Law enforcement agencies, including the police
and the Rapid Action Battalion (RAB), were accused of acting in the interest of a political
party. These agencies were used to harass political opponents and dissidents, obstruct
protests, and constrain civil liberties - a course which again took away public confidence
in neutrality and enhanced extrajudicial actions. According to the Bangladeshi NGO
Odhikar, between 2009 and June 2024, at least 708 cases of enforced disappearances
were reported.486 Many of them ended up in Aynaghar - a secret prison.487

480 “Bangladesh: Repeated cycle of deaths, arrests and repression during protests must end”:
https://www.amnesty.org/en/latest/news/2023/10/bangladesh-repeated-cycle-of-deaths-arrests-and-
repression-during-protests-must-end/
481 “Restrictions impede civil society organisations' ability to operate: Report”:

https://www.tbsnews.net/bangladesh/restrictions-impede-civil-society-organisations-ability-operate-
report-559974
482 “Corruption, nepotism key barriers to development: youth survey”:

https://www.newagebd.net/article/214955/corruption-nepotism-key-barriers-to-development-youth-
survey
483 https://www.worldbank.org/en/publication/worldwide-governance-indicators
484 “Why do we fail to utilise our Right to Information Act?”:

https://www.thedailystar.net/opinion/views/news/why-do-we-fail-utilise-our-right-information-act-
3347061
485 “The Party-Police Nexus in Bangladesh”:

https://www.tandfonline.com/doi/full/10.1080/00220388.2022.2055463?scroll=top&needAccess=true
#d1e149
486 “Enforced disappearance: Govt sets up inquiry commission”:

https://www.thedailystar.net/news/bangladesh/news/enforced-disappearance-govt-sets-inquiry-
commission-3688236
487 “The howls were terrifying': Imprisoned in the notorious 'House of Mirrors'”:

https://www.bbc.com/news/articles/cdd7nqzj20qo

White Paper on State of the Bangladesh Economy 342

6. Undermining the role of parliament:
• Lack of parliamentary opposition488: With the opposition's boycott in the 2014 election, a
highly controlled 2018 election, and again the opposition's boycott in the 2024 election,
parliament was largely a one-party institution, limiting its role as a check on the executive
branch. Parliamentary debates became less robust, with reduced input from opposition
members, leading to the unchecked passage of legislation that often favoured the ruling
party's agenda.
• Centralisation of power in the executive489: The excess centralisation of powers in the
Prime Minister's Office relegated other branches of government, especially Parliament, to
the background and no more than a rubber-stamp body. The institutional checks and
balances required for good governance were seriously weakened because of this factor.

7. Ineffective public institutions and bureaucratic challenges:

• Politicised bureaucracy490: The bureaucracy, which should have been apolitical, became
increasingly subject to a policy of appointments and promotions decided by political
loyalty. This politicisation brought inefficiency and reduced accountability since the
bureaucrats were bound to favour a political class rather than an impartial
administration.
• Public service delivery failures491: Citizens’ complaints about poor public services, such
as health care, education, and infrastructure, reflect inefficiencies linked to corruption
and politicised resource allocation. The inability to effectively manage public services led
to disillusionment among citizens regarding the state’s capacity to deliver basic services
equitably.

Pervasive and interconnected corruption

Corruption has remained one of the intrinsic issues of Bangladesh in every sphere-such as
bribery, misappropriation of funds, and favouring some groups of people over others. Corruption
is so deeply institutionalised that it has contributed decisively to the distortion of the efficiency
and integrity of institutions apart from hindering economic development and undermining public
trust. Reports have underlined extensive corruption in governments' procurement processes,
taxation, banking sector, health sector, transport sector, energy sector, and construction.492 Also,
the Anti-Corruption Commission remained ineffective (Raihan and Bourguignon, 2024).

During the last decade, corruption has been all-pervasive and interlinked at various levels in
different sectors in Bangladesh, miring the entire nation within an impenetrable web of
malfeasance. Those guilty of tax evasion turn out often to be the same people who were
implicated in loan defaults, share market manipulation, and money laundering. The involvement
in so many areas granted corruption complete entrenchment in the financial and regulatory

488 “Column by Mahfuz Anam: Death of the opposition in parliament”:

https://www.thedailystar.net/opinion/views/the-third-view/news/column-mahfuz-anam-death-the-
opposition-parliament-3533876
489 “Inequality a result of centralisation of political power: economists”:

https://www.thedailystar.net/business/economy/news/inequality-result-centralisation-political-power-
economists-3325096
490 “Political Patronage, Civil Service Politicization, and the Ordeals of Career Civil Servants”:

https://www.cambridge.org/core/books/abs/political-patronage-in-asian-bureaucracies/political-
patronage-civil-service-politicization-and-the-ordeals-of-career-civil-
servants/5BA315C04A7A7B9D9C5F3F0F0FDB8E5E
491 “Overhauling public service delivery: Difficult but possible”:

https://www.tbsnews.net/thoughts/overhauling-public-service-delivery-difficult-possible-946001
492 “Getting out of the abyss of corruption in Bangladesh”:

https://www.thedailystar.net/opinion/views/news/getting-out-the-abyss-corruption-bangladesh-
3655781

White Paper on State of the Bangladesh Economy 343

anatomy, which makes it difficult to root out. These cross-sectoral linkages reinforce the
challenges of enforcement, as corrupt practices feed each other in a self-sustaining cycle where
financial misconduct in one area supports and enables similar misconduct in others, undermining
economic integrity and public trust.

Some examples of pervasive and interconnected corruption are as follows:

1. Corruption in public sector services:

• Illegal wealth accumulation by government officials493: Cases identified by the Anti-
Corruption Commission (ACC) involve kickbacks, bribes, and misuse of power.
• Recruitment scams in government jobs494: Bribery, manipulation of results, and
favouritism in securing government jobs.
• Health sector corruption during COVID-19495: Reports of corruption in the
procurement of medical equipment, testing kits, and issuance of fake COVID-19 test
certificates (Hossain et al 2023).
• Passport issuance corruption496: Syndicates within the Passport Office extracting
money from applicants.
• Digital security services corruption497: Tampering with National ID cards, digital
signatures, and other e-governance services, including illegal modification of data and
issuance of fake or duplicate IDs.
• Recent ACC investigations (2022-2024)498: Allegations against former ministers and
public officials related to land scams, illegal wealth, and money laundering.

2. Banking and financial sector scams:499

• Hallmark Group loan scam (2010-2012)500: Embezzlement of around US$ 450 million
from Sonali Bank through collusion with bank officials.
• Basic Bank loan scandal (2009-2013)501: Over $450 million was embezzled through
irregular loans granted between 2010 and 2013.
• Destiny Group Ponzi Scheme (2012) 502: Multi-level marketing scheme that defrauded
over 4.5 million investors, amounting to approximately $750 million.

493 “Recovering BD's stolen wealth: it's time for action”:

https://thefinancialexpress.com.bd/views/recovering-bds-stolen-wealth-its-time-for-action
494 “An epidemic of job scams and the barriers to legal recourse”:

https://www.tbsnews.net/thoughts/epidemic-job-scams-and-barriers-legal-recourse-191716
495 “Covid-19 corruption in the public health sector—emerging evidence from Bangladesh”:

https://academic.oup.com/heapol/article/38/7/799/7181256
496 “The bureaucratic sinkhole that is the passport office”:

https://www.dhakatribune.com/opinion/editorial/307535/the-bureaucratic-sinkhole-that-is-the-
passport
497 “An alarming lapse in data security protocols”:

https://www.thedailystar.net/opinion/editorial/news/alarming-lapse-data-security-protocols-3615491
498 “Corruption allegations: ACC to investigate 41 ex-ministers, MPs”:

https://www.thedailystar.net/news/bangladesh/crime-justice/news/corruption-allegations-acc-
investigate-41-ex-ministers-mps-3681426
499 See the chapter on “Banking Sector” in this White Paper Committee Report for an elaborated

discussion on the irregularities in the banking sector in Bangladesh in the past decade.
500 “Hallmark scam: MD Tanvir, chairman Jasmine get life in prison”:

https://www.tbsnews.net/bangladesh/court/hallmark-scam-case-md-tanvir-wife-among-9-get-life-
imprisonment-811382
501 “Basic Bank loan scam”: https://www.thedailystar.net/tags/basic-bank-loan-scam
502 “Destiny-2000 scam: Form a committee to reimburse investors”:

https://www.thedailystar.net/news/bangladesh/crime-justice/news/destiny-2000-scam-form-
committee-reimburse-investors-3022356

White Paper on State of the Bangladesh Economy 344

 • PK Halder financial scam (2020)503: Embezzlement of over $500 million from non-bank
financial institutions through fake companies.
• E-Orange Ponzi Scheme (2021) 504: Fraud of around $100 million by taking advance
payments and failing to deliver products.

3. Corruption in infrastructure and development projects:505

• Padma Bridge scandal506: World Bank withdrawal of a $1.2 billion loan due to alleged
corruption conspiracy. In 2017, a Canadian court dismissed the case, ruling that the
evidence was insufficient. However, critics argue that the court's decision may not
necessarily reflect the absence of corruption but rather the limitations of the available
evidence.507
• Rooppur nuclear power plant corruption (2019)508: Reports of overpricing in
procurement, with irregularities suggesting collusion between contractors and officials.
• Rampal power plant land acquisition controversy (2018-2020)509: Irregularities in
compensation payments, manipulation of land records, and bribery.
• Matarbari power plant and port development (2020)510: Accusations of irregular
procurement, non-transparent bidding processes, and possible bribes to secure contracts.
• Chattogram elevated expressway (2021-2023)511: Allegations of favouritism in
contract awards and concerns about overpricing in construction and procurement.
• Payra port and power project (2019)512: Irregularities in compensation payments,
manipulation of land records, and bribery to expedite approvals.
• Purbachal new town project (ongoing)513: Allegations of illegal allocation of plots,
bribery, and manipulation in land acquisition.

4. Other cases:
• Biman Bangladesh Airlines corruption514: Irregularities in the procurement of aircraft
parts, leasing agreements, ticketing fraud, and mismanagement of funds.

503 “PK Halder: The Man Behind An 11 Thousand Crore Scam”: https://businessinspection.com.bd/pk-
halder-behind-11-thousand-crore-scam/
504 “E-orange: A planned ‘family fraud’”: https://www.tbsnews.net/bangladesh/corruption/eornage-

planned-family-fraud-298786
505 See the chapter on “Mega projects” in this White Paper Committee Report for an elaborated discussion

on the irregularities in the mega projects in Bangladesh in the past decade.

506 “World Bank cancels Bangladesh bridge loan over corruption”: https://www.bbc.com/news/world-

south-asia-18655846
507 “Maximum accountability should be the norm”: https://www.thedailystar.net/op-

ed/politics/maximum-accountability-should-be-the-norm-1367689
508 “Rooppur Nuclear Power Plant Scam”: https://www.thedailystar.net/tags/rooppur-nuclear-power-

plant-scam
509 “Rampal Power Plant: Myths debunked”: https://www.thedailystar.net/star-weekend/spotlight/how-

valid-are-the-claims-favour-rampal-1414039
510 “Matarbari power plant: ACC opens probe into Tk 1,000cr graft allegation”:

https://www.thedailystar.net/news/bangladesh/crime-justice/news/matarbari-power-plant-acc-opens-
probe-tk-1000cr-graft-allegation-3728546
511 “Allegation of irregularities in construction of ‘Elevated Expressway’ in CTG”:

https://thedailymorningglory.com/2024/07/05/allegation-of-irregularities-in-construction-of-elevated-
expressway-in-ctg/
512 “Frustration mounts over irregularities in Payra port compensation process”:

https://www.dhakatribune.com/bangladesh/development/169003/frustration-mounts-over-
irregularities-in-payra
513 “RAJUK: 126 acres of land in Purbachal vanish into thin air”:

https://en.prothomalo.com/bangladesh/city/hcca57i5cy
514 “Biman: A cesspool of corruption”: https://www.thedailystar.net/opinion/views/closer-

look/news/biman-cesspool-corruption-3266041

White Paper on State of the Bangladesh Economy 345

 • Casino scandal (2019)515: Crackdown on illegal casinos, leading to arrests of ruling party
leaders involved in gambling, extortion, and money laundering.

Crony capitalism and state capture by a segment of business elites

Crony capitalism is a system whereby firms depend on close personal relationships with
government officials and political leaders to secure business favours. It distorts market
competition, with reduced opportunities for new entrants - perhaps more efficient businesses.
The power and energy sector, besides the construction of mega projects in Bangladesh, has also
suffered at the hands of cronies. A few business conglomerates secured lucrative contracts and
licenses through their political network systems (Raihan and Bourguignon, 2024). In the banking
sector, cronies managed to get away with high-default loans (Hassan et al, 2024). In like manner,
the taxation sector in Bangladesh suffered from high tax evasion and avoidance by cronies.516

State capture is exercised in instances when business elites, by using their influence, shape state
policies and regulations to serve their narrow interests and, hence, the functions and decisions of
the state for their ends. This in turn undermines democratic governance and institutional
integrity. Particularly, business elites with huge influence over regulatory bodies, most often yield
favourable regulations and slacker enforcement of laws. This has been evident in such sectors as
RMG, banking, and power and energy, among others (Hassan and Raihan, 2017).

Crony capitalism and the capture of the state by business elites have been a cause of rising
concern in Bangladesh, whereby at different times certain groups or individuals have managed
to exercise enormous influence over policymaking and regulatory frameworks as well as capture
state institutions for their gains. This phenomenon has manifested across several sectors, and
here are some notable examples:

1. Banking sector:517
• New banking licenses: In the past couple of decades, the phenomenal growth in the
banking sector has seen the number of banking licenses more than double, amidst
concerns that this is a saturated market. Most of the licenses were given to business
oligopolies with close connections to the ruling party. This enabled such groups to expand
not only their finances but also, through their control of banking institutions, access credit
on preferential terms, sometimes at the expense of a buildup in NPLs due to the lack of
due diligence.
• Loan defaults and irregularities: Aberrations such as loan defaults were also part of the
manifestations of crony capitalism, increasing NPLs in the banking system. Politically
connected borrowers were granted huge loans with poor collateral and due diligence; this
led to the number of loan defaults going through the roof. Banks often did not take legal
action against these powerful borrowers. This encouraged the culture of impunity.
• Loan rescheduling at preferential treatment: Many influential businesspeople in
Bangladesh obtained loans from state-owned and private banks many times without
much accountability for repayment of the same. The exercise of rescheduling loans and
time to time restructuring without adequate checks and balances kept persons with poor
credit histories to continue obtaining fresh loans. High-profile defaulters were often

515 “Casino scam: Samrat freed, what about the others?”:

https://www.tbsnews.net/bangladesh/crime/casino-scam-samrat-freed-what-about-others-485058
516 “Hasina’s 15-year rule: A regime of crony capitalists”:

https://www.thedailystar.net/business/economy/news/regime-crony-capitalists-3696296
517 “Political Economy of Private Bank Governance in Bangladesh”:

https://www.cambridge.org/core/books/is-the-bangladesh-paradox-sustainable/political-economy-of-
private-bank-governance-in-bangladesh/1B368072B7ED88A77C59F4AFEEC83CEE

White Paper on State of the Bangladesh Economy 346

 spared punitive measures against them due to their political connections, which
underlined the system malady in the banking sector.
• Major loan scandals: The scams involving the Hall-Mark Group and BASIC Bank are
representative of how politically connected businesses can abuse the banking system.
Investigations showed that loans were given without due diligence; the culprits normally
got away easily due to political influence.

