The Bangladesh economy was one of the few that maintained a positive growth rate of 6.94% in 2021 during the COVID-19 pandemic. However, despite this, structural weaknesses in various macroeconomic parameters can hinder the continued progress of the nation. Today, Bangladesh is facing the combined effect of declining global demand for its ready-made garments (RMG) exports, collapsing remittances, rapidly declining foreign exchange reserves to stabilize the volatility of the Bangladeshi taka, concerns about supply-demand gaps in energy markets and inflationary tendencies in the domestic economy. These difficulties have caused Bangladesh to seek a precautionary loan from the International Monetary Fund of $4.5 billion in July 2022.
The increasing divergences in the government’s fiscal balance along with the precarious balance of payments situation in Bangladesh needs urgent attention. Moreover, while the country has been doing well on various developmental benchmarks — such as the Human Development Index (HDI) and the United Nations Sustainable Development Goals (SDG) — external shocks arising from the pandemic and the ongoing Russo-Ukrainian war have exposed the country. social and economic vulnerabilities.
The value of the Human Development Index in Bangladesh has witnessed a continuous rise due to the upward trend in indicators such as life expectancy, per capita gross national income, average years of schooling, and expected years of schooling, which make up the index. In the 2020 edition of the Human Development Index Report, Bangladesh is ranked 133 out of 189 countries (with a score of 0.655 out of 1), while in the recently published Human Development Index Report 2022, it has improved to rank 129 out of 191 countries (A). score of 0.661). This puts Bangladesh ahead of many South Asian countries such as India (132nd), Nepal (143rd), Pakistan (161st) and Afghanistan (180th).
While the country has found itself in the “medium human development” group, the problem of income inequality looms large, even though poverty levels have dropped over the years. Historically, income inequality has been a threat in Bangladesh, even amidst its commendable performance on most other socioeconomic indicators. The country’s Gini coefficient (a measure of economic inequality) increased from 0.456 in 2010 to 0.482 in 2016.
Bangladesh has shown a very unusual stagnation in both income and wealth inequality in the past few decades. Between 1995 and 2021, the percentage of pre-tax national income for the bottom 50 percent of the adult population only moved from 16.25 percent to 17.08 percent, while those values for the top 10 percent of the adult population shifted from 44.88 percent to 42.40 percent. percent. During the same period, the percentage in total net personal wealth for the bottom 50 percent of the adult population changed from 4.69 percent to 4.77 percent, and it increased from 59.2 percent to 58.7 percent for the top 10 percent of the adult population.
On the one hand, this relative stagnation indicates that the state of income inequality has not worsened significantly; On the other hand, it means that income inequality has not translated into any upward trend in wealth inequality. The last reason, however, can be the diversion of income to the consumption stream, which is detrimental to the savings that can enable medium to long-term investments and capital formation in the economy.
The Bangladesh economy is already characterized by a declining trend in gross savings in the past decade – from 35.9 percent of GNI in 2010 to 33.9 percent of GNI in 2020. This has two main effects. First, since savings stimulate investment, especially for developing countries, the downward trend in the former limits asset formation, domestic output, and employment—leading to a deterioration in the growth pattern of the economy. Secondly, if household savings are not channeled sufficiently into infrastructure construction, primarily through government infrastructure projects, it adds to the financial burden of unsustainable infrastructure spending already plaguing the Government of Bangladesh.
On the continuity of Bangladesh’s development trends, further reducing inequality should be the main focus to make the growth process more inclusive – along with the United Nations Sustainable Development Goals (SDG) Agenda 2030 to ‘leave no one behind’ “.
Bangladesh slowly but steadily rose in its total SDG score from 59.37 (out of 100) in 2016 to 64.22 in 2022, which is good for a rank of 104th out of 163 countries. However, its performance in the East and South Asia region remains considerably lower – it ranks 14th out of 19 countries in the region, ahead only of Pakistan, India, Laos, Mongolia and Cambodia. Other significant challenges to sustainable development in Bangladesh include integrating coastal communities into the government’s national plans, illicit financial flows and insufficient resource mobilization, and building more democratic institutions to achieve the SDGs.
Interestingly, the progress made by Bangladesh in various socio-economic indicators has been enabled by the extensive presence of small and large-scale NGOs, which has improved access to basic services such as sanitation and water supply at the village level. This model has also increased women’s participation in public spaces and in families – leading to remarkable improvements in children’s health, education, and life expectancy. This has undoubtedly led to progress in various sustainable development goals such as Goal 3 (good health and well-being), Goal 4 (quality education), Goal 5 (gender equality), and Goal 6 (clean water and sanitation), among others. . .
In conclusion, Bangladesh follows a somewhat unique development model. Traditionally, there is a moderately one-way development pattern, in which organizations in the Global North design implementation strategies, which are then implemented through local partners. However, the Bangladesh approach is characterized by the important role played by local microfinance institutions such as Grameen and international development organizations such as the Bangladesh Rural Advancement Commission (BRAC). These organizations take ownership of the design, financing and scope along with local requirements and solutions, driving more tangible results over the longer horizon.
Bangladesh will need to continue to benefit from this unique advantage amid the difficult economic conditions ahead.