Cost of policy uncertainty

FE Team | Published: December 27, 2025 19:35:50

Bangladesh stands at a critical economic juncture, where sustaining growth depends not only on macroeconomic indicators but also on policy clarity, institutional efficiency and investor confidence. While recent discussions have focused on inflation, policy uncertainty remains largely overlooked.
Frequent changes in regulations and unclear policies increase transaction costs, delay investments and weaken long-term planning. Entrepreneurs and investors - both domestic and foreign - require predictability to commit capital. When regulatory guidelines are revised without consultation or implemented inconsistently across institutions, uncertainty becomes a hidden tax on economic activity, reducing confidence in the business environment.
Small and medium enterprises, which form the backbone of employment generation, are particularly vulnerable. Delays in approvals, ambiguous compliance requirements and overlapping jurisdictions force many firms to operate below capacity or remain informal. This not only reduces productivity but also limits revenue mobilisation for the state, hindering public investment in essential services.
Policy uncertainty also undermines financial sector stability. Banks become risk-averse when future regulations are unclear, constraining credit to productive sectors. As a result, private investment slows, job creation stagnates and economic growth becomes increasingly dependent on public expenditure.
Addressing this challenge requires a coherent economic roadmap, supported by strong institutional coordination, transparent communication and consistent enforcement. Regulatory reforms must prioritise simplicity, digitalisation and accountability, while stakeholder consultations should become a standard part of policymaking.
If Bangladesh is to navigate its current economic pressures and move towards sustainable growth, reducing policy uncertainty must be treated as an urgent economic priority rather than a peripheral concern. Clear, consistent and predictable policies are no longer optional - they are essential for the country's economic future.
Md. Hamidur Rahman
Student, Comilla University
hamidur203.cou@gmail.com