2. Tax evasion and regulatory arbitrage:518

• Selective application of tax laws: The general rate of tax evasion remained high in
Bangladesh, while enforcement was mainly selective. Business entities and
conglomerates with political links often remained "too powerful to touch," enjoying
lenient tax assessments, penalties, or exemptions. For instance, the successive offering of
tax amnesty by the government was criticised as accruing benefits for only those with
unaccounted wealth, many of whom were reputedly linked to political elites.
• Revenue foregone through waivers: Tax incentives or waivers granted to key
industries like textiles, real estate, and other sectors remained quite common. More often
than not, such waivers accrued to businesses with politically influential leadership.

3. Power sector contracts:519520

• Independent Power Producers (IPPs): It was usually granted to companies that had
connections with ruling party stalwarts. The policy shift toward the private generation of
power was accused of being riddled with claims of favouritism. Many IPPs enjoyed
favourable terms, including capacity payments, even for idle plants, due to what critics
claimed was a lack of competitive bidding and transparency.
• Quick Rental Power Plants (QRPPs): To bridge the gap concerning electricity, the
government decided upon quick rental power plants. It was, however, a short-term
remedy. In most cases, contracts were given out without inviting any competitive bids,
and many beneficiaries were companies with strong links with political elites. Therefore,
it initially provided business elites with an opportunity to enter the energy sector. This
resulted in various complaints about increased cost and inefficiency due to the accrual of
more expenses to be paid by the public in terms of electricity prices.
• Contracts for large-scale energy projects: Large contracts in the power plants and big
energy infrastructure projects, were awarded to companies closely related to the political
elite. Allegations of inflated project costs and thus very non-transparent bidding process
suggest the capture of business elites of key energy sector areas through political
connections.

4. Media licenses:521
• Control over media outlets: Media licenses have, in the past, been seen to be issued in a
non-politically neutral manner. Many of the channels that went on air during Hasina's
regime had businessmen owners or patrons who were politically affiliated with the
current ruling party. Incidents like these raise apprehensions regarding the erosion of
autonomy and independence from the media. These channels frequently tended to

518 “Tax evasion by the rich is setting us back as a nation”:

https://www.thedailystar.net/opinion/editorial/news/tax-evasion-the-rich-setting-us-back-nation-
3547806
519 “De-risking private power in Bangladesh: How financing design can stop collusive contracting”:

https://www.sciencedirect.com/science/article/pii/S0301421522003718?via%3Dihub
520 “Corruption highest in four sectors”: https://en.prothomalo.com/bangladesh/6hg6yeob2w
521 “Private Television Channels Ownership and Crony Capitalism in Bangladesh: An Overview”:

https://www.researchgate.net/publication/350610412_Private_Television_Channels_Ownership_and_Cr
ony_Capitalism_in_Bangladesh_An_Overview

White Paper on State of the Bangladesh Economy 347

 display partiality toward the government, which critics say is due to crony capitalist
practices.
• Suppression of dissenting voices: On the other hand, the media critical of the
government were put under regulatory pressure, harassed, or even shut down, showing
how licensing control can effectively be used to muzzle opposition.

5. Contracts in mega projects:522

• Infrastructure development: The government undertook several mega projects in
infrastructure development - that is, the Padma Bridge, Dhaka Metro Rail, different
highways, and flyovers. Quite often, several contracts related to many components of the
implementation of these projects were handed over to politically favoured companies
through nontransparent, little, and unfair procurement processes. The suspicion of crony
capitalism grew with added accusations of cost inflation and mismanagement.

6. Real estate and land allocation:523524

• Preferential land deals: Access to the most prime pieces of land has been one of the most
telling aspects of cronyism, where politically connected developers accessed land at
below-market rates or in the process bypassed legal hurdles to get permits.
• Eviction and land grabs: Accompanied by incidents of forced evictions and land
acquisitions whereby some politically connected individuals managed to seize land for
commercial purposes, usually at the expense of marginalised communities.

7. Stock market manipulation:525

• The 2010-11 stock market crash in Bangladesh revealed how powerful business groups,
with ties to political elites, manipulated stock prices, leading to massive losses for retail
investors. Despite public outcry and investigations, many of the key players involved
avoided prosecution, suggesting political protection.
• In 2020-21, BEXIMCO raised BDT 30 billion from the stock market under the name of
“Beximco Green-Sukuk Bonds”.526 The funds were said to be used for the construction of
Tista Solar Limited and Korotoa Solar Limited, both subsidiaries of Beximco Limited, and
for the purchase of machinery for the expansion of Beximco’s textile business, as well as
to ensure environmental development and preservation. Institutional investors, such as
banks, insurance companies, and other financial institutions, were required to purchase
a certain amount of these bonds, ensuring that Beximco had buyers for its issued bonds.527

8. Industry:
• Access to export facilities and tax incentives: State capture can be reported in the textile
and garment sector, where well-connected business leaders have managed to get tax
exemptions, and subsidies on easy terms. A number of these incentives are reportedly
designed in a way to benefit the companies owned by the business elite having political
connections to give undue market advantage to them. These elites have, at times, resisted

522 “Crony capitalism sucks away development gains”: https://www.tbsnews.net/economy/crony-

capitalism-sucks-away-development-gains-41695
523 “RAJUK: 126 acres of land in Purbachal vanish into thin air”:

https://en.prothomalo.com/bangladesh/city/hcca57i5cy
524 “Land grabbing, prevention and recovery in Bangladesh”:

https://landportal.org/news/2021/11/land-grabbing-prevention-and-recovery-bangladesh
525 “Stock market scam report”: https://www.thedailystar.net/news-detail-180982
526 “Beximco bond: BSEC forms body to probe irregularities”:

https://thefinancialexpress.com.bd/home/bsec-forms-committee-to-probe-into-beximcos-sukuk-bonds
527 “Salman F. Rahman: Mastermind of Stock Market Scams and Financial Manipulation”:

https://businessinspection.com.bd/salman-f-rahman-scams-and-financial-manipulation-of-stock-
market/

White Paper on State of the Bangladesh Economy 348

 both the enforcement of labour regulations and the raising of safety standards as part of
their strategy for clinging on to political influence.528
• Manipulation of trade and tax policies: Some firms have been alleged to shape trade and
policies in ways that aim to protect their interests. Since through such regulations, they
enjoy preferred treatment, these elite enjoy a competitive edge in business, while the
smaller or less well-connected businesses seem not to prosper under those very
conditions. Examples include firms from electronics529, steel530, and edible oil531.

Anti-reform coalition among political and business elites, and civil and military
bureaucracy

An anti-reform coalition comprises a group of powerful actors who resist necessary reforms to
maintain their privileges and control over resources. This coalition can include political elites,
business elites, and bureaucrats who benefit from the status quo. Efforts to implement anti-
corruption reforms have often been thwarted by a coalition of political leaders, bureaucrats, and
business elites who prefer to maintain the existing corrupt practices that benefit them (Raihan
and Bourguignon, 2024). During Sheikh Hasina's rule, there have been multiple instances where
anti-reform coalitions among political elites, business groups, and segments of the civil and
military bureaucracy have impeded significant reforms across sectors. Here are some examples:

1. Taxation reform:532533534
• Resistance to widening the tax base: For as long as there was an expressed interest in
expanding the base and collecting taxes more efficiently, in particular targeting high-
income earners and enterprises, resistance also built up. The heavy industrialists and
members of the trade associations continuously lobbied against effective tax enforcement
and resisted the imposition of Value Added Tax reforms. In 2012, as a part of its Extended
Credit Facility agreement with the IMF, the Government adopted a new VAT reform act,
called the ‘VAT and Supplementary Duty Act 2012’, which aimed at modernising and
expanding the scope of the VAT. The reform promised to improve the efficiency of VAT
collection and to raise substantial new revenues. However, the 2012 VAT Law has not
been implemented properly, in view of opposition from politically well-connected vested
interest groups.
• Limited autonomy for NBR: The limited autonomy and always being plagued with
political pressures are what have severely suffered the NBR and barred comprehensive
tax reforms. Political elites often use their contact to get the taxmen off key business
supporters.
• Resistance to digitalisation of taxation: Digitalisation of tax collection systems with an
aim towards minimizing evasion and increasing transparency faced resistance. The pace

528 Raihan (2024)

529 “Tax exemptions should be granted through the parliament, not SROs”:
https://www.tbsnews.net/thoughts/tax-exemptions-should-be-granted-through-parliament-not-sros-
553566
530 “High tariff protection for steel industry affects users”:

https://www.thedailystar.net/business/economy/news/high-tariff-protection-steel-industry-affects-
users-3189346
531 “Edible oil market now controlled by big four”:

https://www.thedailystar.net/business/economy/news/edible-oil-market-now-controlled-big-four-
3591461
532 Also see the chapter on “Domestic Revenue Mobilisation” in this White Paper Committee Report.
533 “The Political Economy of Domestic Tax Reform in Bangladesh: Political Settlements, Informal

Institutions and the Negotiation of Reform”:

https://www.tandfonline.com/doi/full/10.1080/00220388.2016.1153072
534 “Overcoming tax reform challenges in Bangladesh”: https://tds-

images.thedailystar.net/opinion/views/news/overcoming-tax-reform-challenges-bangladesh-3718151

White Paper on State of the Bangladesh Economy 349

 of adoption of any tools which would leave little room for underreporting or avoidance
has been slow; this is partly because people benefiting from loopholes and manual
processes have pushed back. There has also been immense lobbying by sectors worried
about increased oversight and tax burdens that come with the shift.
• Reluctance to reform property and wealth tax: Plans to implement or raise taxes on
property, wealth, and luxury goods have been met by high-net-worth business elites and
real estate-heavy politicians. The outcome has been the inability of the government to tax
the rich effectively and a narrowing of the tax revenue base, further leading to inequality.
• Opposition to transparent tax audits: Business elites and tax officials/collectors prefer
doing things informally so that settlements can be made to allow underreporting.535
• Delays in progressive taxation: Groups of wealthy people oppose the imposition of
higher taxes on items constituting luxury goods and capital gains, hence holding back
efforts to reduce inequality.

2. Banking sector reform:536537

• Political patronage and NPLs: High NPLs persisted due to politically connected
borrowers receiving unchecked loans. Political elites protected business allies, impeding
stricter regulations and effective debt recovery, despite central bank efforts to improve
governance.
• Governance issues in state-owned banks: Inefficiencies arose from political
appointments. Efforts to depoliticise management faced resistance, as political elites used
these banks for patronage.
• Interference in central bank operations: Political interference limited the Bangladesh
Bank’s autonomy to regulate financial institutions, affecting monetary policy and banking
decisions.
• Lenient restructuring of large debtors’ loans: Politically connected businesses
received lenient loan terms, undermining discipline. Reform attempts met resistance
from political and business elites.
• Pushback against bank ownership reform: Proposals to limit family ownership in
banks faced resistance, allowing influential families to retain control.
• Resistance to stricter capital adequacy norms: Banks lobbied against stricter capital
requirements, arguing these measures would limit lending, hindering sector resilience.

3. Judiciary reform:538539
• Appointment and independence: Political appointments affected the independence of
the judiciary. Efforts to establish a merit-based selection system were opposed by
political elites eager to exert influence over the judiciary.
• Resistance to anti-corruption drives: Anti-corruption efforts were very often applied
selectively, with accusations that the judiciary was lenient toward people with good
connections to the top political class, hence that reform would be curbed.

535 “Taxpayers suffer as NBR can't carefully verify return audit”:

https://thefinancialexpress.com.bd/economy/bangladesh/taxpayers-suffer-as-nbr-cant-carefully-verify-
return-audit-1515297657
536 “What’s driving the government’s U-turn on banking sector reform?”:

https://www.thedailystar.net/opinion/views/the-overton-window/news/whats-driving-the-
governments-u-turn-banking-sector-reform-3292791
537 “Political Economy of Private Bank Governance in Bangladesh”:

https://www.cambridge.org/core/books/is-the-bangladesh-paradox-sustainable/political-economy-of-
private-bank-governance-in-bangladesh/1B368072B7ED88A77C59F4AFEEC83CEE
538 “Overview of corruption within the justice sector and law enforcement agencies in Bangladesh”:

https://www.u4.no/publications/overview-of-corruption-within-the-justice-sector-and-law-
enforcement-agencies-in-bangladesh.pdf
539 “Time to reform the judiciary”: https://thefinancialexpress.com.bd/views/opinions/time-to-reform-

the-judiciary

White Paper on State of the Bangladesh Economy 350

 • Blocking an independent judicial commission: Political elites did not want an
independent commission to preside over appointments and transfers, so they remained
opposed to any such proposal.
• Slow court digitisation: Ineffective use of the courts' potential was because of opposition
to the reforms from the legal fraternity. Hence case backlogs and delays persisted.
• Interference in high-profile cases: Political interference hampered judicial reforms,
delaying or dismissing cases involving influential figures.
• Stalling anti-money laundering efforts: Elites and business groups resisted the judicial
attempts at tackling money laundering in a way that cases were deliberately stalled.
• Ineffective separation of the judiciary from the executive: Though the separation of
the judiciary from the executive was constituted in 2007, in practice there have been
executive interferences over the judiciary in many cases.540

4. Public administration reform:541

• Civil service reforms: Reforms aimed at improving efficiency and reducing politicisation
faced resistance from political and bureaucratic elites who preferred the status quo,
delaying merit-based promotions and streamlined processes.
• Bureaucratic alliances: Senior bureaucrats often aligned with political elites, stalling
reforms that threatened their discretionary power and patronage networks, especially in
lucrative sectors like procurement.
• Resistance to decentralisation: Central bureaucrats resisted efforts to decentralise
power to local governments, maintaining a centralised structure that limited local reform
implementation.
• Opposition to performance-based appraisals: Performance-based appraisal systems
encountered significant pushbacks, as many bureaucrats resisted changes that threaten
job security and political favouritism, hindering public service improvement.
• Resistance to outsourcing and privatisation: Proposals to outsource public services
faced pushbacks from unions and bureaucrats fearing job loss and loss of patronage,
stalling efficiency reforms.

