AS BANGLADESH approaches its anticipated graduation from the least developed country status category in 2026, it faces formidable challenge of sustaining its economic achievements while addressing persistent inequalities. The recent Multidimensional Poverty Index 2024 report shows that poverty in Bangladesh extends beyond income, encompassing multiple deprivations in health, education and living standards.
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Economic growth and inequality
BANGLADESH鈥橲 gross domestic production expanded at an average rate of 6鈥�7 per cent a year. The gross domestic product per capita reached $2,785 in 2023 in a reflection of its economic resilience and progress. However, economic theory, especially the concept of trickle-down economics, suggests that growth alone does not guarantee an equitable distribution. The report indicates that 20.5 per cent of Bangladesh鈥檚 population continues to live in multidimensional poverty, with pronounced disparities between rural (28.4 per cent) and urban (6.5 per cent) regions.
The economic divide is further exacerbated by regional disparities. While urban centres such as Dhaka and Chattogram have reaped benefits of economic activities, rural areas, home to 83.7 per cent of the nation鈥檚 poor, remain underdeveloped. This situation aligns with the structural transformation theory, which emphasises the necessity for the diversification of economic activities beyond traditional sectors to effectively reduce poverty. Without addressing these structural inequalities, Bangladesh鈥檚 growth risks creating a concentration of wealth in urban centres, leaving the rural population marginalised.
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Escalating costs of essential services
Education: Education remains a critical sector where disparities are particularly pronounced. According to the MPI 2024 report, 13 per cent of the population lacks adequate years of schooling, with rural areas experiencing higher rates of educational deprivation. Bangladesh Bureau of Educational Information and Statistics data suggest that urban students are 1.8 times more likely to complete secondary education than their rural counterparts. The rising costs associated with private educational institutions, combined with limited access to quality public schools, pose significant barriers for low-income families, perpetuating the cycle of poverty. Economic theories on human capital development underscore the importance of investing in education as a means of enhancing productivity and fostering sustained economic growth. For Bangladesh, addressing the high costs of education and expanding access to quality educational institutions is critical for cultivating a skilled workforce capable of driving the economy forward.
Healthcare: The healthcare sector presents another noticeable example of inequality. Over the past five years, private healthcare costs in Bangladesh have surged by 15 per cent, driven by high demand and insufficient public healthcare infrastructure. The MPI report shows that about 27 per cent of children are undernourished, reflecting a poor access to health care and nutrition services. The health poverty trap theory explains how prohibitive healthcare costs prevent low-income families from accessing essential care, perpetuating intergenerational cycles of poverty. Ensuring the affordability and accessibility of health care is essential for enhancing productivity and overall quality of life, which are foundational to sustainable economic development.
Housing and living costs: The rising cost of living, especially in urban areas, has further exacerbated existing inequalities. In Dhaka, rent prices have increased by an average of 8 per cent a year over the past decade, with many low-income families allocating over 40 per cent of their income for housing. The high cost of living, coupled with rising food prices, compounds the financial burden on these households. According to Engel鈥檚 law, lower-income households spend a higher proportion of their income on essential goods, such as food, leaving little for other necessities such as education and health care. Addressing housing affordability through the development of subsidised housing projects and implementing price regulation measures could alleviate this financial strain on low-income households.
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Implications of LDC graduation
BANGLADESH鈥橲 forthcoming graduation from the LDC status is a notable achievement, signalling the nation鈥檚 economic resilience. However, this transition also entails the loss of preferential trade agreements, grants and financial aid, which could impact key export sectors. Economic theories on comparative advantage suggest that economies must diversify and strengthen their value chains to maintain competitiveness. For Bangladesh, this means moving beyond its dependence on the apparel sector to more diversified industries such as information technology, pharmaceuticals and agro-processing. To facilitate this transition, it is essential to ensure that the work force is adequately educated, healthy and housed, reinforcing the need for comprehensive and inclusive development strategies.
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Strategic recommendations
Investment in education and research: The government must prioritise funding for public education to lower costs and enhance quality, particularly in underserved rural areas. Scholarships and subsidised student loans can make higher education more accessible to low-income families. Human capital theory emphasises that investment in education fosters productivity and innovation, both of which are essential for sustained economic growth. Bangladesh should also focus on promoting research and development in universities, encouraging public-private partnerships to stimulate innovation. Enhancing the higher education infrastructure to support advanced research is essential for innovation-led growth. Investment in universities, especially in STEM fields, can promote technological advancement. Additionally, reducing visa processing times for students and professionals seeking to study or work abroad can facilitate access to global knowledge networks, enhancing the skills and competitiveness of the work force.
Healthcare accessibility and affordability: Expanding public healthcare infrastructure and implementing universal healthcare policies can mitigate the high costs associated with private healthcare services. The economic concept of public goods suggests that health care, being non-excludable and non-rivalrous, should be universally accessible to ensure public welfare. Countries with strong public healthcare systems such as Japan and Germany exemplify how universal healthcare contributes to productivity and economic stability.
Affordable housing initiatives: The introduction of affordable housing projects, particularly in urban areas experiencing high rental prices, is imperative. Economic theories on supply-side economics posit that increasing the supply of affordable housing can stabilize prices. Furthermore, providing incentives for private developers to invest in affordable housing projects could help address the current supply-demand imbalance.
Economic diversification and skills development: To sustain growth post LDC graduation, Bangladesh must diversify its economic portfolio. Structural transformation theory suggests that economies should shift from labour-intensive industries to more diversified, high-value sectors. Investment in vocational training and skills development can prepare the work force for emerging industries such as information technology, electronics and renewable energy. Statistics of the Bangladesh Skills Development Authority indicate that training in high-demand skills has increased employment rates by 20 per cent in regions where such programmes have been implemented.
Climate resilience and sustainable agriculture: Given its vulnerability to climate change, Bangladesh must invest in climate-resilient infrastructure and sustainable agricultural practices. Environmental economics emphasises that sustainable development requires investment in adaptation and mitigation strategies, which ensure long-term economic stability by minimising climate-related risks. By prioritising renewable energy, sustainable farming and disaster-resilient infrastructure, Bangladesh can protect vulnerable communities and support economic growth.
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Bridging gap for sustainable progress
BANGLADESH鈥橲 journey towards LDC graduation represents a significant achievement. This milestone must, however, also prompt critical reflection on the persistent inequalities that threaten sustainable progress. The MPI report highlights the necessity for addressing multidimensional poverty, particularly disparities in access to education, health care and housing. Economic theories provide a framework for understanding these inequalities and guiding effective policymaking.
Adopting policies that promote human capital development, invest in essential services and encourage economic diversification will enable Bangladesh to ensure that its economic growth is both inclusive and sustainable. Addressing these structural inequalities will not only improve the quality of life for millions of Bangladeshis but also enhance its global competitiveness, ensuring a successful transition beyond the LDC status. Moving forward, collaborative efforts from the government, the private sector and civil society will be critical to building a resilient and prosperous Bangladesh, where every citizen is afforded the opportunity to prosper.
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Mostafizur Rahman is a research officer in the economics department in the North South University.