The trajectory of economic development is neither linear nor guaranteed. History warns us that gains can be fleeting if the foundations are not secure, writes Md Murad Ahmed
BETWEEN the financial years of 2010 and 2023, Bangladesh recorded an average gross domestic product growth rate of 6.4 per cent, a figure that stood out in comparison to many other lower-middle-income countries. However, recent revelations have cast doubt on the accuracy of this performance. A white paper released in February 2024 recalibrated the actual average growth rate to 4.2 per cent, indicating that previous figures were significantly overstated. During this period, Bangladesh managed to retain its lower-middle-income status, achieved in July 2015 after graduating from the least developed country category. While headline indicators such as export revenues, remittance inflows and a reported unemployment rate below 6 per cent painted a positive picture, underlying structural weaknesses persisted beneath the surface of what appeared to be a robust macroeconomic performance.
Despite the encouraging trends in gross domestic product growth, exports, imports and remittances, other critical aspects of the economy raised cause for concern. Interest rates were steadily climbing, foreign capital inflows 鈥� including portfolio investments and foreign direct investment 鈥� began to lose momentum, and both consumer and investor confidence remained subdued. Meanwhile, inflationary pressures mounted year after year, debt levels rose sharply and the capital market delivered inconsistent returns. These economic strains were compounded by growing political uncertainty, which further eroded market stability. As confidence dwindled, investments slowed and unemployment began to climb, adding to the mounting pressures on the economy. Eventually, the widening current account deficit, coupled with escalating political tensions, became unsustainable and contributed to a severe political crisis following the recent mass uprising.
听In light of these developments, the question arises: is Bangladesh at risk of regressing to LDC status? While definitive conclusions remain elusive, the possibility cannot be dismissed. The country鈥檚 financial and institutional structures are not yet sufficiently robust to support sustainable economic advancement. Even if Bangladesh manages to retain its lower-middle-income classification, the underlying vulnerabilities could still leave it exposed to adverse shocks. Globalisation Theory, often cited to explain capital movements from high-income to low-income countries, suggests that disparities in per capita income drive investment flows. However, this theory assumes convergence in education levels and institutional quality 鈥� an assumption that is far from guaranteed in the real world. As such, internal preparedness becomes a more decisive factor in long-term sustainability.
One of the most persistent challenges lies in the financial sector. Bangladesh鈥檚 secondary and tertiary production systems lack adequate integration, and the broader financial market remains underdeveloped. Essential instruments such as bonds, pension funds, derivatives, futures, options and hedging tools are either absent or grossly underutilised. The absence of these mechanisms not only hinders effective risk diversification but also discourages broader participation in the financial market. This creates space for illicit activities such as money laundering and tax evasion. Moreover, the emergence of quasi-government institutions offering dollar-denominated loans for capital equipment introduces an additional layer of financial risk. In the absence of proper hedging mechanisms or sufficient understanding of foreign currency exposure, many firms could face profitability shocks 鈥� an issue reminiscent of the East Asian financial crisis of 1997鈥�98.
Institutional deficiencies pose another significant hurdle. The lack of strong, independent institutions has long undermined economic and governance structures in Bangladesh. Both public and private sectors suffer from weak institutional frameworks that fail to ensure checks and balances. Bias, inefficiency and corruption have eroded the credibility and effectiveness of key institutions. Symptoms of institutional decline include outdated information systems, resistance to change, lack of coordination and uninspired leadership. Addressing these issues requires a renewed focus on building accountability, improving transparency and embracing technological innovation. Equally important is the need for leadership training and capacity development to revitalise institutional performance.
The political framework further complicates the economic outlook. Although the country has an abundance of political actors, the quality of leadership remains a pressing concern. Mere quantity cannot substitute for the vision and competence required to navigate this stage of development. As the economy grows and the population expands, the need for skilled and farsighted leadership becomes increasingly urgent. Historical experience offers a pertinent reminder. In the 17th century, Bengal 鈥� encompassing present-day Bangladesh, West Bengal, Bihar, Orissa and Assam 鈥� accounted for 12.5 per cent of India鈥檚 GDP, which itself represented 25 per cent of global GDP. With a per capita income surpassing even that of Western Europe, Bengal held a prominent place in the global economic order. Yet, in the absence of effective leadership and coordination, this economic dominance eventually deteriorated, culminating in its decline to LDC status. This historical precedent underscores the critical importance of governance in sustaining economic success.
Bangladesh鈥檚 progress over the past decades is undeniably commendable, but the path forward demands a more deliberate and strategic effort. Sustaining this progress requires a firm commitment to financial reform, institutional strengthening and the cultivation of leadership capable of guiding the country through its next phase of development. Globalisation alone cannot be relied upon to sustain growth; internal systems must be resilient enough to weather external shocks and policy shifts in the global economy. The foundational elements of sound finance, good governance and effective leadership must be put in place now, not later.
The trajectory of economic development is neither linear nor guaranteed. History warns us that gains can be fleeting if the foundations are not secure. Bangladesh must take these lessons seriously. Our forebears once achieved global economic prominence, and it is within our reach to reclaim that legacy. But to do so, we must act with urgency and resolve 鈥� because if we fail to take the necessary steps today, the burden will inevitably fall on the next generation.
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Dr Md Murad Ahmed is a managing director at GRD Consultants Ltd.