5. Trade policy reform:542543

• Protective trade barriers: Efforts to liberalise trade faced resistance from influential
business groups benefiting from protective tariffs and subsidies. Political elites often
supported these groups due to financial backing, hindering competition.
• Export sector challenges: Attempts to diversify exports beyond the ready-made
garments sector were limited by established business conglomerates that dominated the
market, overshadowing new industry incentives.
• Protection of oligopolistic interests: Industries like steel, and edible oil benefited from
tariffs and tax benefits, reducing competition. Local conglomerates resisted reforms that
opened these sectors to international players, often with political support.
• Challenges in streamlining export incentives: Powerful lobbies hindered reforms for
export incentives, pushing to maintain existing structures tailored to their interests, and
limiting diversification opportunities in other sectors.

540 “How far have we ensured judicial independence in Bangladesh?”:

https://www.thedailystar.net/supplements/50-years-our-constitution-original-ideals-vs-
reality/news/how-far-have-we-ensured-judicial-independence-bangladesh-3160231
541 “Things to consider before setting out for civil service reform”:

https://www.tbsnews.net/thoughts/things-consider-setting-out-civil-service-reform-934401
542 “Changing trade policy directions is imperative now”:

https://www.thedailystar.net/opinion/views/news/changing-trade-policy-directions-imperative-now-
3626601
543 “Bangladesh Diagnostic Trade Integration Study, 2016 and 2023”:

https://www.adb.org/sites/default/files/publication/978146/sawp-100-export-diversification-
bangladesh.pdf

White Paper on State of the Bangladesh Economy 351

 • Resistance to liberalizing agricultural imports: Agricultural protections benefit large
agribusinesses, blocking liberalisation efforts that could reduce food prices or shortages.
• Blocking reforms in logistics: Trade facilitation reforms faced opposition from
entrenched interests in logistics, who prefer maintaining systems that rely on informal
payments and connections.

6. Capital market reform:544545

• Political influence on regulatory bodies: Political elites exerted pressure on the
Bangladesh Securities and Exchange Commission (BSEC) to favour certain business
interests, hindering regulatory reforms aimed at increasing market transparency and
protecting investors.
• Resistance to strengthening corporate governance: Business groups, aligned with
political elites, lobbied against proposed reforms to enhance corporate governance,
fearing increased accountability and oversight.
• Blocking new securities laws: Efforts to introduce more robust securities legislation
faced opposition from influential conglomerates, who preferred existing weak laws that
allowed them to operate with minimal scrutiny.
• Interference in financial institutions: Political connections among banks and financial
institutions often resulted in preferential treatment for certain businesses, undermining
efforts to create a level playing field in the capital market.
• Lack of support for market diversification: Established business interests resisted
initiatives to diversify financial instruments and investment options, preferring to
maintain control over traditional markets.
• Delay in implementing technology solutions: Proposals to digitalise trading platforms
and improve market access were stalled due to resistance from traditional market players
who benefit from current systems.

These examples highlight the deep-rooted and multifaceted resistance to reform across key
sectors in Bangladesh. The alignment of interests between political elites, business leaders, and
bureaucrats creates a complex network that effectively blocks or dilutes reform initiatives,
making it difficult for the government to implement changes that could foster long-term economic
and institutional development.

21.3 Why Systematic Institutional Failures?

The erosion of democratic institutions

The key to the weakening of political institutions in Bangladesh under the rule of Sheikh Hasina
demonstrated an entrenched pattern of power centralisation supported by a frail institutional
framework and a long-standing culture of confrontational politics. Public institutions became
politicised due to such centralisation of powers, with the leading state bodies increasingly
servicing the ruling party's interests instead of adhering to democratic principles. The
suppression of opposition voices, coupled with tight control over the media, further entrenched
a system where dissent was stifled, and citizens’ freedom of expression was significantly
curtailed. These practices nurtured a climate in which democratic norms and mechanisms of
accountability were inexorably undermined, leaving little room for real pluralism or institutional
independence.

544 “Why capital market under bear attack”: https://www.tbsnews.net/economy/why-capital-market-

under-bear-attack-769110
545 “Bangladesh 2.0: How capital markets reform may benefit from banking crisis”:

https://www.tbsnews.net/thoughts/bangladesh-20-how-capital-markets-reform-may-benefit-banking-
crisis-958981

White Paper on State of the Bangladesh Economy 352

Given these challenges to democratic governance, however, some level of economic performance
and limited international condemnation lent the regime an aura of legitimacy, thereby enabling
it to continue with authoritarian practices with little resistance. The preoccupation of the
government with GDP growth fetishism, coupled with the absence of strong global pressure, led
it to relegate democratic reforms to the background in its pursuit of political control.

The issues began in earnest with the deeply flawed 2014 election, which created a significant
crisis of political legitimacy. For any government, legitimacy is essential for long-term survival,
but since 2014, this legitimacy has been increasingly questioned. In response, the government
has amplified a narrative of development as a compensatory measure. However, in the name of
legitimizing this development, crony capitalism has expanded significantly, with project-based
corruption reaching new heights over the last decade. A small group of business conglomerates
has gained disproportionately from state policies, aligning with elites at the political centre, along
with factions of the military and civilian bureaucracy. Together, they have fostered a coalition
dedicated to cementing this development narrative as a lasting framework.

Supremacy of 'pockets' of functional informal institutions over fragile formal institutions

Raihan (2024) argues that, in Bangladesh, what governs performances is a host of informal
institutions, while the formal institutions remain weak and fragile. In contrast to many other
comparable countries in Asia and Africa at a similar stage of development, and especially in
comparison to the LDCs, the country group to which Bangladesh belongs, Bangladesh has been
successful in creating some efficient pockets of 'growth-enhancing' informal institutions, against
an overall distressing picture as regards its formal institutions. Examples of ‘pockets of efficient
informal institutions’ in Bangladesh include the well-functioning privileges and special
arrangements for the RMG sector, promotion of labour exports, agricultural research and
development related to food security, and microfinance. However, the country has failed to make
formal institutions stronger and functional which is critical to maintaining a high growth rate and
achieving further development goals.

Supremacy of the ‘deals environment’ over coordinated industrial policy

Raihan, Bourguignon and Salam (2024) argue that under the 'deals environment' the industrial –
or, more broadly, development – strategies, as well as significant investment or resource
allocation choices, are frequently the outcome of agreements, or 'deals,' between the political and
business elites. These arrangements are for specific activities or programs that are decided on an
ad hoc basis, rather than following a well-defined overall strategy. Deals involving RMG exports
resulted in positive outcomes. Others didn't or didn't allow better choices, such as export
diversification, to be pursued. To be sure, deals do not have to be incompatible with formal
industrial strategies as long as they are part of a well-defined overall plan, and the state retains
complete control over the support given to specific industries. However, the deal environment in
Bangladesh didn’t fit this requirement.

It is important to note that industrial policy is inextricably linked to the government's other policy
instruments, such as macroeconomic policy (e.g., the real exchange rate), public infrastructure,
and SEZ management. Transparency and accountability regarding the implications of these
policies for industrial development are also important. It is also worth noting that the general
business climate is critical for industrial development, particularly for attracting foreign direct
investments, which, as many East Asian countries have discovered, are critical for increasing
manufacturing exports. However, Bangladesh's business climate is noticeably unfavourable, and
improving Bangladesh's standing in business climate indices is a primary focus in that regard.

White Paper on State of the Bangladesh Economy 353

Ineffective regulation

The challenge the government faces in regulating certain key activities to achieve more efficiency
and equity in the economy is referred to as the ‘problem of effective regulation’. In some
circumstances, the legal framework for such regulation is at issue, which may be antiquated or
otherwise inadequate for the goal pursued, and in which reform attempts have continually failed.
In other circumstances, the framework may exist, but there isn't enough capacity to put it into
action. Many examples of weak regulatory enforcement include non-compliance with legal
standards in the banking industry, the weak enforcement to improve labour conditions and
factories’ working conditions in a crucial sector like RMG, the poor performance of taxation, and
capital flight (Raihan, Bourguignon and Salam, 2024).

3.5. Weak state capacity

Where underperforming public services are a pointer, Bangladesh is fighting the issue of limited
state capacity, which can badly affect overall development potential in general. Resource scarcity
is one of the major binding constraints for inadequacy, evidenced by a very low tax-to-GDP ratio
in Bangladesh. In fact, it is among the lowest in the world and thus constrains the government's
capacity to finance important services. Given the lack of revenue emanating from taxation, the
state cannot invest sufficiently in such social functions as health, education, and infrastructure.
This inability to fund the aforementioned functions adequately has impeded expansion and
efficiency in public services, thus leaving a large number of communities without adequate
service and hence affecting general social well-being (Raihan, Bourguignon and Salam, 2024).

The public sector in Bangladesh also remained relatively small compared with international
experience and constrains the provision of quality services countrywide. Additionally, due to a
shortage in the staff of public sectors, limited resources reduce the supply of services that are
critical for development and equity. Lack of adequately funded and structured public services
keeps most people out of quality healthcare, quality education, and social security perpetuating
cycles of poverty and limiting social progress.

It is important to note that Bangladesh’s development achievements are partly attributable to the
contributions of NGOs, particularly in microfinance and service delivery, areas where state
capacity has historically been limited. Over the past five decades, the government allowed NGOs
a certain degree of freedom to fulfill critical functions, supporting essential services for citizens
and compensating for the state’s limited reach. However, in the last decade, this space constricted.
NGOs focused on human rights, democratic reforms, and anti-corruption efforts faced growing
challenges and harassment, reflecting a shift in governmental tolerance for organisations critical
of its policies, thereby impacting civil society’s role in governance and accountability.

21.4 Key Messages

1. Strengthening political institutions: The systematic failures in political institutions in

Bangladesh during Sheikh Hasina's regime were marked by an erosion of democratic
norms, a curtailment of civil liberties, and the weakening of checks and balances. These
failures reflect an overarching centralisation of power that marginalised essential
accountability mechanisms and limited public trust in state institutions. To reestablish
confidence in these institutions, reforms focused on judicial independence, electoral
transparency, and the autonomy of civil society are crucial.

2. Strengthening institutional governance: The effective, transparent, and accountable

functioning of institutions holds the key to translating growth into sustainable growth for
Bangladesh. Reforms aimed at removing entrenched corruption, improving the

White Paper on State of the Bangladesh Economy 354

 regulatory framework, and implementing laws will be extremely important to restore
civic trust and reliability in institutions.

3. Combatting crony capitalism and state capture: It is important to reduce the power of
business elites in making state decisions. To that effect, policies have to be pursued which
break entrenched networks of cronyism, ensure fair competition, and provide for
transparency in processes involved in the award of licenses, contracts, and other
discretionary state resources.

4. Comprehensive reform in critical economic domains: It is indispensable, for

sustainable growth, that serious reform of the key economic domains be undertaken, such
as the banking sector, taxation, public finance management, and trade and industrial
policies. This should cover strengthening regulatory oversight, widening the tax base,
increasing fiscal transparency, and adopting strategic trade and industrial policies. These
changes would bring about a resilient, inclusive, and competitive economy with less
capture or vested interest in a way to ensure that development is equitably assured.

5. Enhancing state capacity and public services: This could be furthered by broadening
the base and improving the efficiency of tax collection to provide additional resources for
strengthening health and education services. Beyond this, investments in human capital
will be as crucial as infrastructure investments in supporting longer-term economic
development.

6. Promoting inclusive industrial policy: What Bangladesh requires, instead of ad-hoc

arrangements, is a well-articulated and coordinated industrial policy with a focus on
export diversification, foreign investment, and promotion of sectors other than
readymade garments. The same should be undergirded by a supportive business
environment, transparency, and spelt-out and consistent policies.

White Paper on State of the Bangladesh Economy 355

References

Hassan M, Bidisha SH, Mahmood TI, and Raihan S. (2024) Political Economy of Private Bank
Governance in Bangladesh. In: Raihan S, Bourguignon F, Salam U, eds. Is the Bangladesh
Paradox Sustainable?: The Institutional Diagnostic Project. Cambridge University Press;
2024:146-178.
Hassan, M., and Raihan, S. (2017). 'Navigating the Deals World: The Politics of Economic Growth
in Bangladesh', in Lant Pritchett, Kunal Sen, and Eric Werker (eds), Deals and
Development: The Political Dynamics of Growth Episodes (Oxford, 2017; online edition,
Oxford Academic, 21 Dec. 2017),
https://doi.org/10.1093/oso/9780198801641.003.0004
Hossain, M.M., Rahaman, M.M., and Rahman, M.J. (2023). Covid-19 corruption in the public
health sector—emerging evidence from Bangladesh, Health Policy and Planning,
Volume 38, Issue 7, August 2023, Pages 799–
821, https://doi.org/10.1093/heapol/czad036
Khan, M. (2012). Governance and growth: history, ideology and methods of proof. Good growth
and governance in Africa: rethinking development strategies, 51-79.
Raihan S, Bourguignon F, Salam U, eds (2024). An Institutional Diagnostic of Bangladesh. In: Is
the Bangladesh Paradox Sustainable?: The Institutional Diagnostic Project. Cambridge
University Press; 2024:333-382.
Raihan S, Bourguignon F. (2024). An Institutional Diagnostic of Bangladesh: An Introduction. In:
Raihan S, Bourguignon F, Salam U, eds. Is the Bangladesh Paradox Sustainable?: The
Institutional Diagnostic Project. Cambridge University Press; 2024:11-26.
Raihan S. (2024). Informal Institutions, the RMG Sector, and the Present Challenge of Export
Diversification in Bangladesh. In: Raihan S, Bourguignon F, Salam U, eds. Is the
Bangladesh Paradox Sustainable?: The Institutional Diagnostic Project. Cambridge
University Press; 2024:101-136.

White Paper on State of the Bangladesh Economy 356

Chapter XXII. Data Ecosystem – Villain of the Development Narrative*

22.1 The Data Problematique: From Illusion to Delusion

A well-performing public data and information system is like oxygen for effective policymaking.
It provides the empirical foundation for decisions that impact the quality and trajectory of
economic growth and governance in a country. High-quality data is essential at every stage of the
policy cycle, from articulation and implementation to evaluation and course correction. In
Bangladesh, the integrity of the data ecosystem has been a matter of concern for years. During
the last fifteen years, independent experts and economists have repeatedly questioned the quality
and reliability of public data, raising doubt about its quality and often credibility to present an
objective state of economy and development and hence, support informed policymaking. When
official statistics on key metrics such as GDP, inflation, private investment or employment are
unreliable, it creates a disconnect between economic realities and policy responses. This impairs
the government's and other stakeholders’ ability to address critical issues effectively and make
decisions.

