ECONOMY OF BANGLADESH

By
Saba Nuzhat
Lecturer
GED Cell, FBA
 Historical Background of the Economy of BD
 Mujib era: Between 1972 and 1975, the government of Bangladesh took
nationalization policy. That means nationalized economy or, state owned
economy.

 Zia era: Between 1976 and 1981, the approach changed from nationalized
economy to denationalized economy

 Ershad era: Between 1982 and 1990, he focused on denationalized economy,

more specially development of Private sector (Establishment of Privatization
Board in 1989)

 Khaleda Zia era: Between 1991 and 1996, 2001 and 2006, More importance
was given to trade. Roving trade representative of the country was appointed.
In the economic interest of the nation, the policymakers of Bangladesh would
come closer to India for regional and bilateral economic cooperation.

• Sheikh Hasina era: Between 1996 and 2001, and (2008-) ,she build up the
international migration and remittances and explained the concept of "Bay of
Bengal Industrial Growth Belt (BIG-B)" as an initiative to aim at cooperation in
infrastructural development, the improvement of investment environment and
regional connectivity.
 Nature of the Economy of BD
 It is a mixed economy.
 Free market economy.
 Open border relationship with rest of the world.
 Developing the concept of privatization.
 Dependency on national and international loan.
 Dependency on development actors, organizations and
countries .
 Emphasizes on foreign direct investment (FDI).
 Recent Economic Trends in BD
 The country's foreign exchange reserve is reported to have hit a new high with a record of
33596.30 USD Million in August of 2017 and currently it is estimated as 31729
USD Million in November, 2019.

 As of March 2019, the average inflation rate stands at 5.4%, according to the

data provided by the Bangladesh Bureau of Statistics (BBS). The government
has forecast a 5.5% inflation during the 2019-20 fiscal year. Inflation reported to
5.47% in October 2019.

 In the fiscal year (FY) 2016-17, according to IOM, the contribution of migration can be
seen through remittances, which made up 7.24% of the country's GDP’;
amounting to about US$ 12.79 billion. More than 8 million migrant workers sent $15.31
billion in remittance to homes (2016). Currently, Remittance in Bangladesh increased to
1639.62 USD Million in October in the FY 2019-20. Bangladesh was the third
highest recipient of remittance in South Asia in 2018, after India and Pakistan
and 11th highest recipient globally.

 Bangladesh received a record 1583 USD Million in FDI in 2018, upto 67.94%
in 2018, according to World Investment Report 2018. Bangladesh registered a
record level of foreign direct investment (FDI) inflow in 2018, topping the list
in South Asia.

 Garment still accounts for more than 80% of the export basket, despite domestic optimism about
the pharmaceutical sector, which makes up only 0.5 percent. So Bangladesh needs to diversify its
export basket.
Bangladesh’s Gross Domestic Product (GDP)
is set to grow by an 8.13%—the highest ever in
the country’s economic history—in the current
fiscal year (FY2018-19).   
Besides, the per capita income of the country is
also set to grow to $1,909 in the current fiscal
year, up from $1,751 in the previous fiscal year
(FY2017-18)
The total size of the GDP in FY2018-19 will rise to
Tk2,536,177 crore from Tk2,250,479 crore
recorded in the previous fiscal year.
The Bangladesh economy is charging towards
record growth figure for 2018; driven by double-
digit growth in manufacturing and construction
sectors.
The rise in construction growth is attributable to
progress in implementation of mega projects and
increased growth in housing construction,
stimulated, among others, by recovery in
remittance.
The BBS data shows that the agriculture sector,
whose contribution to the GDP is 14.10 percent,
grew 3.06 percent in fiscal 2017-18, up from 2.97
percent last year.
The services sector, whose contribution to the
GDP is 52.85 percent, grew 6.33 percent this year,
down from 6.69 percent registered a year earlier.
The industrial sector, whose contribution to the
GDP is 33.71 percent, grew 11.99 percent against
10.22 percent in fiscal 2016-17.
Sector-wise Contribution to GDP

