Following a consultation with Bangladesh at the end of January 2026, the global multilateral lender IMF in a press release made a rather cautious forecast about the economy under the post-election government. The IMF was somewhat positive about GDP's growth prospect amidst the recent economic slowdown. However, it projected the GDP growth at 4.7 per cent in 2026 and 2027. At the same time, the international lender cautioned that the economy would continue to face, what it termed, mounting macro-financial challenges arising from weak tax revenue and financial sector vulnerabilities. This was only expected as the interim government was not prompt enough to start the promised fiscal and financial reforms earlier. Evidently, as a post-July 2024 upsurge government, it failed to show the boldness it should have in carrying out the reform in the financial sector.
In fact, there is no short-cut formula to combat inflation other than by reducing excessive demand through increasing supply. The central bank, as it has been doing so far, has been trying to resolve the inflation issue through tightening money supply by raising interest rates. The money supply in the market can also be reduced by selling government bonds. The government can also cut its spending and/or raise taxes as part of its contractionary fiscal policy. Improving supply-side efficiency is yet another option that the government will need to focus on to ease inflation. At the same time, use of subsidies (keeping government spending within certain limits, though) and controlling commodity prices are some of the tools to tame inflation. A slide in the value of taka needs also to be arrested to check commodity price hike. In this context, higher income taxes or VAT to reduce disposable income should target the highest earners including both individuals and businesses, rather than taxing the lower income segments of the economy.
Establishing fiscal discipline towards a long-term fiscal sustainability and stability in public finances also helps reduce inflation risks. Increasing productivity through investing in technology and infrastructure can enhance efficiency and reduce production costs. This is one way of cost control as part of supply-side policies. Reducing high-interest debts, investing in inflation-resistant assets such as gold, real-estate, etc., are also tools used against inflation. To be frank, instead of applying a single tool like raising interest rate, a slew of measures can be used to tame the kind of intractable inflation that Bangladesh has been experiencing since long. Among other issues, increasing tax-to-GDP ratio, the focus should be on direct taxation, automation and simplification of tax laws to ensure compliance. Also, creating jobs for the growing number of graduates that the industry in its present stage cannot absorb will be a top priority area for the post-election government.
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