The issue not only concerns domestic stakeholders but also hampers Bangladesh's ability to
present a credible economic narrative to international stakeholders. Global credit rating agencies
rely heavily on accurate data to assess a country's economic risk and growth potential to inform
investor confidence. As it stands, the flaws in Bangladesh's data ecosystem, if unchecked, can
severely impede its ability to secure favourable ratings and attract foreign investment.

Global indices and comparisons highlight the limitations of Bangladesh’s national statistical
performance. World Bank’s Statistical Capacity Index (SCI) indicated a decline in Bangladesh’s
statistical performance between 2014 and 2020, particularly underperforming in areas like data
reliability, timeliness, and transparency compared to regional peers like India and Vietnam. While
recent World Bank assessments indicate improvements in areas like SDG data availability and
data usage by international organisations, significant gaps remain in data services, sources, and
infrastructure. These gaps underline concerns around data quality, accessibility, openness,
disaggregation, and the enabling environment required for leveraging new data sources.

As Bangladesh approaches its graduation from Least Developed Country (LDC) status, the
situation becomes particularly pressing. Monitoring the country’s smooth transition, identifying
lapses in implementation, and responding effectively with agility will depend heavily on robust
and credible data. Data will also be essential for assessing the country’s readiness to face a more
competitive and demanding global market post-graduation. Thus, the critical review of the
national data ecosystem is not merely a technical exercise but a crucial step towards shaping a
robust development path for a nation on the cusp of significant transitions.

In the above backdrop, this chapter undertakes the critical task of reviewing the national data
ecosystem, focusing on a) a deep dive into four data issues and the reasons behind and b) an
assessment of the data ecosystem using the "four A" framework546 – availability, accessibility,
agility and accuracy; c) outlining the institutional challenges of data generation; and d) critical
lessons and outlook. The methodological approach involved using comparative assessments and
validating concerns through proxy indicators to assess data reliability. The investigation is

* The chapter has been prepared by Dr Debapriya Bhattacharya, Distinguished Fellow, Centre for Policy
Dialogue (CPD) and Convenor, Citizen's Platform for SDGs, Bangladesh; Mr Towfiqul Islam Khan, Senior
Research Fellow, CPD; Ms Sarah Sabin Khan, Head of Solutions Mapping-Accelerator Lab, UNDP Bangladesh
and Ms Iffat Anjum, Head of Exploration, UNDP Bangladesh.
546 The framework is adopted from Debapriya Bhattacharya, Towfiqul Islam Khan, Muntaseer Kamal and

Rakshanda Khan (2022). Improved Fiscal Data in Bangladesh for a Transparent and Accountable Public
Sector. Dhaka: Centre for Policy Dialogue (CPD).

White Paper on State of the Bangladesh Economy 357

grounded in a qualitative review of existing literature, international indices, and national data
sources, complemented by circumstantial evidence and insights from practitioners gathered
through extensive consultations with diverse stakeholders. Relevant data concerns identified in
other chapters are referenced as appropriate.

The analyses of this chapter highlight institutional challenges on three key fronts that have
enabled the systemic compromise of data integrity or led to data-related disarray in the country
over the years – capacity deficit, coordination failure, and collusive behaviour. These challenges
have impeded data-generating institutions' ability to consistently produce high-quality credible
data that is timely, disaggregated, accessible, and usable. What may have started as an illusion to
establish a development narrative perhaps ended up being a delusion even to the wire-puller.
Reform aspirations outlined in the chapter, therefore, focus on strengthening institutional
capacities at all levels through financial and technical reinforcement, improving inter-agency
coordination and interoperability by breaking down data silos, and ensuring the political
autonomy of national statistics through the establishment of an independent data commission.

22.2 A Deep Dive into Selected Areas to Unveil the Structure of the Problematique

Data reliability issues have been highlighted throughout this White Paper in multiple chapters.
The mystery of constant acceleration in GDP growth (Chapter 2), making sense of inflation data
(Chapter 3), and the revealed inconsistencies in the balance of payments (Chapter 4) have come
to light. Consistently underreported non-performing loans surely require more forensic auditing
at the individual bank level (Chapter 10). Labour market statistics suffer from inadequate quality
as the definitions did not follow global standards (Chapter 16). Additionally, inaccuracies in
export figures (Chapter 12) and public investment reporting (Chapter 17 and 19) are widespread.
These collective issues, often driven by political manipulation and institutional limitations,
undermine the reliability of the reported data.

The decision to conduct a detailed analysis in this chapter of four critical data issues—GDP
growth, inflation, the Labour Force Survey (LFS), and the Household Income and Expenditure
Survey (HIES)—is driven by their significant impact on national policy and economic
management. These areas were chosen because of their importance in crafting an elevated
development narrative for the country under the previous government, which has faced
reasonable scrutiny.

The selected indicators and surveys have been central to ongoing discussions about data
reliability. For example, the HIES is a fundamental survey that provides estimations not only on
poverty but also on key indicators such as income, consumption, and inequality. Furthermore,
these data sources do not operate in isolation; they intersect with a broader network of
institutional data generation, including administrative records, national revenue figures, private
investments, non-performing loans, and export statistics. Concerns regarding accuracy and
transparency are prevalent across all these areas.

The purpose of these deep dives is to emphasise the extent of discrepancies and uncertainties in
the data, explain the reasons behind them, evaluate the reliability of the data series, and identify
common systemic weaknesses. A crucial question is whether there is a need to re-estimate key
indicators in order to establish more realistic benchmarks for assessing ongoing and future
reform efforts. Ultimately, the goal is to explore potential pathways for reform that can help
restore confidence in national statistics.

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Economic Growth: Where it all started

Over the past several years, Bangladesh's GDP growth rate has been the centre of attention. At
the same time, GDP estimates have been under scrutiny for the past several years due to their
apparent disjuncture with several other key macroeconomic and development correlates,
including private sector credit, revenue mobilisation, import payments for capital machines,
energy consumption, export receipts, employment generation, etc.

It is often apprehended that the integrity of GDP data may be compromised in view of political
gains. This has particularly gained more consensus in the last decade. A recent World Bank
study547 (covering 1985-2019) estimated that structural growth drivers (e.g., trade and FDI,
finance, infrastructure, macroeconomic stability and political stability) could predict GDP growth
in Bangladesh reasonably well during the 1990s and 2000s. However, the share of unexplained
GDP growth (residual) started to increase in the 2010s. This reached its peak for the period 2015-
2019 when 3.7 percentage points of growth could not be explained by the structural drivers. The
World Bank report terms this period “rather unusual”. Often, think tanks in the country raised
similar questions. Curiously, between FY2014 and FY2019, GDP growth rate (Base year: 2005-
06) never declined compared to the preceding year’s estimates.

The mismatch between GDP data and its components has been discussed widely. For example,
FY2017 industrial production statistics (QIIP, Base year: 2005-06) reported a 54.8% growth in
the leather and related products industry, while exports of the sector declined by (-) 16.3% in
that year. In FY2018, the same sector again posted a 50.5% growth when export receipts declined
by (-) 21.3% in the same year. Pharmaceuticals also registered similar unusually high growth
rates. Similarly, the volatility of natural gas use for industry or total is not reflected in value-added
estimations for the industry sector.

Indeed, about half of the GDP estimates are not based on credible real-time data. The following
table indicates that GDP data may often be subject to past surveys that do not capture real-time
scenarios of the economy. For example, the value added for private transport is calculated by the
cumulative number of vehicles newly registered with the government authorities (BRTA) and the
fixed value added per vehicle. This does not necessarily consider outdated transport.

This is also reflected when the variations of sectoral GDP growth rates are examined. A simple
standard deviation test548 for sectoral GDP growth rates shows that the growth rate of the
services sector was by far the most stable (Figure 22.1). It may not be due to the resilience of the
subsectors; rather, it originated from the weaknesses in the estimation process. Curiously, the
volatilities of growth rates for the sectors for which the accuracy of data is often questionable (as
measured by standard deviation) are significantly lower than other sectors. Sectors such as
Animal Farmings, Fishing, Hotel and Restaurants, Land Transport, Water transport, Real Estate,
Renting and Business Activities, and, Community, Social and Personal Services had standard
deviations ranging from 0.2 to 0.6. Chapter 3 of this White Paper also highlighted that a significant
part of the country’s value addition is downwardly rigid.

547 World Bank (2022). Change of Fabric.

548 Standard deviation represents the variation of a variable's values relative to its mean.

White Paper on State of the Bangladesh Economy 359

Figure 22.1: Standard Deviation of Sectoral GDP Growth Rates (FY2010-FY2019)
1.7

1.1

0.5

AGRICULTURE INDUSTRIES SERVICES

Source: Estimated based on BBS data.

There is a serious need to take urgent steps to address the weaknesses in the data for estimating
credible national account statistics. A number of surveys will need to be conducted on a regular
basis. There is a need for a number of government agencies (e.g., Livestock Department,
Directorate of Fisheries etc.) to improve data quality. The estimates of GDP rely significantly on
budget data from the government, but surprisingly, BBS is not ‘allowed’ to get the actual
expenditure data from MoF in a timely manner. A significant part of the budgetary allocations
remains unspent, undermining GDP data quality.

The estimation of GDP following the expenditure method is seriously constrained by credible
data. Trade data is more readily available. However, government expenditure, including public
investment, is based on budget or revised budget data that suffer from the same inaccessibility of
actual public expenditure data originating from the IBAS++. Most significantly, there is no
credible data for consumption, which is calculated residually/arbitrarily. The same is true for
savings data. An important portion of private investment data also relies on past surveys, not real-
time data. If it is compared, the estimates based on the expenditure method are more unreliable
compared to the sectoral method.

The pressing question that has emerged repeatedly over the past decade regarding economic data
is whether it has been deliberately manipulated for political purposes. Our discussions with
relevant data professionals of the BBS and other organisations recalled that during the post-2013
period, the political policymakers took a special interest in GDP figures and surely made strong
influences. It has been mentioned that the national accounts data releases for multiple years were
subject to maintaining the level of satisfaction of the key policymakers. To this end, in certain
cases, past years' data for certain background data were also revised. Allegedly, a collusive group
within the BBS emerged to ensure the economic performance of the country was maintained
against all odds, be it only on paper. During the post-2019 period, this collusive group was largely
maintaining the act. Data producers may have felt pressured to present an overly optimistic view
of development characterised by accelerated economic growth, especially since past estimates
were repeatedly manipulated. Nevertheless, both data producers and users agreed that the urge
to influence data on development indicators started from the GDP growth.

Inflation: when people cannot relate to national data

There is wide apprehension regarding the ability of official inflation data to reflect the real
scenario faced by the common people. Using detailed data from a 2018 nationwide survey of

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10,500 households, SANEM constructed specific consumption baskets for these groups and
calculated food price indices based on retail price data from the Department of Agricultural
Marketing and the Trading Corporation of Bangladesh. The study found that the food inflation
experienced by marginalised groups is significantly higher than official reports by BBS. While BBS
recorded food inflation at 4.85% for urban and 5.94% for rural areas in January 2022, SANEM's
estimates suggest that marginalised households faced inflation rates over twice those figures.
Marginalised households spend a larger proportion of their total expenditure on food (61.13% in
urban areas and 65.36%) in rural areas. BBS's weights used in CPI calculation were 45.17% for
urban and 58.54% for rural. The study also highlighted the disproportionate impact of inflation
on vulnerable households. BIDS also claimed that food inflation in rural areas was higher than
official figures reported in December 2023. BIDS independently conducted the study across all 64
districts, where it compared a food basket targeting poor people with data from previous years.
BIDS estimated food inflation in rural areas to be 15% in December 2023. This is compared to the
national food inflation rate of 9.58% reported by BBS.

In August 2022, there were significant price increases in diesel (42.5%) and octane (51.6%). The
rate of inflation for August was 9.5%. While diesel and octane represent only two of the 422 items
in the consumer basket used to calculate the CPI, and standalone price increases for these fuels
may not drastically impact overall inflation, fuel price has multiplier effects, particularly in
driving up prices of food, transport and utilities, among others. However, the unusual delay and
reluctance to release August's CPI and inflation data led to speculation and scepticism about the
authenticity or accuracy of reported figures. There is also widespread discontent often reported
about how reported inflation rates were not reflective of the extent of diminished purchasing
power of people. In that month, the CPI inflation for Gross rent, fuel & lighting components was
8.4%.

The comparison of data on commodity prices from other alternative sources also creates more
confusion. The prices of commodities reported by data collected by the Consumers Association of
Bangladesh have been higher than BBS in recent years. Hence, CAB repeatedly estimated the
inflation to be higher than the estimates of BBS. Regrettably, BBS does not disseminate
commodity price data to the users. Indeed, since March 2023, BBS even stopped publishing
“Average Retail Prices (Open Market) Of Selected Commodities in Dhaka City”. Hence, validating
the price data could not be possible as the country continued to face price hikes.

The distrust about inflation data increased as BBS made a revision in estimating inflation with an
expanded commodity basket with a new base year. The latest rebasing of CPI (2021-22) that used
HIES 2016-17 downgraded the weight of the weights of food inflation in both rural and urban
areas significantly, about six percentage points and ten percentage points, respectively. At the
same time, the CPI now considers a much more expanded range of commodities (more than 700).
Many commodities included in the new estimation method are largely unavailable in many
market points of the country, creating an opportunity for the enumerators to use arbitrary
judgements. More importantly, this large set of commodities does not necessarily reflect the
consumption basket of the common low and limited-income group. In the past, BBS used to
publish inflation data for specific population groups. This has become particularly important as
policymaking based on inflation data should necessarily focus on low-income households. The
disaggregation level of the sub-groups is also inadequate for policymaking. For example, food
inflation has only two groups: ‘food and non-alcoholic beverages’ and ‘alcoholic beverages,
tobacco and narcotics’. Inflation data should be presented in a more disaggregated manner to
make it more useful for policymaking.

White Paper on State of the Bangladesh Economy 361

The data collection system of inflation data needs to be more technically rigorous and
transparent. Immediate initiative should be taken to use CAPI549 instead of using the email system
to ensure the accountability of the enumerators. A guideline needs to be established to ensure
discretionary practice is not performed for unavailable products in a market or for the same
product to be accepted at variable prices. Improvement is required in the collection of data for
non-food items. To restore the credibility and reliability of inflation statistics, unit-level data (for
all products in all marketplaces), including the inflation calculation method, should be made
publicly accessible so that citizens and analysts can cross-check national statistics.