In 2018, the share of agriculture in Bangladesh's gross domestic

product was 13.07 percent, industry contributed approximately 28.54
percent and the services sector contributed about 52.96 percent.
 REMMITANCE INFLOW
In Bangladesh, Remittances refers to inflows of migrants’ and short-term employee
income transfers.
 According to World Bank, Bangladesh is now one of the largest recipients of
remittance with almost $15.3 billion in 2018. It was third highest recipient of
remittance in South Asia in 2018.
Remittances from more than 10 million citizens abroad are very important for
Bangladesh economy. Saudi Arabia has been the largest source of remittances,
followed by UAE, Qatar, Oman, Bahrain, Kuwait, Libya, Iraq, Singapore, Malaysia, the
US and the UK.
Remittance inflow increases by 20% in first 4 months of FY2019-20. According to BBS,
the country received $1.59 billion in July, $1.44 billion in August, $1.47 billion in
September and $1.63 billion in October of the FY2019-20.
The flow of remittances into the country shows upward trend in the current FY2019-20
as the government has taken effective measures, including two percent cash incentive,
to streamline the legal channel for encouraging non-resident Bangladeshis (NRBs) to
send money to the country.
Economists and bankers believe the government’s announcement to award 2 percent
incentives on remittances, increase in manpower export and rise in fuel oil prices in
the global market have caused the surge in Bangladesh’s remittance inflow.
Remittance Inflow in Bangladesh
 Export
Bangladesh is world’s second-biggest
apparel exporter after China.
Garments including knit wear and
hosiery account for 80% of exports
revenue; others include: jute goods,
home textile, footwear and frozen
shrimps and fish.
The majority of the country’s trade is
conducted with the USA but a small
portion of exports also sees its way to
Germany, the UK, France and Italy.
Exports in Bangladesh decreased to
255.98 BDT Billion in October from
260.20 BDT Billion in September of
2019. Exports in Bangladesh averaged
49.71 BDT Billion from 1972 until
2019, reaching an all time high of
279.82 BDT Billion in July of 2019.
The country’s export earnings reached
an all-time high of US$ 40.53 billion
in the just concluded fiscal year (FY),
2018-19, registering a 10.55 per cent
growth over that of the previous fiscal
year.
The ready-made garment (RMG)
sector contributed more than 84 per
cent or $34.13 billion to the total
export income in FY 19. The country
earned $ 16.88 billion from knitwear
exports, registering a growth of 11.19
per centOn the other hand, earnings
from home textile exports fell by 3.07
per cent to $ 851.72 million. The
earnings from exports of jute and jute
goods fell by 20.41 per cent to $
816.27 million in FY 19 from $ 1.02
billion in the previous fiscal.
 Import
 Bangladesh imports mostly petroleum and oil
(11 percent of the total imports); textile (10
percent) and food items (9 percent). Others
include: iron and steel (7 percent), edible oil (4
percent), chemicals (4 percent), yarn and
plastic and rubber articles (4 percent). In
2013, imports of food/ grains decreased
substantially mainly due to adequate domestic
supply of rice during the period.
 Imports in Bangladesh increased to 425.90
BDT Billion in October from 356.82 BDT Billion
in September of 2019. Imports in Bangladesh
averaged 84.39 BDT Billion from 1976 until
2019, reaching an all time high of 465.30 BDT
Billion in January of 2019.
 In 2017 Bangladesh imported $44B, making it
the 53rd largest importer in the world.
 The top import origins of Bangladesh are China
 ($15.1B), India ($7.05B), Singapore
 ($2.55B), Japan ($1.68B) and Brazil ($1.6B).
 Bangladesh imported US$53 billion worth
of goods from around the globe in 2018,
up by 6.2% from 2017 to 2018.
Bangladeshi imports represent a modest
0.3% of total global imports. The
