Stability, welfare, and confidence

As a new government assumes office, Bangladesh begins another important chapter in its development journey. Elections renew political leadership; they also renew public expectations. Citizens will judge this new term not by the scale of promises made, but by the stability maintained, the welfare delivered, and the confidence restored in institutions and markets alike.
Over the past decades, Bangladesh has demonstrated remarkable resilience. Growth accelerated, poverty declined, and the country advanced steadily toward middle-income status. Yet recent global shocks - the pandemic, supply chain disruptions, commodity price volatility, and tighter international financial conditions - have exposed structural vulnerabilities. Inflation has remained elevated, hovering close to double digits at its peak, placing sustained pressure on household purchasing power. For lower-income families, food inflation has often been even higher, eroding real wages and savings.
The challenge before the new government is therefore to safeguard macroeconomic stability in the short term while advancing reforms that strengthen long-term resilience and inclusion.
First and foremost, macroeconomic stability must anchor the early agenda. Without stability, social welfare cannot be protected and private investment cannot flourish.
Foreign exchange reserves, which once exceeded US$ 45 billion, have declined significantly in recent years, reflecting import pressures, global shocks, and exchange rate adjustments. Rebuilding external buffers will require disciplined policy coordination, export momentum, and a realistic exchange rate framework that protects competitiveness.
Public debt remains moderate at roughly 40 per cent of gross domestic product (GDP) by international comparison. However, the composition of borrowing is gradually shifting toward less concessional sources in a higher global interest rate environment. Transparent debt management, prioritisation of high-return investments, and careful sequencing of infrastructure projects will ensure that today's borrowing does not become tomorrow's constraint.
Containing inflation is equally critical. Rising prices disproportionately affect lower- and middle-income households. Prudent fiscal management, monetary coordination, and disciplined public expenditure will be essential. Stability should not be mistaken for austerity. It is about restoring balance, strengthening credibility, and ensuring that policy signals are consistent and predictable.
Second, growth must translate into welfare. Economic growth, though necessary, is not sufficient. Citizens experience development through jobs, services, and security in their daily lives.
Nearly two million young people enter the labour market each year. Creating productive employment opportunities at this scale demands not only sustained growth but growth that is diversified, technology-enabled, and innovation-driven. Expanding opportunities in manufacturing beyond ready-made garments, in modern services, in agro-processing, and in the digital economy can help absorb this growing workforce.
At the same time, social protection systems must continue to evolve. The COVID-19 pandemic demonstrated both the importance of safety nets and the value of digital delivery mechanisms. Strengthening targeted cash transfers, improving beneficiary databases, and ensuring transparency can protect vulnerable households during periods of adjustment. Protecting the vulnerable is essential for social stability.
Human capital investments also warrant renewed focus. Improvements in healthcare quality, education outcomes, and nutrition will determine productivity and competitiveness in the coming decades. As Bangladesh aspires to higher-income status, the returns to investing in people become even more significant.
Third, beyond macro indicators and welfare programmes lies a more fundamental issue: institutional confidence.
Markets function on trust - trust in regulations, contracts, financial institutions, and policy continuity. Citizens likewise place trust in public institutions when services are delivered efficiently and fairly.
Strengthening governance in the financial sector and improving regulatory transparency will reinforce credibility. A sound banking system that allocates credit efficiently to productive sectors is indispensable for private sector-led growth.
Revenue mobilisation is another structural priority. With a tax-to-GDP ratio in the single digits - among the lowest in comparable emerging economies - Bangladesh's ability to finance social services and infrastructure sustainably remains constrained. Expanding the tax base, modernising administration, and improving compliance are difficult but necessary reforms.
Urbanisation adds another layer of urgency. Effective local governance, improved urban service delivery, and stronger municipal institutions are central to managing congestion, pollution, and infrastructure demands in rapidly growing cities.
Fourth, Bangladesh's next phase of growth must increasingly be driven by a dynamic private sector. Public investment has played a catalytic role in infrastructure expansion. The task ahead is to crowd in private capital - domestic and foreign - by ensuring policy clarity and predictability.
More than 80 percent of merchandise export earnings continue to come from ready-made garments. Diversification is therefore an economic necessity. Improvements in logistics, trade facilitation, regulatory certainty, and energy sector governance will be closely watched by investors.
Confidence builds gradually but can erode quickly. Early, consistent policy actions will therefore shape perceptions of continuity and reform intent.
Fifth, Bangladesh remains highly vulnerable to climate change. Estimates suggest that climate-related events already cost the economy around 1-2 percent of GDP annually. Embedding resilience into infrastructure planning, agriculture, coastal protection, and urban development is no longer optional.
Mobilising climate finance, leveraging concessional resources, and strengthening institutional coordination will support this agenda. Climate resilience is integral to sustaining development gains already achieved.
This moment calls for measured leadership. Transitions in government provide opportunities for recalibration. The coming months offer a window to reinforce credibility, address structural bottlenecks, and renew a social compact centred on stability, welfare, and opportunity.
Bangladesh's development story has long been built on pragmatism and resilience. By anchoring macroeconomic stability, safeguarding vulnerable households, strengthening institutions, and enabling private sector confidence, the new government can lay the groundwork for the next phase of inclusive and sustainable growth.
Elections conclude a political contest. Governance begins the work of building confidence - in the economy, in public institutions, and in the future.

Manmohan Parkash is a former Senior Advisor to the President and former Deputy Director General for South Asia at the Asian Development Bank. manmohanparkash@gmail.com