Labour force survey: Ignoring the global standard to depict an improved scenario

Bangladesh's labour market statistics, as reported by the Bangladesh Bureau of Statistics (BBS),
indicate a low level of unemployment. The primary reason for this is that the BBS employs a very
flexible and outdated methodology. The ILOSTAT website's Bangladesh country profile provides
key labour market indicators based on the 19th International Conference of Labour Statisticians
(ICLS) published in 2013, while the BBS report uses standards and definitions from the 13th ICLS,
published in 1982. Furthermore, the BBS uses a different age range for youth and the working-
age population than what is recognised by international standards. These discrepancies in
standards and definitions have enabled the BBS to report an inflated employment rate for years,
thereby downplaying the extent of the unemployment issue in the country. The reliance on
outdated standards distorts the actual representation of labour and employment conditions,
affecting several key indicators, including the labour force participation rate (LFPR), employment
rate, unemployment rate, youth unemployment, youth not in employment, education, or training
(NEET), and informal employment.

The scope of activities included under employment in the 13th ICLS is narrower than that defined
in the 19th ICLS resolution, while conversely, the 13th ICLS has a broader definition of
employment. For example, individuals engaged in the production of goods for their own final
consumption are classified as employed under the 13th ICLS definition; however, they are
excluded from the employment definition in the 19th ICLS resolution and instead categorised as
engaging in "own-use production work," separate from "employment work." The 19th ICLS
resolution introduced the concept of work and differentiated five mutually exclusive forms: i)
employment work, ii) unpaid trainee work, iii) production work for own consumption, iv)
volunteer work, and v) other activities, including unpaid community service and unpaid work by
prisoners.

By adopting the 13th ICLS definition in its report, the BBS includes individuals engaged in the
production of goods for their own final consumption in the employment rate calculation. In
contrast, the 19th ICLS resolution focuses solely on those who work in jobs for pay or profit. In
Bangladesh, where a significant portion of the population is involved in producing goods for their
own consumption, this change in employment definition from the 13th to the 19th ICLS results in
a substantial difference, as demonstrated in the comparison of indicator data between the BBS
report and ILOSTAT. This definitional divergence not only inflates the employment rate
significantly but also leads to discrepancies in various other labour and employment-related
indicators. This is particularly true for the female workforce.

Surprisingly, the BBS report claims to follow the definitions of the 19th ICLS for core indicators,
despite the ILOSTAT website indicating that several nationally reported data on key labour
market indicators in Bangladesh are based on the 13th ICLS standards and definitions.

549CAPI, or Computer-Assisted Personal Interviewing, is an effective face-to-face data collection method

where interviewers utilize devices such as tablets, mobile phones, or computers to accurately capture
responses during interviews. This approach enhances data quality and streamlines the interviewing
process.

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Overall, if the 19th ICLS standards are considered, the employment-population ratio, labour force
participation rate and share of informal employment are overestimated while unemployment
rate, youth unemployment rate (as % of total youth), and NEET youth (as % of total youth) are
overestimated by the BBS (Table 22.1). Regrettably, these statistics for previous years are not
available, and hence, the trends cannot be examined. Surely, from the policymaking perspective,
19th ICLS method makes more sense, and BBS should follow it in future. To this end, efforts should
be made to estimate statistics for previous rounds of surveys following the 19 th ICLS for
comparison purposes.

Table 22.1: Discrepancy between BBS and ILOSTAT data on Labour Market
Indicator ILOSTAT based on19th ICLS LFS 2022
(2022)
Employment-population ratio National: 46.8% National: 59%
(%) Male: 75% Male: 77.2%
19.1% Female: 41.2%
Labour force participation National: 49.55% National: 61.2
rate (%) Male: 78.5% Male: 80%
Female: 21.25% Female: 42.77%
Unemployment rate National: 5.6% National: 4.6%
Male: 4.5% Male: 4.4%
Female: 9.7% Female: 4.9%
Youth unemployment rate (as National: 16.8% National: 8%550
% of total youth) Male: 14.8% Male: 5.2%
Female: 22.7% Female: 2.8%
NEET youth (as % of total National: 30.9% National: 22%551
youth) Male: 11.1% Male: 16%
Female: 49.3% Female: 27%
Share of informal employment National: 81.1% National: 84.9%
(%) Male: 78.1% Male: 78.5%
Female: 92.8% Female: 96.7%
Source: LFS 2022 and ILOSTAT.

In addition to definitional issues, the survey data from the LFS may have also been influenced by
internal factors over the years. There have been allegations that LFS data in the recent past was
revised and not released until it met the expectations of those in charge. For instance, the
quarterly LFS data for 2016 was not published after the first year. Instead, the annual data for
2016-2017 was released. Following a hiatus, the quarterly LFS was conducted again in 2022. It
has been claimed that the results were reviewed and revised by the administration (SID) before
being made public.552 The delay in releasing the full report of employment statistics also makes it
difficult to pursue policies based on evidence.

Labour market statistics worldwide serve as an essential indicator for assessing the health of the
economy and for informing macroeconomic policies. To enhance their effectiveness, it's
important to improve the clarity of definitions and the timeliness of data releases. By ensuring
that LFS adhere to global methodological standards and are made available promptly, we can
significantly boost their utility for policymakers and contribute to more informed decision-
making.

550 The reported values differ from those on the ILOSTAT website: 11.5% (male 14.9%, female 7.9%). This
discrepancy might be due to differences in how youth is defined by BBS and ILO.
551 The ILOSTAT website reports a discrepancy for LFS 2022: 15% overall (10.5% male, 19.1% female).

Similar to the previous footnote, this may stem from differing definitions of youth used by BBS and ILO.
552 Indeed, a committee of SID oversees the results of survey reports of BBS before releasing them.

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Poverty statistics: Making sense out of it

Poverty rates have been reducing since 2010 and have reached 18.7% in 2022 from 26.5% in
2016. Similarly, extreme poverty rates have declined from 9.2% in 2016 to 5.6% in 2022 (HIES
2022). However, these reductions do not align with improvements in other well-being indicators,
such as food security. A recent study by BBS (Food Security Statistics, 2023) revealed that about
22% of the households perceived themselves as moderate to severe food insecure. It was 70% in
the poorest households (quantile). According to the official data, the poverty reduction rate does
not go in parallel with contemporary food insecurity statistics. The sharp decline in extreme
poverty surely raised the eyebrows of analysts.

Similar data discrepancies are evident for inflation and food price data from official sources. The
market price data produced by the Department of Agricultural Marketing (DAM) does not comply
with the real market situation (as reported by the electronic and print media). It is being informed
that WFP calculated the cost of a nutritious food basket using the market price data from the DAM;
it remained much higher than the national food poverty line provided in the HIES 2022.
Reportedly, WFP is conducting a field verification survey to update the poverty estimates from
HIES 2022. This field verification is planned to use both qualitative and quantitative approaches
to perception-based poverty ranking at the upazila level in some hotspot areas. The expected
results are expected to depict the dynamics of the poverty level, the impact of the Ukraine war,
economic changes, and recurrent disasters at the district level. Indeed, our interview with a BBS
official revealed that due to the poor quality of HIES data, it has become challenging to conduct
poverty mapping for the extreme poverty segment. It is also alleged that there was strong
pressure on poverty statistics in 2016 and 2022 to remain in line with the development narrative.
Indeed, the poverty data based on consumption estimates and some analyses based on non-
income/consumption criteria also do not corroborate.

The historical discrepancy in HIES data highlights a critical area for improvement regarding the
alignment of income and consumption data. In HIES 2022, 81% of households with an income
below BDT 40,000 per month report average consumption expenditures that exceed their
income. This is an increase from 74% noted in the HIES 2016 round. To enhance the accuracy of
poverty assessments, it is essential to revisit the poverty line estimation procedure. The
consumption basket utilised for food poverty line estimation is based on data that is fifty years
old and updating it could provide a more accurate reflection of the current context and needs of
households today.

Recognising that political influences and priorities often guide statistical manipulations is crucial.
This underscores the importance of accurate data as the backbone of effective policymaking.
Manipulated data, on the other hand, can lead to devastating consequences, making the need for
reliable data even more urgent. The report titled “A National Multidimensional Poverty Index
(MPI) For Bangladesh” has not been published for years, allegedly due to a lack of political buy-
in. The estimation method has been changed to improve results. The latest version of the report
(February 2024), which used 2019 MICS data (pre-COVID), indicated that the incidence of
multidimensional poverty in terms of head-count ratio was 24.05%, so nearly one-fourth of
people in Bangladesh are multidimensionally poor (Table 22.2). Curiously, the first (final)
estimate for this exercise (November 2020) reported that the incidence of multidimensional
poverty in terms of head-count ratio was 36.1%.

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 Table 22.2: MPI Head-count Ratio, according to two versions of the unpublished report
titled A National Multidimensional Poverty Index (MPI) For Bangladesh
MPI Head-count Ratio February 2024 version November 2020 version
National 24.05% 36.1%
Rural 27.0% 39.7%
Urban 13.48% 23.2%
Source: A National Multidimensional Poverty Index (MPI) For Bangladesh.

The differences in estimations arose primarily due to the use of one different indicator. Years of
schooling (five years considered in new estimates vis-à-vis eight years in previous estimates).
The unreleased report (latest version) highlights that, following discussions with stakeholders,
five years of schooling has been recognised as a significant achievement in educational progress.
Allegedly, the earlier version of the report was not published as the poverty incidence measured
by MPI (MICS 2019) was found to be much higher than the poverty incidence measured by the
consumption-based CBN method (HIES 2017). Indeed, years of schooling explained more than
30% of the total MPI in the 2020 estimates (highest among all indicators). The contribution
declined significantly in 2024 estimates (still second highest) along with the level of poverty
incidence. The earlier version (November 2020) also reported child MPI, which showed that 57%
of people who share their households with children are multidimensionally poor. This statistic
has not been from the new version. Nevertheless, the report based on new estimates has not yet
been published. Allegedly, the government decision-makers found it to be higher than the poverty
incidence based on HIES 2022; hence, the report did not come to the public domain. Regrettably,
the efforts to measure MPI in Bangladesh have been shelved for about four years.

Data concerns are widespread

Data concerns are prevalent across various sectors, extending beyond the four critical areas of
statistics previously mentioned. The earlier chapters of the White Paper have highlighted these
issues as well. It's important to note that key economic and development data is collected by
various government agencies through surveys, administrative records, and accounting systems.

The population data in Bangladesh has recently entered a constructive phase of discussion,
particularly following the controversies surrounding the latest population and housing census
(PHC) conducted from June 15-21, 2022. This decennial census faced unique challenges,
especially due to the impacts of COVID-19 and subsequent climatic issues that affected data
collection in flood-affected districts (Sylhet, Sunamganj, Moulvibazar, and Netrakona). The Post
Enumeration Check (PEC) carried out by BIDS on behalf of the BBS revealed that the initial
population count was 2.75% lower than expected, prompting a closer examination of the census
process. Experts from multiple sectors, including government, academia, and communities, have
expressed concerns about potential political influences that might have led to an undercount,
highlighting the importance of transparency and autonomy in conducting the PEC. Additionally,
there were crucial suggestions focused on enhancing the content of the census, particularly
regarding the representation of Indigenous people and persons with disabilities. Addressing
these groups’ needs will be vital for building trust with civil society organisations and the
communities they represent. The PEC report emphasised the importance of better planning and
operational independence for both the PHC and PEC, ensuring accurate data management and
reconciliation processes are upheld. The census data plays a significant role in shaping various
aspects of policy and resource allocation, including indicators like per capita national income and
securing grant support from global sources for immunisation. Reliable population figures are
essential for estimating the demand for essential commodities and will ultimately guide future
surveys and programs in the coming decade. This discourse around the census and its findings
presents an opportunity for collaborative improvement and a commitment to transparency and
inclusivity moving forward.

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Concerns regarding the quality of agricultural production data are of paramount importance. The
reliability of domestic production figures for various crops often raises questions, as sustained
growth may not fully reflect market volatility or changing import demands. There are suggestions
that BBS officials in the field could benefit from greater support to ensure transparency and
accuracy in reporting. For example, the joint signature requirement from agriculture field offices
before data is sent to headquarters may create undue pressure to present overly positive growth
figures. There is a large consensus that statistics on domestic production for livestock, poultry
and fisheries are unreliable. This issue has never received the required policy attention.
Addressing these procedural challenges could help ensure that accurate and reliable data is
reported, ultimately enhancing the understanding of agricultural trends and supporting better
decision-making. The stakeholders emphasised that the unavailability of credible production and
demand data creates a hindrance in evidence-based policymaking. This is particularly hurting
when the country is passing through long-lasting inflationary pressure.

More examples of similar traits can be noted. Data related to power production capacity and
energy reserves are often believed to be overestimated. Faulty demand projections in the power
sector have contributed to a financial burden on both the government and citizens. Furthermore,
estimations of economic and financial returns for public investment projects conducted during
feasibility studies are either intentionally manipulated or not conducted at all, particularly during
revisions of timeframes and budget allocations. We have observed how the overestimation of
export receipts and foreign exchange reserve data has led to significant issues in macroeconomic
management. The repressed NPL data were used to camouflage the wounds of broken financial
system. A similar fate is anticipated for external public debt data and its projections. Overall, fiscal
data is rife with contradictions from various sources, while the most reliable source, iBAS++, is
not readily available for wider stakeholders, including policymakers. Additionally, data on public
investment project implementation is not provided on a monthly basis, and public expenditure
data for critical areas such as social protection programmes is lacking. Consequently, both
policymaking and accountability efforts are hindered.

The common threads: A need to rejuvenate the data ecosystem

The deep dive into the four critical areas of development data brings forth the necessity to take
cognisance of various aspects of the problematique. First, data generation in Bangladesh suffers
from a capacity deficit. While some statistics may be re-estimated based on standard
methodology based on available data (e.g., labour market statistics), some required background
information may not be available. For example, given the current state of available information
on GDP data, particularly for expenditure methods, quality data on consumption and savings may
not be made available. Moreover, the quality of data supplied by the associated ministries will
always limit the capacity of BBS to produce more reliable data. Despite having legal protection to
this end, BBS is found to be a hostage to the capacities of these agencies. Regrettably, these issues
are hardly discussed in the policy discourse. Second, there is a serious lack of coordination
between data-producing agencies. For example, BBS does not have access to actual budget data
from the iBAS++ system, which constrains the agency from producing more accurate data for
value addition in several sectors. Such lacuna can easily be fulfilled with political buy-in. Third
and most importantly, our deep dive highlights that there is serious collusive behaviour to
manipulate data. This is perhaps true for both national account estimates as well as survey data
produced by the BBS. More importantly, such behaviour has spread beyond the political actors to
the professional data producers. This means that an institutional remedy will be required to
rejuvenate a credible data ecosystem in Bangladesh.