following product groups represent the
highest dollar value in Bangladesh’s
import purchases during 2018.
1. Machinery including computers: US$6.7
billion (12.7% of total imports)
2. Cotton: $6.6 billion (12.4%)
3. Mineral fuels including oil: $4.6 billion
(8.7%)
4. Electrical machinery, equipment: $3.9
billion (7.3%)
5. Iron, steel: $2.8 billion (5.2%)
6. Vehicles: $2 billion (3.9%)
7. Manmade staple fibers: $1.9 billion
(3.6%)
8. Plastics, plastic articles: $1.9 billion
(3.6%)
9. Animal/vegetable fats, oils, waxes: $1.7
billion (3.3%)
10. Cereals: $1.5 billion (2.8%)
 Inflation
Inflation is a quantitative measure of the rate at which the average price level of a 
basket of selected goods and services in an economy increases over a period of time.
It is the constant rise in the general level of prices where a unit of currency buys less
than it did in prior periods. Often expressed as a percentage, inflation indicates a
decrease in the purchasing power of a nation’s currency.
Imagine your grandma stuffed a $10 bill in her old wallet in the year 1975 and then
forgot about it. The cost of gasoline during that year was around $0.50 per gallon,
which means she could have then bought 20 gallons of gasoline with that $10 note.
Twenty-five years later in the year 2000, the cost of gasoline was around $1.60 per
gallon. If she finds the forgotten note in the year 2000 and then goes on to purchase
gasoline, she would have bought only 6.25 gallons. Although the $10 note remained
the same for its value, it lost its purchasing power by around 69 percent over the 25-
year period. This simple example explains how money loses its value over time when
prices rise. This phenomenon is called inflation.
The annual inflation rate in Bangladesh edged up to 6.05 percent in November of 2019
from 5.47 percent in the prior month. It was the highest inflation rate since
September 2017, as both food (6.41 percent vs 5.49 percent in October) and non-food
products (5.47 percent vs 5.45 percent) prices advanced faster. nflation Rate in
Bangladesh averaged 6.50 percent from 1994 until 2019. The government has
forecast a 5.5% inflation during the 2019-20 fiscal year.
INFLATION
 Foreign Direct Investment (FDI)
A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in
one country by an entity based in another country. A foreign direct investment (FDI) is an investment made
by a firm or individual in one country into business interests located in another country. Generally, FDI takes
place when an investor establishes foreign business operations or acquires foreign business assets in a foreign
company. Foreign direct investment frequently involves more than just a capital investment. It may include
provisions of management or technology as well. Apple’s investment in China is an example of an FDI.
Foreign direct investment to Bangladesh surged 51 percent last fiscal year to its highest on record. The World
Investment Report 2019 released last month showed that the inflow of FDI into Bangladesh rose by 68
percent to a record high of $3.6 billion. In 2018-19, net FDI stood at $3.88 billion in contrast to $2.58 billion a
year earlier, according to data from the central bank.
FDI is riding largely on Japan Tobacco Inc’s acquisition of Akij Group’s tobacco business for $1.47 billion.
Japan Tobacco, one of the largest tobacco companies in the world, completed the acquisition of Dhaka
Tobacco, a concern of Akij Group, in November last year, in what was the biggest ever single FDI in
Bangladesh.
This rise in FDI in Bangladesh is in part due to investments in the power sector and in labour-intensive
industries such as ready-made garments.
China was the top investor last year surpassing the United States.
Bangladesh registered a record level of foreign direct investment (FDI) inflow in 2018, topping the list in
South Asia.
