New Delhi, Oct 26 — Bangladesh's economy remains constrained by four interconnected "traps" comprising political confrontation, corruption, extortion and capital flight, which collectively generate a fifth trap of persistent poverty, a new report has said.
The report from Bangladesh-based The Financial Express pointed out that isolated reforms fail to produce lasting results because these "traps" are interconnected.
"Recapitalising troubled banks without confronting politically connected lending may restore liquidity without accountability," the report said.
Regarding the first trap, the report said political confrontation creates uncertainty, disrupts business activity and weakens institutions, providing conditions for other "traps" to flourish.
Corruption flourishes as a nexus between politicians and bureaucrats, which distorts the allocation of credit, contracts and licences, allowing politically connected actors to benefit while productive sectors struggle to secure financing.
Extortion raises production and distribution expenses acting as an unofficial cost on businesses and informal workers, with the burden ultimately passed on to consumers and low-income households.
The publication mentioned an estimate from Transparency International Bangladesh (TIB) that private buses and minibuses pay nearly Tk 10.59 billion annually in extortion.
"During the hartals and blockades of late October to November 2023, the president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) put the economy's losses at Tk 65 billion per day," the report noted.
Consequently, capital flight removes resources that could otherwise finance domestic investment and job creation and is also the exit route for wealth created by illegal means.
The World Bank found net foreign direct investment (FDI) in FY26 fell 15 per cent to about $1.5 billion, only 0.3 per cent of GDP.
The report noted that a banking system with a 33.2 per cent non-performing loans (NPL) ratio, exceptionally weak private-sector credit growth, and foreign investment of just 0.3 per cent of GDP provides insufficient room for sustained employment expansion.