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22.3 An Assessment based on the 4-A Framework: Much to be Done, Much can be Done

This section focuses on four key dimensions that encompass multiple elements discussed
previously, as well as additional aspects. These dimensions were selected from existing
frameworks because they effectively capture the complexity of the data ecosystem. We will
evaluate both the demand and supply sides of the data ecosystem based on four 'A's: data
availability, accessibility, agility (promptness), and accuracy. These dimensions will highlight the
current challenges within the data ecosystem.

The availability dimension examines whether the variable of interest exists. Data should be
publicly accessible, meaning it must be published on relevant government websites in a timely
manner and available at no cost. Additionally, data must be reported promptly, which includes
considering the frequency of data reporting and any time lags in reporting. It is also essential for
data to be harmonised across various sources; the information from one source should be
consistent with other relevant indicators.

Availability

Over the years, we have seen notable improvements in data availability. For example, in 2016,
only 112 out of 247 SDG indicators had data available, whereas by 2023, this figure rose to 213
indicators. This progress is encouraging; however, there is still room for enhancement in certain
areas. Specifically, some key indicators still lack available data, highlighting the need for
continued efforts. One area that requires attention is the disaggregation of data. Disaggregation
is largely focused on gender (female/male) and location (rural/urban). Even within the
disaggregated data based on gender and location, the number of indicators is not substantial—
only 27 indicators provide gender-based data, and 20 indicators present data based on location.
The other vulnerable population groups still lack the necessary disaggregated data. Addressing
this gap is crucial for a deeper understanding of the development levels within these groups.
Moreover, it’s important to note that actual public spending is not consistently reported across
all variables for which budget data exists, for example, in the realm of social protection. There is
potential for some data to be made available with existing resources; the key challenge lies in
securing political buy-in to facilitate this process.

Accessibility

The restricted access to data poses a significant challenge to the advancement of the data
ecosystem. Even the most precise and well-collected data can only benefit society when it is made
available to key stakeholders, including government officials, policymakers, researchers, and civil
society organisations, in a format that is user-friendly. Data is usually disseminated as published
reports and in PDF format. Regrettably, they are mostly not available in Excel or other more user-
friendly formats.553 Key data-providing agencies such as the BBS, Bangladesh Bank, and MoF lack
a user-friendly search database. Consequently, data users frequently rely on international
sources like the World Bank and IMF. In recent years, in most cases, copying from PDF files has
also been restricted.554 Unit-level data has always been costly for many users. Even when a user
buys unit-level survey data from BBS, s/he may not get full access to the dataset.555 Also, metadata
is often not available. BBS and various other government agencies often hesitate to publish data
immediately after it has been generated. This reluctance stems from several factors: many of

553 Bangladesh Bank website provides a long series of data in Excel format. However, more recent data is
not shared in this format. Moreover, this series often lacks harmonisation in some cases.
554 For example, the online version of the HIES 2016 report available on the BBS website is about 284 MB,

making it difficult for users to use.

555 For example, with the unit level data of HIES, purchased from BBS, the community level data is not

provided.

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these bodies lack the necessary resources and capabilities to publish and manage data according
to global best practices, and there is often a limited understanding of the actual needs of data
users and the best methods for disseminating information. Furthermore, there is a pervasive
sense of uncertainty among bureaucrats and a reluctance to face scrutiny from experts in the field.
This trepidation often leads to delays in the online publication of data. In addition, political
obstacles frequently hinder the timely sharing and dissemination of information, as various
political influences exert pressure on the decision-making process. Access to administrative data
is frequently limited under the pretence of confidentiality, further complicating the situation.
Data related to public finance is a prime example. Moreover, overall electronic access to data
remains severely restricted. The searchability of websites also has limited capacity.

Agility

A significant challenge facing data collection in Bangladesh is the considerable delay in the
availability of datasets. Often, these datasets are not released until several years after their initial
collection. For instance, BBS conducts surveys such as HIES only once every five years and the
MICS every three years. Although efforts have been made to conduct the Quarterly LFS more
frequently, the full report for the 2022-23 fiscal year remains unavailable, even a year after the
preliminary findings were shared. In the context of public finance, there is typically a waiting
period of about six to seven months before data is made accessible. Additionally, the availability
of historical data series is quite limited, with only a few indicators providing a comprehensive
view over time. This lack of timely and accessible information can hinder effective analysis and
policymaking in the country. This was particularly felt during the COVID-19 period when
policymaking significantly suffered from a dearth of data.

Accuracy

Standardisation and harmonisation of data is a perineal challenge. The discussion on LFS data
above highlighted this issue. The accuracy of fiscal data in Bangladesh has come under scrutiny
multiple times due to discrepancies. Different sources have published inconsistent figures for the
same indicator at the same time, and some sources have presented varying figures for the same
indicator over different periods. In FY2023-24, NBR’s revenue mobilisation data figure was Tk.
21,264 crore higher than the figure reported by the Finance Division. Our discussion with NBR
officials informed us that NBR, in the future, may follow the iBAS++ data to report their revenue
mobilisation.556 Similar discrepancies are also common between the IMED and Finance Division.
In FY2023-24, IMED reported ADP expenditure was Tk. 7,134 crore higher than the figure
reported by the Finance Division. The total number of persons with disability in Bangladesh
varies very significantly among the BBS surveys due to the use of different definitions and
methodologies. The other issue in this domain is the lack of comparability. The rebasing and
adoption of new methodology often do not lead to making previous data comparable. Hence, for
users, data may not be comparable over time.

22.4 Challenges of Data-Generating Institutions

The in-depth analysis of four key data issues, along with the 4-A assessment of the data
ecosystem, uncovers significant structural challenges and systemic weaknesses that hinder the
production of high-quality data necessary for informed policymaking and planning. While these
challenges are not unique to Bangladesh, their expression and severity differ depending on the
governing regimes. Generally, the more authoritarian a regime, its data practices are less
transparent, resulting in a more contentious narrative around growth and development. In
Bangladesh, the institutional challenges faced by data-generating agencies can be broadly

For the July to October 2024 period, NBR introduced the use of iBAS++ data for the first time.
556

However, past data trends are not yet available.

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categorised into three aspects: capacity deficit, coordination failure, and collusive behaviour with
political compulsions.

Capacity deficit

The national statistical system suffers from a lack of technical capacity in critical areas such as data
collection, methodological design, remedial action, documentation, and use of appropriate
technology and software, which undermines the robustness and reliability of the data produced.
Consultations with officials revealed that transfers of experienced BBS staff, politically influenced,
have significantly weakened the institution's ability to retain and effectively utilise acquired
expertise, which, in turn, has had detrimental effects on overall institutional capacity. Moreover,
limited career growth prospects have demotivated staff, leading to reduced efficiency and
productivity.

Challenges in oversight functions emerge as the Statistics and Information Division (SID) is staffed
primarily by administrative cadres rather than individuals with specialised statistical expertise.
This lack of technical expertise within the SID undermines the quality of oversight and hinders
the effective functioning of the BBS in effectively collecting, compiling, and reporting data on
critical economic indicators such as GDP and inflation.

The NSO also lacks institutional budget allocation to fund regular surveys needed for updating
essential data, such as coefficients for GDP and inflation. The BBS does not have a core budget
beyond the salaries of officials to carry out regular surveys and produce updated reports.
Consequently, the NSO has to rely on development projects, often foreign aid-funded, to initiate
surveys, resulting in delays and inefficiencies.

Coordination failure

Coordination lapses are prevalent among BBS and other data-generating agencies in terms of
interoperability, harmonisation of definitions, standards, classification and disaggregation.
Although BBS has established formal data-sharing protocols with local institutions, as well as
regional and international organisations, the National Strategy for the Development of Statistics
(NSDS) 2015 sheds light on several deficiencies in institutional coordination. Specifically, it
pointed out the lack of alignment between BBS and other agencies regarding definitions,
standards, classifications, and data disaggregation. Some line ministries continue to use their own
definitions and classifications, which are inconsistent with those adopted by BBS. This also causes
a lack of interoperability and data integration among different government bodies (e.g., NID
database, SSNP database, IBAS++), duplication of efforts and inefficient use of resources.

Collusive behaviour with political compulsions

The lack of operational autonomy of the NSO and other national data-generating agencies, such as
Bangladesh Bank and NBR, undermines the independence, impartiality, and transparency of the
national statistical system. This lack of autonomy has allegedly led to compromises in the
integrity of data collection and reporting processes, resulting in potential biases and
manipulation of key statistics. Under political pressure to present a consistently positive
narrative of the nation's economic growth and human development, NSOs were often compelled
to conform and employ questionable tactics to maintain this facade. BBS has faced criticism for
delays in the timely publication of data, which diminished opportunities to cross-check and
validate relevance for immediate policy responses. Delays in releasing data and reports have
been deliberate at times in order to contain sensitive information, further compromising the
integrity of the data dissemination process. The NSDS 2015 emphasised this need for
improvements in the governance, autonomy, statistical legislation, and ICT infrastructure of the
BBS.

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The lack of operational autonomy also results in a lack of integrity in the selection of technical
expert committee members. The BBS relies on a technical expert committee to advise on issues
such as rebasing, validation of methodology, and estimation during major updates. However, this
committee is not a permanent body and is only convened during significant updates, such as the
rebasing of national accounts. Concerns have been raised during stakeholder consultations
regarding the selection process for the committee’s members. It is widely believed that political
considerations or filters are applied in the selection of committee members, which naturally
undermines the integrity of the end product.

These issues not only hinder the generation of reliable statistics but also undermine the
transparency and credibility of national reporting, with significant implications for policy
decisions and the country’s ability to maximise benefits from international trade, investment and
cooperation.

22.5 Critical Lessons and Outlook

Bangladesh's data ecosystem presents opportunities for improvement, as it currently faces

political and structural challenges that lead to inconsistent and often contradictory statistics
across various sectors. Economists have highlighted the misalignment between reported
economic growth and key indicators such as private sector investment and employment trends.
The widespread malpractices are highlighted in this chapter (and in the entire White Paper)
include back calculation based on the will of policymakers, aligning statistics with the desired
development narrative, methodological cherry-picking, delayed data release, concealing of data
as well as statistical and analytical reports, producing faulty estimates. Surely, the prevailing
scenario calls for soul-searching. The policymakers of the past regime blindfolded themselves by
continuous manipulation of key statistics and creating an atmosphere of fear and control that
caused permanent damage to the professionalism, integrity and accountability across the data
ecosystem.

Addressing these discrepancies will require enhancing capacity, improving coordination, and
tackling contextual factors that influence the alignment of data collection processes with actual
economic activities. Moreover, there is significant potential to maximise the value of data by
reducing segmentation and promoting sharing among institutions and agencies. By integrating
diverse data sets, new and coherent insights can be derived to inform decision-making.
Establishing a transparent system and working to resolve existing inconsistencies could foster a
culture of trust in public data while empowering stakeholders to make informed choices for the
future. Based on the critical review of the data ecosystem, the following reform aspirations for a
better outlook of public data are recommended:

Create a pathway for reform

Given the state of the data ecosystem, it has become critical to undertake a more in-depth scrutiny
of the key statistical indicators to measure the extent of distortion. To this end, it is high time to
create an Independent Expert Committee for Review and Reestimation of National Data Series. The
committee should be independent of the current bureaucracy and high-powered. The committee
should revisit the previous trend of key national statistics and make possible adjustments to bring
forth the real picture of the country’s economy. This will create a pathway to improve
methodological and administrative improvements in data generation methodology,
dissemination, and quality assurance mechanisms. The committee should be given the required
authority and resources to conduct this task and will work for a specific timeframe. The data-
producing government officials should work under the committee and give the committee full
access and cooperation. If this exercise is not taken into account, and if the data generation
process improves in the days ahead, there is a probability that progress in key areas may be

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misinterpreted, leading to misguided policymaking. Therefore, the selection of such an exercise
should be approached with careful consideration.

Also, BBS should establish technical committees consisting of independent experts (data users
and data assessors) and data producers (relevant BBS officials) to review methodology and
approve the data generated by the BBS before its release. The technical committees should be
engaged from the very beginning of the process chain and empowered to examine methodology,
data collection process, analysis and reporting. The current practice of requiring administrative
approval from the Ministry for data release should be discontinued, as should the ongoing
practice of SID vetting for survey results before release. The role of SID should be limited to
administrative decisions, while technical aspects should be left to BBS alone.

Prepare a plan
To build a robust data ecosystem that effectively meets policy needs and enhances decision-
making, several key recommendations should be implemented. First, it is crucial to map data
needs comprehensively, ensuring that data collected from existing surveys and administrative
reports is readily available. Enhancing data coverage and ensuring optimal levels of
disaggregation will provide a more nuanced understanding of the issues at hand. Forming
partnerships with non-state data stakeholders can further enrich the data landscape.
Additionally, to ensure national data aligns with global quality standards, a Data Quality
Assurance Framework (DQAF) should be developed, prioritising relevance, accuracy, and
reliability while increasing the frequency and timeliness of data production. Accessibility must
also be a priority; formulating a data dissemination policy and leveraging ICT can significantly
improve the reach and usability of data, while the Right to Information (RTI) Act should be
effectively utilised to promote transparency and accountability. Strengthening institutional
capacity is essential, including ensuring data producers' autonomy, enhancing interagency
coordination, and introducing statistical cells within agencies to provide data-related assistance.
Moreover, sufficient funding must be secured through national financing plans to support core
data generation needs, fostering a global partnership to bolster resources. A more effective and
responsive data ecosystem that serves all users and enhances policy formulation can be
established by addressing these areas.

Invest in capacity
Strengthening institutional capacity presents a valuable opportunity for national data-generating
institutions to enhance their impact and effectiveness. A more robust data environment can be
established by focusing on improving the technical and financial capabilities of data-generating
agencies, particularly BBS. However, the current practice of project, workshop and foreign travel-
based capacity development efforts, largely funded by foreign grants and loans, may not be good
enough. Increased budget allocations and investments in modern data collection tools, digital
platforms, and ongoing in-house staff training are steps that can significantly elevate data quality,
facilitate more frequent surveys, and improve accessibility for all. It is alleged that the project-
centric approach has groomed the prevailing collusive culture.557

In addition to bolstering internal capabilities, aligning national data collection methodologies

with globally recognised frameworks and best practices—such as the UN Fundamental Principles
of Official Statistics, the OECD standards, the SDSN TReNDS, and the Open Data Watch
framework—will enhance the credibility and comparability of our national statistics. This
alignment not only ensures consistency but also fosters trust among data users.

