Bangladesh faced serious fears of economic collapse just before the political transition in August 2024. Foreign exchange reserves were falling rapidly, external payment pressures were rising and inflation reached a twelve year high. At that time, the Bangladesh Bank was injecting at least Tk10,000 crore every week to support cash strapped banks, while businesses struggled with heavy exchange losses due to extreme dollar volatility.
Following the transition, a series of bold measures by the central bank helped stabilize the economy and calm fears of a Sri Lanka style crisis. Dollar shortages eased, inflation slowed and confidence among investors and businesses gradually improved.
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One of the most visible improvements was in foreign exchange reserves. After clearing overdue external payments, Bangladesh Bank added around 8 billion dollars to reserves within a year. Reserves rose from 18.8 billion dollars in December 2024 to 26.8 billion dollars by 4 December 2025, providing more than four months of import coverage.
Currency stability also returned after the central bank adopted a more flexible exchange rate regime and raised policy interest rates. The taka has remained stable at Tk122 to 123 per dollar for six straight months. At the same time, the central bank stopped money printing and moved quickly to merge and restructure weak banks. These governance reforms helped restore depositor confidence, leading to a noticeable rise in bank deposits and improved liquidity.
Inflation trends have also improved. Overall inflation dropped from 11.36 percent in July 2024 to single digit levels for the past six months. Food inflation, which had peaked at 14 percent, fell to 7.36 percent in November. Although inflation remains above the Bangladesh Bank’s fiscal year 2026 target of 6.5 percent, official assessments credit tighter monetary policy, supply side measures, stable global commodity prices and a steady exchange rate for the progress.
Despite these gains, economic challenges persist. Private sector investment remains weak as businesses delay expansion plans ahead of the February national election. According to the Planning Commission’s Economic Update and Outlook, tight monetary policy has helped control inflation but has also slowed credit growth.
Private sector credit growth fell to a four year low of 6.29 percent in September. Years of mismanagement in the banking sector and capital flight under the previous regime have limited banks’ ability to support new lending. Non performing loans rose sharply to 36 percent of total outstanding loans in September, reaching a historic Tk6.44 lakh crore, compared to Tk2.84 lakh crore just a year earlier.
Business leaders say the fear of economic collapse has passed, but investment uncertainty is now the biggest concern. Several companies have postponed expansion despite improved access to foreign currency, citing political uncertainty, export risks and global market pressures.
Export performance has weakened for four consecutive months, the longest decline since the Covid period. Export earnings fell 5.54 percent year on year in November to 3.89 billion dollars. Exporters point to lower demand from the United States, increased competition from China and India in the European market and buyer caution linked to Bangladesh’s political situation.
Reflecting these pressures, the Asian Development Bank lowered its fiscal year 2026 growth forecast for Bangladesh to 5 percent, citing weaker global demand, supply chain challenges and declining export orders.
Import activity has also slowed. Letter of credit openings dropped by more than 12 percent year on year in October, showing weak investment appetite. At the same time, the central bank had to buy over 2.5 billion dollars in fiscal year 2026 to prevent the taka from appreciating as banks held excess foreign currency.
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To prevent widespread financial stress among large borrowers, Bangladesh Bank introduced a special long term loan rescheduling package. The scheme allows loans to be rescheduled for up to ten years with a 2 percent down payment. Since May, the central bank has received around 1,200 applications from borrowers with loans exceeding Tk50 crore, indicating continued pressure on corporate cash flows.
While the economy is no longer facing an immediate crisis, analysts warn that restoring investment momentum, fixing the banking sector and ensuring policy stability after the election will be critical to sustaining recovery and long term growth.