The power sector alone attracted investments worth $1.01 billion, where China contributed $0.83 billion,
followed by $0.73 billion in the food sector, and $0.43 billion in the textile sector.
Several mega projects were ongoing for developing infrastructure and after implementation of the mega
projects, the inflow of FDI would increase further.
We have already given licences to 11 private SEZs. The government is also establishing public SEZs.
Moreover, we are establishing country-specific SEZs.
FDI Status of the Country
 Annual Development Program
Annual Development Programme (ADP) an organised list of projects in various
sectors and allocations for them for a year out of a five-year plan period for
implementation of the government's development policies, programmes and
investments in the plan. The ADP is prepared on the basis of the year's development 
BUDGET approved by the parliament. The PLANNING COMMISSION formulates the ADP
of the government of Bangladesh in the light of basic objectives and goals stated in a
Five-Year Plan. Funds are allocated to implement development projects included in the
ADP. Both internal (domestic) and external (aid) funds are used to finance projects.
Potential availability of funds often becomes a major consideration in preparing the
ADP, which has historically remained dependent upon FOREIGN AID.
Annual Development Programme (ADP): ‘ADP’ stands for Annual Development
Programme which is an organized list of projects in various sectors. ADP is prepared on
the basis of a year’s development budget and approved by the parliament.
The government has finalized a Tk2,02,721crore annual development project (ADP) for
the upcoming 2019-20 fiscal year,  giving the highest allocation to the transport sector.
New ADP allocation size has increased by 17.18% compared to Tk1,73,000crore
 original ADP for the previous FY2018-19. Of the total outlay, the government would
generate Tk1,30,921 crore from internal sources, while Tk71,800 crore would come
from foreign sources.
 Cont.
The government gave the transport sector priority considering the rapid implementation
of Padma Bridge and its rail link projects. NEC allocated Tk52,806crore for the transport
sector, which is 26% of the total size of the ADP, while the second highest allocation is
for electricity — Tk26,017 crore. The physical infrastructure, water supply and housing
sector got Tk24,324 crore — the third highest allocation.
Among the other sectors, education and religion got an allocation of Tk21,379 crore,
science, information and ICT Tk17,541 crore, rural development Tk15,157 crore, health,
population and family welfare Tk13,055 crore, agriculture Tk7,616 crore, water resource
Tk5,653 crore and the public administration sector got Tk5,024 crore allocation for
FY2019-20.
On ministry-wise ADP allocation, local government department got the highest allocation
with Tk29,777 crore, power and electricity division TK26,014 crore as second highest
and road transport and highway division Tk25,163 crore as the third highest recipient.
Although a big allocation is given to the ADP every year, the amount invariably gets
revised down during the course of the year due to lackadaisical implementation.
The implementation rate of the Annual Development Programme (ADP) in the last fiscal
year (FY19) was 94.32 per cent with an overall expenditure of Taka 1.67 trillion.
 Budgeting in Bangladesh
Budget is an itemized estimate of expected income and expense for a given period in
the future. A government budget is a government document presenting the
government's proposed revenues and spending for a financial year.
Government Budget is an itemized accounting of the payments
received by government (taxes and other fees) and the payments
made by government (purchases and transfer payments). A budget
deficit occurs when an government spends more money than it takes
in. The opposite of a budget deficit is a budget surplus

