Reform, not stimulus, key to restoring growth: PRI

Bangladesh must move beyond short-term stimulus measures and prioritise productivity-driven reforms to restore growth momentum, economists said today (21 May), warning that structural weaknesses now pose a bigger threat to recovery than low public spending.

The recommendations came at a seminar titled "Restoring Growth through Productivity Reforms: Pre-Budget Priorities," organised by the Policy Research Institute of Bangladesh (PRI) in Dhaka ahead of the FY27 national budget.

The discussion took place amid persistent inflation, weak private investment, slowing credit growth, and mounting fiscal pressure. PRI also highlighted Fitch Ratings' recent decision to revise Bangladesh's sovereign outlook to "Negative" from "Stable," citing external vulnerabilities, banking sector fragility, and stalled institutional reforms.

Speaking as chief guest, Fahmida Khatun warned against reducing reform initiatives to rhetoric.

"Reforms should not become mere slogans," she said, adding that repeated implementation failures have undermined past reform efforts. She stressed the need to keep key sectors – including banking, energy, and infrastructure – free from the influence of vested interests.

Khatun also expressed concern over deteriorating fiscal discipline, noting that implementation of the Annual Development Programme (ADP) stood at only 36.19% during July-March of the current fiscal year, the lowest in five years. She said operating expenditure is growing faster than development spending and urged policymakers to address project delays and cost overruns.

Presenting the keynote paper, PRI Principal Economist Ashikur Rahman said Bangladesh can no longer depend on demand-side expansion to sustain growth.

"A productivity-based growth model is now essential," he said, identifying investment climate improvement, energy sector restructuring, and institutional reform as immediate priorities.

Rahman noted that inflation remains above 9% while private sector credit growth fell to a historic low of 4.72% in March, reflecting weak business confidence and continued stress in the financial sector. Under such conditions, he warned, expansionary fiscal or monetary policies could intensify inflationary and fiscal pressures.

Chairing the event, PRI Chairman Zaidi Sattar said macroeconomic stabilisation alone would not be sufficient to restore high and sustainable growth.

"Bangladesh can no longer rely solely on traditional drivers of growth; future competitiveness will depend on productivity, innovation, policy predictability, and openness to investment and technology," he said.

Sattar said the country remains under pressure from slowing growth, weak investment momentum, and elevated inflation, although export recovery, remittance inflows, and improved foreign exchange reserves signal underlying economic resilience.

He also called for tariff rationalisation, tax reforms, stronger trade openness, energy sector restructuring, FDI promotion, and greater investment in critical infrastructure ahead of Bangladesh's post-LDC transition.

The discussion was also attended by former NBR chairman Nasiruddin Ahmed and former DCCI president Shams Mahmud.