Embracing technology is also a key component of this enhancement. By modernising data

collection and dissemination methods through the adoption of emerging technologies—including
Geographic Information Systems (GIS), big data analytics, citizen-generated data, blockchain,

557 Few stakeholders have also alleged corruption practices in SID and BBS.

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machine learning, and artificial intelligence—along with basic digital tools like mobile
applications, automated reporting systems, and interactive data portals, we can significantly
improve user satisfaction. These technological advancements will enable independent reviews
and provide valuable feedback for enhancing data quality and validation. Establishing effective
feedback loops will ensure that data services are responsive to user needs and aligned with
evolving national priorities.

Furthermore, addressing data gaps and improving data disaggregation is essential for a
comprehensive understanding of our socio-economic landscape. Regular independent audits and
recalibrations of key economic indicators can help close these gaps and ensure our reported
figures accurately reflect actual conditions. Additionally, re-estimating disputed series from the
past will provide a solid foundation for assessing the effectiveness of future reforms. By
prioritising disaggregated data, especially at localised levels, we can enable evidence-based
policymaking that truly supports marginalised communities and fosters inclusive growth.

Improve coordination
Fostering better coordination and collaboration among public and peripheral data-generating
entities presents a valuable opportunity to address the challenges of fragmented and inconsistent
reporting of public data. By tackling this issue, it is possible to enhance the reliability of the data
ecosystem. One key step forward is the establishment of effective frameworks for data sharing
between government agencies. All government agencies should be encouraged to make more
data available to other agencies and stakeholders. The best approach is to pursue proactive
disclosure. Simple steps can be taken to secure easy wins. For example, data on public investment
projects, including their monthly progress and the relevant DPP documents, should be made
public. Additionally, if big data from the BTRC were made public, think tanks and businesses could
use it to make more informed decisions.558 Integrating data from non-state entities and citizen
contributions can significantly enrich our data landscape. This approach will improve the
consistency and reliability of public data and facilitate more integrated, coherent, and insightful
policy analysis and decision-making. Embracing these reforms will strengthen national data
capacities and rebuild trust and credibility in the information we rely on.

Ensure independence
Fostering the political and operational autonomy of national statistics, particularly for the
Bangladesh Bureau of Statistics (BBS) and other public data-generating agencies, is vital to
enhancing data integrity in Bangladesh. Recognising public data and information systems as the
fifth pillar of the state—alongside the legislative, judiciary, executive, and media—can
significantly strengthen democracy.

Globally, there are numerous best practices that can serve as models for establishing the
independence of official statistics. For example, the United Kingdom’s Office for National
Statistics, the largest independent producer of official statistics, operates under the UK Statistics
Authority. This structure ensures that data collection and publication occur without political
interference, setting a strong precedent for data integrity. Canada offers another valuable
example, as the Statistics Act ensures that Statistics Canada operates independently of
government directives. The Chief Statistician reports directly to Parliament, ensuring
accountability and transparency in governmental data practices. In Mexico, the National Institute
of Statistics and Geography (INEGI) exemplifies successful autonomy, serving both as a producer
of statistical and geographical data and as the coordinator of the National System of Statistical
and Geographical Information. The 2008 Law on the National System of Statistical and Geographic
Information empowered INEGI with full technical and managerial autonomy, effectively
distancing it from governmental influence. This reform has not only strengthened INEGI’s
governance structure but has also significantly built public trust in its data as objective and

558 It is recognised that privacy concerns should be maintained duly.

White Paper on State of the Bangladesh Economy 372

reliable. Implementing similar measures in Bangladesh can pave the way for a robust and
impartial data system that supports informed decision-making and fosters public confidence in
government statistics.

To address concerns about data manipulation and enhance data integrity proactively, BBS may
be converted into an independent statistical commission that operates free from political influence
and will report directly to the President. Creating this commission would play a vital role in
overseeing all aspects of data generation, compilation, and dissemination, ensuring alignment
with international standards of reliability and transparency. One of the commission's key
responsibilities would be to thoroughly investigate discrepancies and gaps in national statistics,
identifying areas where technical experts can improve. Additionally, it will put forward a
governance structure that safeguards data independence from political and administrative
pressures, thereby strengthening the reliability of our statistics. The commission would also focus
on harmonising national data with global standards, enhancing data quality, and filling data gaps
to bolster trust among international stakeholders, such as rating agencies, development partners,
and investors. This initiative would create a robust data ecosystem that supports evidence-based
policymaking and elevates the global credibility of Bangladesh’s economic statistics, ultimately
benefiting the nation’s development and growth.

White Paper on State of the Bangladesh Economy 373

 E. REFORMS AND
POLICIES

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Chapter XXIII. Articulation of a Strategic Outlook*

The present White Paper exercise essentially validates the longstanding widespread concerns
about the state of the economy. A closer look at the evidence on the ground reveals that the
situation is much worse than was anticipated and apprehended earlier. Addressing the emergent
situation no doubt calls for a number of actions in the areas of macroeconomic stabilisation, policy
changes and institutional reforms.

This closing chapter of the present document neither seeks to summarise the rich findings
presented in the preceding chapters nor presents an exhaustive list of the tasks that the Interim
Government ought to undertake. Indeed, the White Paper is not envisaged to outline the reform
agenda.559 Instead, the present chapter highlights the following seven critical areas of immediate
concern.
(i) Rolling out an economic stabilisation programme based on the experience of the first few
months of the current regime
(ii) Delineating a framework for the forthcoming national budget (2025-26)
(iii) Proposal for a mid-term planning format (2025-27) guided by a robust evaluation of the
now postponed 8th Five-Year Plan (2020-25)
(iv) Identifying Priority Reform Domains
(v) Operationalising a robust transition strategy for LDC graduation
(vi) Accelerating fuller delivery of the SDGs
(vii) Hosting of a Forum for dialogue with Development Partners

23.1 Rolling Out an Economic Stabilisation Programme

While reform measures are eagerly anticipated, the need to restore macroeconomic stability is
becoming of paramount importance. The economic stabilisation programme to be implemented
in the immediate term will need to focus on the following domains.

The persistence of inflation was never as long-lasting as it has been since 2021, causing a
livelihood crisis for fixed, lower and limited-income families. Ordinary citizens are also anxious
about the security of savings and deposits, particularly those who have their savings in troubled
commercial banks. While a medium of stability may have been restored in the exchange rate
market and foreign exchange reserves; however, its durability is yet to be firmed up and
cemented. The external sector is yet to pick up to the extent that the government is capable of
intervening in the forex market towards sustainable stabilisation.

Regrettably, the lack of fiscal space has put a limit on the government’s ability to extend support
to productive sectors and population groups who are in need of immediate relief and support.
The economic agony of common citizens cannot be appropriately addressed without boosting
private investment and job creation. To this end, business communities are seeking assurance
from policymakers regarding the efficiency of ports and logistics, the supply of gas and electricity,
and industrial peace. Both domestic and international private sectors emphasise the need for an
early resolution of law and order issues and a predictable environment to boost business
confidence and private investment.

*The chapter has been prepared by Dr Debapriya Bhattacharya, Distinguished Fellow, Centre for Policy
Dialogue (CPD) and Convenor, Citizen's Platform for SDGs, Bangladesh; Professor Mustafizur Rahman,
Distinguished Fellow, Centre for Policy Dialogue (CPD) and Mr Towfiqul Islam Khan, Senior Research
Fellow, Centre for Policy Dialogue (CPD).
559 A separate document on institutional and policy reforms, prepared by the White Paper Committee

through wide ranging deliberations, addresses these in greater detail.

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The policy responses thus far have been largely compartmentalised. The central bank has strictly
maintained a firm contractionary policy in its attempt to contain inflation. NBR has responded
with periodic relaxation of taxes and tariffs to incentivise imports. Still, supply-side policy
responses should be taken more aggressively by giving support to the farmers and domestic
industries. Oligarchic dominance has affected the supply of commodities in the market. It is
critical to ensure access to real-time data and predictability on the supply side, taking cognisance
of possible sabotage by the big operators. In the meantime, social protection measures beyond
TCB sales should be expanded for people in distress.

One has to welcome the changes in the boards of troubled commercial banks. However, the
central bank had to resort to printing money to give relief to troubled banks. At this moment, the
central bank is likely busy conducting forensic diagnostics. This will provide a true picture
regarding the actual amount of the distressed assets of the banks. It also needs to be recognised
that the present constrained business situation of these banks will incentivise many of the
depositors to withdraw deposits at every opportunity unless they are confident that these banks
will turn around with extended policy support. Taking this into cognisance, sooner than later, a
tentative but time-bound plan of action will be required to restore confidence among the
depositors. More importantly, the troubled banks will need to demonstrate visible success in
recovering bad assets. Progress in this domain should be regularly communicated to the public.
To effectively address the capital shortfall and liquidity challenges faced by the troubled banks, a
strategic capital infusion may be required sooner rather than later. As was noted, some steps are
being taken by Bangladesh Bank in this connection. It is essential that this process is thoughtfully
planned and executed and carefully sequenced to ensure sustainable recovery.

The apparent stability in the foreign exchange market is largely attributed to a combination of
acceleration in remittance inflow, import restraints and budgetary support extended by
development partners. However, these may not be sustained over the medium term. Boosting
export receipts and augmenting foreign direct investment are the key enabling factors in the
backdrop. Both economic measures and negotiations with development partners need to be
blended towards this end.

The government has been making efforts to pursue a cautious approach towards public
expenditure, acknowledging the prevailing constrained fiscal space. The national budget that was
passed in June 2024 was inflated with unrealistic projections and a lack of accountability. The
Interim Government should immediately work out a revised budget for the second half of the
fiscal year with realistic projections and by taking note of the needed policy priorities. While a
reform agenda is being discussed, debated and prepared for domestic resource mobilisation,
administrative emphasis needs to be placed on curbing tax evasion and expanding the direct tax
base. Priorities should be identified for both operating and development expenditures. While the
government is rightly focusing on mobilising more external resources in the form of budgetary
support, an in-depth assessment of the debt situation is urgent. Concurrently, an initiative needs
to be launched to restructure and renegotiate external debt. The government should also initiate
a more structured policy engagement with international development partners from the global
north and south regarding partnerships to support its economic recovery and reform agenda.

The economic stabilisation programme of the Interim Government requires three elements. First,
a clearly articulated and well-coordinated action plan needs to be devised at the earliest
considering the above. This plan, which will guide the policy actions of all policymaking agencies
of the government in a coordinated way, can be regularly updated and monitored. Second, to
prepare this plan and monitor its implementation, an economic advisory council may be
established to advise the Interim Government. The council should include the advisors of the
Interim Government who are responsible for key ministries dealing with economic issues, the
Governor of Bangladesh Bank, independent experts, and business and labour leaders. The
bureaucracy will support the council. Third, there is a need for regular monitoring of real-time

White Paper on State of the Bangladesh Economy 376

quality and disaggregated data to support the work of the council. A team of technical
professionals, including government officials and independent experts, should be assigned to this
task. The progress and impact of the envisaged economic stabilisation programme should be
reported to the Interim Government on a fortnightly basis. Progress should also be communicated
to broader stakeholders, including the business community, development partners and media,
for transparency and accountability. This will also help boost confidence among the stakeholders.

As a part of the macroeconomic stabilisation phase, some easy-to-implement measures (low-

hanging fruits) ought to be carried out on an immediate basis. That said, reforms, including
regulatory reforms, must follow a strategic approach with appropriate phasing, pacing and
sequencing. The stabilisation period is expected to continue till the forthcoming budget (2025–
26), at which point stabilisation efforts should be consolidated, and medium-term reforms will
need to be rolled out. While sustainable stabilisation will hinge critically on deeper reforms, the
starting point should be a coordinated approach to macroeconomic management through
necessary policy changes.

23.2 Delineating A Framework for the National Budget for FY2026

The national budget for FY2025-26 presents a valuable opportunity for the Interim Government
to showcase its dedication to implementing short-term reforms while laying the groundwork for
a robust medium-term agenda in public finance management. The starting point of this exercise
should involve preparing a credible fiscal framework. To maximise this potential, the Interim
Government could consider five guiding principles in formulating the national budget for the next
fiscal year.

Emphasise on broadening the fiscal space. To enhance fiscal space effectively, a strategic and
multifaceted approach should be adopted that emphasises both the generation of additional
domestic revenue and the reduction of leakages within the financial system. The FY2026 budget
presents an opportunity to focus on broadening the tax base rather than placing undue burden
on existing taxpayers. By modernising the taxation system through digital tools, NBR can tap into
previously untapped resources and adapt to the evolving demands of the digital economy. A
thorough analysis of current tax exemptions is crucial. By evaluating data meticulously, the
government can identify and phase out ineffective tax incentives while directing efforts towards
incentivising strategic sectors that promise growth and sustainability. Furthermore, the Interim
Government should set an example by prioritising combating tax evasion and strengthening
compliance mechanisms to cultivate a more inclusive fiscal base. Addressing issues that are
critically important, especially in the areas of taxation of wealth and property, deserves
immediate attention. By implementing targeted strategies to reduce IFF and curtail tax evasion
and avoidance, a more transparent and efficient tax system can be established. Keeping these
priorities at the forefront of the government’s agenda will be vital for achieving meaningful fiscal
reform and long-term sustainability.

Streamline public expenditure. To foster a more balanced economic landscape, it is essential to

maintain current austerity measures while ensuring that they have minimal impact on social
safety nets, healthcare, education, agriculture, and SMEs. The upcoming national budget should
pivot towards prioritising investments in these critical sectors rather than solely focusing on
infrastructure. It is vital to identify and pursue exemplary investments in health and education as
national priorities. As the government prepares to formulate the national budget, conducting a
thorough expenditure review of nearly completed infrastructure projects will be called for. This
review can help identify projects that are not expected to benefit the economy and identify ways
to cut losses. The exclusion of non-productive initiatives from the ADP list also needs to be
seriously considered.

White Paper on State of the Bangladesh Economy 377

Additionally, continuing government efforts to reduce unnecessary and costly public
expenditures, such as the purchase of government vehicles and international travel, will ensure
a more allocative efficiency and promote a more responsible use of resources. Furthermore,
developing exit strategies for fiscal incentives tied to exports and remittances will be crucial. If a
market-based exchange rate regime is adopted, the resulting depreciation could provide a means
to adequately balance out current fiscal incentives. This strategic approach will help create a
sustainable framework for economic growth while providing necessary support to strategic
sectors of the economy.

Safeguard the interests of vulnerable and disadvantaged groups. To enhance fiscal space and
prioritise public expenditure for FY2025-26, it is essential to also consider the broader economic
implications and equity concerns. Focusing on support for vulnerable and disadvantaged groups
should be one of the cornerstones of the fiscal management strategy (in designing both revenue
and expenditure measures) for the upcoming year.

