Tariq Rahman Must Revive Bangladesh’s Economy

Spring in Bangladesh––Pohela Falgun—came on Feb. 14, two days after the Bangladesh Nationalist Party (BNP) led by Tarique Rahman won a two-thirds majority in the national election in Bangladesh. But the triumph deserves an asterisk: the first election held after the 2024 revolution led by students toppled the autocratic Prime Minister Sheikh Hasina was marked by a ban on her Awami League party from participating in the polls.

The election results also announced the resurgence of the Islamist Jamaat-e-Islami party as a major political force in the country, which has largely been governed by the Awami League and the BNP since its founding in 1971. The Islamist party, which has never wielded power and has a reputation for not being corrupt, has found greater support in western Bangladesh bordering India––a poor hinterland that has seen little investment in industry and job creation.

With its seemingly unassailable parliamentary power, the BNP government may initially sweep all before it, legislating new bills at will. Should it stumble on the economy, the BNP government will find itself caught between the pincers of a rising Jamaat-e-Islami and a latent Awami League base. Youth discontent over jobs and corruption is unlikely to disappear easily. Rahman, who was sworn in as prime minister on Tuesday, will have to work hard to maintain political stability but his political success will depend on his primary task: reviving the economy.

It is the economy

The BNP has pledged to double the size of the economy—from roughly $460 billion to $1 trillion   in nominal GDP by 2034. Achieving that target would require annual growth of about 9%,  a tall order for a country whose economic growth has slowed to around 4%. The party has also promised to increase education spending from 2% to 6% of GDP and health spending from 0.75% to 5%. No credible plan exists to raise the government revenue needed to fund such ambitions. To more than double the growth rate, private investment would have to rise from 23% of GDP to 35%.

High interest rates over the past year and a half have drawn fierce criticism from economists and business groups alike. Many identify structural bottlenecks in distribution channels, rather than monetary policy alone, as the chief cause of elevated food prices. This is the Rahman government’s Achilles heel.

Agriculture accounts for 12% of the economy and employs around 44% of the workforce, around 50 million people. To bring down urban food prices and raise returns for hard-pressed farmers, Prime Minister Rahman needs to move decisively to tackle powerful, unregulated middlemen in food distribution from farms to cities, who raise prices along the way while depriving the farmers of fair prices. And he has to invest in post-harvest logistics to benefit both farmers and the government in regulating supply and prices.

The other priority has to be managing remittances from Bangladeshi overseas workers, which is a lifeline no less important than any International Monetary Fund program. Around 10 million Bangladeshi workers toil abroad, mostly in the Gulf states. They have done more than the IMF to shore up foreign reserves: in just three months their transfers of around $7.5 billion match the fund’s entire support package for the country.

After the fall of the Awami League government in 2024, many of these workers switched from informal hundi  networks—which crumbled along with the regime’s patronage structures—to legal banking channels. The result was dramatic: remittances jumped from $21 billion in 2023 to $30 billion in 2025. To put that in perspective, the $9 billion increase alone exceeds Bangladesh’s total annual garment exports to the American market. If regulation of informal channels slackens, Bangladesh Bank, the central bank of the country, could lose this crucial flow of foreign exchange just as quickly as it gained it.

Roughly one million Bangladeshis leave for jobs abroad each year: a vital safety valve for an economy that produces two million new job-seekers annually but cannot absorb them all. Without this outlet, the country’s much-vaunted demographic dividend  would become a powder keg. Unfortunately, intense corruption and exploitation permeate the labour-export sector. Several destination countries have already closed their doors  to Bangladeshi workers, leaving the country dangerously dependent on Saudi Arabia for new opportunities.

As for the broader reform agenda, Khan Ahmed Sayeed Murshid, an eminent economist who led the writing of a report on economic restructuring in Bangladesh, counsels pragmatism: the BNP should keep the grand plan in mind but “target bite-sized, high-impact projects” for urgent implementation. The new administration must also secure reliable energy supplies for industry and repair a battered financial sector. Looming above all of this is the impending loss of trade privileges as Bangladesh is set to graduate from least-developed country status in November 2026 —a transition that will strip away tariff concessions on which many of its exporters still depend.

Between Washington and Beijing

Reviving the economy is tied to a country’s geopolitical relationships. The first signs from Rahman suggest misplaced priorities. In its election manifesto, the BNP announced its intention to join the Association of South-East Asian Nations (ASEAN). 

In his first appearance before international journalists, Rahman highlighted South Asian Association for Regional Cooperation (SAARC), which was initiated in 1980 by his father Ziaur Rahman, who served as the president of Bangladesh at the time. SAARC is a moribund regional organization. Last year India and Pakistan fought an air war. Cross-border trade across the subcontinent remains negligible.

But Bangladesh does border an ASEAN member, too: Myanmar. And more than a million Rohingyas refugees from Myanmar continue to languish in camps in Bangladesh with no solution in sight. Joining the ASEAN would allow Bangladesh access to diversified supply chains and a surge in inward Foreign Direct Investment. 

Bangladesh shares its longest land border with India but the relations between the two countries turned acrimonious after the 2024 ouster of Sheikh Hasina, who was supported by India. She fled to India and New Delhi’s refusal to hand her over to face prosecution has evoked strong criticism in Dhaka. Hostile statements led to suspension of visa operations and sports boycotts by both countries. Hasina continues trying to disrupt Bangladeshi politics from India and the BNP leaders demand her extradition to face trial.

Against a backdrop of widespread anger and distrust towards India, the BNP will have to tread carefully as it seeks a thaw in relations with New Delhi. For its part, India has little ability to compete with China in the realms of infrastructure or new industrial investment. New Delhi is also accused of imposing onerous agreements, particularly on energy contracts with Adani Group—a company with close ties to the Indian government––which supplies around 15% of Bangladesh’s electricity.

New Delhi would need to do something dramatic—significantly reduce non-tariff barriers to imports or agree to a more equitable flow of water into downstream Bangladesh. With New Delhi unlikely to oblige on any of these fronts, any future rapprochement will be limited.

The most significant test for Rahman is balancing the United States and China. China is Bangladesh’s largest trading partner, with annual bilateral trade of around $18 billion, mostly goods imported from China. And Beijing has been the largest supplier of defense hardware to Dhaka. The two countries recently concluded an agreement to set up a drone manufacturing factory in Bangladesh. Beijing has pledged an investment of over $24 billion in the country as part of the Belt and Road Initiative.

America is the single largest market for garments exports from Bangladesh, and it leads on inward investment in energy, with Chevron playing a key role in gas production in the country. A few days before the election, Brent Christiansen, recently appointed as the U.S. ambassador to Bangladesh, said that he would engage with the new government to clearly “articulate the risks” of involvement with China in certain areas––a remark that prompted a fierce retort from Beijing. Washington, he suggested, will emphasize the “opportunities and benefits” it offers, particularly through military cooperation. Christiansen has also spoken of American companies evaluating investment prospects in Bangladesh but waiting for a “clear signal” from the Rahman government that it is business-friendly.

The political instincts of the Bangladeshi elite tilt towards the West but they are aware that investment in infrastructure has largely come from Asia. Japan and China lead in constructing bridges, ports, and railways. Beijing is offering to fund a $1bn project to help store diminished river water flow for irrigation. Last year a delegation representing 143 Chinese companies visited Bangladesh. They left underwhelmed by the interim government.