The public expenditure framework must address the challenge of the continuing rise in prices of
essentials to effectively support low and limited-income households, as well as small farmers. A
substantial and targeted investment in social safety net programmes aimed at marginalised
groups, including women, youth, and individuals with disabilities, will be needed. The upcoming
budget should kick off initiatives to tackle educational disparities and enhance quality healthcare
infrastructure, particularly in rural communities. Additionally, expanding access to TVET that
aligns more closely with market demand could greatly benefit the country’s workforce. The
government should also prioritise renewable energy projects by providing fiscal incentives to
lessen dependence on fossil fuels. Furthermore, mobilising and allocating new funds for climate
resilience programs will be crucial in addressing environmental vulnerabilities. This balanced
approach can pave the way for a more equitable and sustainable future for all.

Explore opportunities to mobilise and utilise funds from external sources for budget deficit
financing. To address the challenges posed by declining foreign exchange reserves, it is essential
for the government to prioritise the implementation of all foreign-funded ADP projects. Special
attention should be given to projects that are nearing completion (particularly those over 85%
finished by June 2025), as they can quickly contribute to economic stability, private investment
and job creation. Multilateral and bilateral concessional loans present a valuable opportunity for
cost-effective financing. However, the successful acquisition of these external funds will rely
heavily on enhancing the design and implementation capacities of government agencies.
Consequently, the rapid pace of improvements in these areas is vital. Moreover, policy reforms
will play a pivotal role in securing necessary budget support, encouraging the government to
adopt a more flexible approach. It is crucial to ensure that external budgetary supports, such as
those from IMF programs, are reinforced with actionable reforms to promote long-term fiscal
stability. Lastly, the government must emphasise proper utilisation and accountability of these
funds. Doing so can ensure that financial resources are able to effectively address the country’s
critical developmental needs and contribute to sustainable progress.

Uphold good governance. The political economy landscape of Bangladesh presents both
challenges and opportunities for meaningful reforms. While there has often been a general
consensus among stakeholders on the necessity of these reforms, addressing the attendant
political economy factors can pave the way for progress. By focusing on good governance in
enhancing revenue mobilisation efforts, the government can create a more efficient and effective
tax system and build confidence among taxpayers and the private sector. Developing strategies
that ensure value for public money will significantly contribute to sustainable development.
Achieving good governance and securing political support from the highest levels will be vital
components in driving these initiatives forward. In the course of the next fiscal year, the Interim
Government can set examples to this end. Together, these efforts can lead to substantial
improvements in the efficacy of public finance management.

White Paper on State of the Bangladesh Economy 378

23.3 Proposing a Mid-Term Planning Format

With the suspension of the 8th Five-Year Plan (2020-2025), it is critically important that an
independent and substantive evaluation of the goal delivery during the elapsed plan period is
undertaken. As the Interim Government is expected to have a limited tenure, putting out a five-
year plan may not be realistic. However, a medium-term outlook (2-3 years) is necessary for
budgetary predictability as well as for managing international development finance.

The government could instead prioritise developing a two-year mid-term planning format,
designed to be flexible and extendable as needed. This approach would facilitate the preparation
of a Mid-Term Budgetary Framework (MTBF) while ensuring policy continuity, predictability,
and credibility – key to maintaining trust with international development partners, lenders, and
stakeholders.

The mid-term strategy should provide a developmental roadmap that aligns with national
priorities while maintaining the flexibility to address emerging challenges. Such a format would
also strengthen engagement with international development partners, ensuring that external
assistance is directed towards key areas, including infrastructure development, social sector
investments, and environmental sustainability. By aligning domestic priorities with international
support, the mid-term planning format would not only give predictability to enhance
Bangladesh's developmental trajectory but also build a strong foundation for long-term
partnerships and progress.

23.4 Identifying Priority Reform Domains

The White Paper highlights several entrenched structural challenges within Bangladesh’s
governance and economic frameworks, necessitating comprehensive reforms that span multiple
areas. Addressing structural bottlenecks across the major sectors of the economy is essential for
strengthening Bangladesh’s governance and economic frameworks.

The Interim Government has already initiated a number of reform agendas. This process needs
to be strengthened further to sustainably bring the economy out of the mess that it has inherited.
The preceding chapters of the White Paper identify six priority areas: banking sector, energy and
power, revenue mobilisation, illicit financial outflow, public expenditure (particularly
development projects) and data ecosystem. In some of these areas, commissions, committees and
task forces have already been constituted to suggest concrete measures to repair the economy
and improve economic management. However, a more wholesome and integrated approach will
be required to effectively address the prevailing deep-rooted challenges.

23.5 Operationalising a Robust Transition Strategy for LDC Graduation

Bangladesh, as per the schedule provided by the United Nations, is set to graduate from the Least
Developed Country (LDC) category in November 2026. The country has, on two occasions (2018
and 2021), met the three sets of graduation thresholds set by the United Nations Committee for
Development Policy (UN CDP). According to the recent triennial review by the CDP (February
2024), the current status of Bangladesh, in spite of the recent economic and political challenges,
remains comfortable. This is validated by the information below (Table 23.1).

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Table 23.1: Bangladesh’s position in LDC graduation criteria
Graduation Criteria Threshold Bangladesh’s status
Gross National Income (GNI) per capita Graduation: $ 1,306 $2,684
LDC average: $ 1,307
Human Assets Index (HAI) Graduation: 66 or above 77.50
LDC average: 59.6
Economic and Environmental Graduation: 32 or below 21.90
Vulnerability Index (EVI) LDC average: 21.9
Source: UNDESA (as of November 2024).

Indeed, even the recent dampened economic performance during the current fiscal year is not
expected to bring the country down below the stipulated thresholds. Further, the concern raised
recently about the inflated nature of certain critical indicators will have little relevance in this
case. The UN bodies will only revisit their calculations when a revised data set (including the GNI
estimates) is available from government sources. Notwithstanding the reservations expressed by
certain exporters’ groups, there is hardly any plausible reason, as of now, for Bangladesh to
request a deferment of the exit date from the LDC group.

Under these circumstances, Bangladesh will be well advised to pursue a substantive and effective
LDC graduation strategy. This will require putting forward a transition plan to counteract the
negative fallouts of Bangladesh’s graduation out of the LDC group and enable the required
structural transformation of the economy. It will not be out of place to mention that the
postponement or deferment of Bangladesh’s LDC graduation date is going to invite political
backlash from the expected quarters.

It may be recalled that a Smooth Transition Strategy (STS) to support the LDC graduation
trajectory of Bangladesh has already been developed. The STS offers a set of economy-wide
policies, and its congruence with the country’s medium-term planning format is going to be
challenging. However, concern remains regarding its coordinated implementation, including the
challenge of institutional and policy leadership,

23.6 Accelerating Substantive Delivery of the SDGs

As we reach the midpoint of the United Nations' Agenda 2030, concerns arise as only 17% of the
Sustainable Development Goal (SDG) targets are currently on track worldwide, according to the
UN’s Sustainable Development Goals Report 2024. Although the UNESCAP SDG Gateway
highlights Bangladesh’s notable performance across 33% of the 248 indicators, significant
challenges remain as 17% of the indicators are showing regression, and 10% have stagnated. The
challenge is further compounded by the absence of disaggregated and reliable data, which fails to
provide a real picture of equitable progress, especially for left-behind groups.

A significant limitation of the SDG Tracker for Bangladesh is the absence of data from 2019 to
2023, for 58% of the indicators, including climate-related indicators. However, the available data
presents a mixed picture: 53 indicators have shown improvement, 34 have worsened, and nine
have remained stagnant. The status of certain indicators raises concerns about the reliability and
accuracy of the data (see Chapter 22).

Assessment of SDG progress and challenges in Bangladesh can be organised into four thematic
areas, viz. economic, social, environmental, and governance—using data from 2019 onward.

Within the economic domain (SDGs 1, 2, 7, 8, and 10), significant progress has been observed only
in SDG 7 (Affordable and Clean Energy). This is demonstrated by increased access to electricity,
a modest rise in clean and renewable energy consumption, and enhanced energy-generating

White Paper on State of the Bangladesh Economy 380

capacity. However, challenges remain, particularly as energy intensity - the ratio of primary
energy consumption to GDP - has declined. SDG 1 (No Poverty) has also made some strides, but
concerns persist about how poverty is measured and the reduction in government spending on
critical sectors such as education, healthcare, and social protection. Ongoing economic challenges,
including high inflation, growing food insecurity, increased rates of youth not engaged in
education or employment or training (NEET), rising child labour, and inadequate public service
delivery, compounded by widespread corruption, contributed to the stagnation or decline of
indicators related to SDG 2 (Zero Hunger), SDG 3 (Good Health and Well-being), and SDG 8
(Decent Work and Economic Growth).

In the social domain (SDGs 3, 4, 5, and 6), SDG 6 (Clean Water and Sanitation) has seen
improvements in infrastructure, such as the provision of hand-washing facilities. However, access
to safe drinking water and adequate sanitation has deteriorated. Serious concerns exist as
regards SDG 3 (Good Health and Well-being), SDG 4 (Quality Education), and SDG 5 (Gender
Equality) due to an increase in child marriage, child mortality, and adolescent birth rates, along
with a decline in the quality of education. This situation is exacerbated by limited access to
stipends and scholarships, rising child labour, and the unequal access to and distribution of public
services worsened by corruption. Furthermore, the growing share of female workers in informal
labour sectors, particularly in domestic and care-related roles, highlights persistent gender
disparities in the labour market, further hindering progress towards achieving gender equality.
These interconnected factors present significant barriers to realising the full potential of
Bangladesh's social development goals.

Challenges concerning climate-related SDGs (SDGs 12, 13, 14, and 15) are primarily due to
insufficient data. Moreover, progress on climate-related SDGs is contingent on global
advancements, underscoring the complexity of achieving these goals amid external challenges.

In the governance domain, official data indicate an expansion in public service delivery,
particularly in birth registration, and a reduction in conflict-related deaths till 2023. However,
these positive developments are overshadowed by a troubling rise in incidents of intentional
homicide, kidnapping, enforced disappearances, arbitrary detention, and the torture of
journalists, media personnel, trade unionists, and human rights advocates. These trends point to
a broader erosion of civil rights and the independence of human rights institutions under the
watch of the erstwhile regime. They reflect limited civic space, lack of transparency,
accountability, and weak governance structures in Bangladesh under the previous regime. The
suppression of dissent and the undermining of democratic institutions highlight systemic flaws
that obstruct progress towards a more just, inclusive, and accountable governance system.

The delivery of the SDGs is particularly affected by a lack of progress as regards the means of
implementation (SDG 17). The most disappointing performance is evident in the areas of
domestic resource mobilisation, while remittance inflows have also declined as a proportion of
the GDP. This situation is further aggravated by a lower-than-required inflow of external
assistance in the form of ODA. The lack of comprehensive data beyond baseline figures also
complicates these issues, which call for special attention to the generation of disaggregated data.
Additionally, slow progress on systemic issues at the global level, including climate change,
technology transfers, trade, and migration, constrains Bangladesh’s ability to make the needed
advances towards achieving the SDGs.

Since the emergence of COVID-19, the SDGs, as a development policy framework, have lost
significant traction. The development agenda should rejuvenate the guiding principles of the
SDGs, including leaving no one behind, facilitating a data revolution, promoting localisation, and
pursuing an integrated and transformative approach. To this end, the institutional framework
and policy alignment for SDG delivery need to be revisited in the context of the new political
realities in Bangladesh.

White Paper on State of the Bangladesh Economy 381

23.7 Hosting a Forum for Inclusive and Sustainable Development

With the advent of the new Interim Government, Bangladesh's development context and
discourse have undergone substantive changes. These changes also impinge upon the country's
external economic relations. The international development partners (IDPs) have so far shown
their goodwill and interest in working with and extending their support to the Interim
Government. Yet, there are concerns regarding the continuity of externally funded/supported
projects and policies agreed upon by the earlier regime.

Along with those providing development finance, the development partners extending
preferential market access to Bangladesh’s exports are also in dialogue as the country prepares
to leave the LDC group. The foreign direct investors who have long complained about the absence
of an enabling regulatory environment remain keen to engage with the current government. In
this context, the government will be well advised to convene a forum to have wide-ranging
discussions with the four groups of international development partners: (i) providers of external
development finance, (ii) providers of preferential market access, (iii) hosts of Bangladeshi migrant
workers, and (iv) foreign investors.

The proposed Forum for Inclusive and Sustainable Development560 will comprise government
agencies, the four aforementioned groups of IDPs, experts, domestic investors, labour unions,
CSOs and other relevant stakeholders. The objectives of the forum will include the following.
▪ To facilitate alignment of priorities of the IDPs with Bangladesh’s current development
aspirations
▪ To enhance coordination between the Bangladesh government and the IDP as well as
among the IDPs themselves concerning Bangladesh
▪ To discuss the policy and reform outlook of the Bangladesh government with the IDPs
▪ To identify measures to improve the effectiveness of development cooperation

The Forum for Inclusive and Sustainable Development may be held in early 2025 in Dhaka. This
would help the Interim Government articulate the medium-term development aspirations and
the associated reform agenda of the country and mobilise financial and technical support in view
of this. A one-and-a-half-day of the de platform may be organised by the Government of
Bangladesh led by the Office of the Chief Adviser, with the active participation of the Principal
Coordinator for SDGs Affairs, with support from the ERD and in collaboration with the Local
Consultative Group of the IDPs. The format of the forum should include an inaugural session with
the keynote address by the Hon’ble Chief Adviser, sector/issue-specific roundtables, a feedback
session, and a closure with the adoption of an outcome document. The outcome document will
lay out Bangladesh's future development cooperation agenda.

560 Asimilar forum held in the past was known as the Bangladesh Development Forum, which had replaced
the erstwhile Aid Consortium in Paris. The last meeting of this forum was held in 2020.

White Paper on State of the Bangladesh Economy 382

 The present government, brought to power through a student-
citizens uprising, has been saddled with an economy which is
afflicted by severe structural strains and macroeconomic stresses.
Rising inequalities and lack of distributive justice have been one of
the most disconcerting features of the economy. These challenges
are perceptibly visible in areas running from public finance
management to the sustainability of external balances to the human
development status of disadvantaged communities. The Interim
Government of Bangladesh has to deal with these challenges as it
seeks to restore macroeconomic stability and undertake reform
measures for promoting inclusive development.

Recognising the seriousness of the situation, the Interim

Government, through a gazette notification on 29 August 2024,
decided to establish a Committee to prepare a White Paper on the
state of the economy. The twelve-member Committee was given
three months to deliver an objective assessment of the economic
landscape inherited by the government. The present document is an
outcome of the said directive.

White Paper on State of the Bangladesh Economy 383