Major institutions in budget formulation & implementations in BD are:

• Ministry of Finance
i. Finance Division: overall & expenditure
ii. Internal Resource Division- domestic
iii. Economic Relations Division- external

• Ministry of Planning- FYP, ADP

• Planning Commission- Coordinating & finalization of investment plans
• IMED - Implementation Monitoring and Evaluation Division
• Line Ministries- Scrutinizing demand
 Preparation of Revenue Budget
The revenue budget pays for the normal functioning of the government and is intended to be fully financed
from domestically generated sources. The Ministry of finance and planning is responsible for the
preparation of revenue budget in cooperation with different ministries/divisions and account offices. The
steps of the preparation of revenue budget are-

a) Distribution of forms
It means the process of distribution of budget forms. It includes
Estimating officer’s forms and controlling officer’s forms.
b) Submission of estimates to the Finance division
It means the process by which the accountant general submits the
final estimates of receipt and expenditure to the finance division.
c) Finalization of estimates
The budget wing of the finance division examines the estimate
report from the controlling officers and accountant general. Then it
makes the final best judgment about the budget.
d) Schedule of new expenditure
It means the detection of some new expenditure for the upcoming
year. Though it is a part of revenue budget, sometimes it can be
presented separately.
 Parliament has passed the Tk523,190 crore national budget for the fiscal year 2019-
20, themed as “Bangladesh on a Pathway to Prosperity: Time is Ours, Time for
Bangladesh.”
 Finance Minister AHM Mustafa Kamal on June 13 placed a Tk 5,23,190 crore largest-
ever budget for the 2019-20 fiscal with a focus on developing communications
infrastructure and human resources and achieve the 8.2 percent GDP growth.
 The revenue target is BDT 3,778.1 bn, 19.33% higher than FY19.
 The finance minister proposed allocating, from the annual development programme,
27.4 percent for human resource (education, health and related others), 26 percent
for communication (roads, rails, bridges, and related other communications), 21.5
percent for the overall agriculture sector (agriculture, rural development, water
resources, and related others), 13.8 percent for power and energy sector and 11.3
percent for other sectors.
 Allocation proposed for the social infrastructure sector in the proposed budget is Tk
1,43,429 crore, and Tk. 1,64,603 crore for physical infrastructure sector of which Tk.
66,234 crore will go to overall agricultural and rural development, Tk 61,360 crore to
overall communications, and Tk 28,051 crore to power and energy.
 The overall budget deficit will be Tk 1,45,380 crore, which is 5 percent of GDP. In
financing the deficit, Tk 68,016 crore will come from external sources and Tk. 77,363
crore from domestic sources (banking system, savings certificates and other non-bank
sources).
 The total revenue collection has been estimated to be Tk 3,77,810 crore where the
National Board Revenue (NBR) will contribute Tk 3,25,660 crore tax revenue from
non-NBR sources have been estimated at Tk 14,500 crore.
 The National Board of Revenue, the main breadwinner for the government, has been
tasked with bringing home Tk 325,600 crore in fiscal 2019-20, up 16.29 percent from
this year’s revised budget
 Vision 2021 Expectations

The expectations are that by 2021, the war against poverty will have been
won, the country will have crossed the middle income threshold, with the
basic needs of the population ensured and their basic rights respected, when
everyone is adequately fed, clothed and housed, and have access to health
care. And all this is achieved on a sustainable basis without damaging the
environment. Furthermore, this progress will be ensured in an environment
where every citizen has the opportunity fully and positively to contribute to
the economy and society and equitably share the benefits from progresses
achieved.
 Approaches to Development Planning in BD
Development planning provides the road map for accelerated growth and lays
down broad approaches for eradication of poverty, inequality, and human
deprivation. Bangladesh's economy has been an orphan without a long-term
perspective plan, more like a vessel without a compass. Marking vision 2021 a
reality, is a strategic articulation of the development vision, mission, and goals
of the Bangladesh government. To make the Vision 2021 a reality, the
Perspective Plan of Bangladesh 2010-2021 was adopted. Specific strategies and
the task of implementation will be articulated through the two five-year plan:
Sixth Five Year Plan (2011-2015) and the Seventh Five Year Plan (2016-2020)
which are further broken down as Annual Development Programs of every
years.
 Annual average growth (%)
Plan Period Target Actual

First five year plan (FY1973-FY1978) 5.5 4.0

Two year plan (FY1978-FY1980) 5.6 3.5
Second five year plan (FY1980-FY1985) 5.4 3.8
Third five year plan (FY1985-FY1990) 5.4 3.8
Fourth five year plan (FY1990-FY1995) 5.0 4.2
Fifth five year plan (FY1997-FY2002) 7.0 5.1
Interim PRSP (FY2003-FY2005) - 6.2
Unlocking the Potential: NSAPR-I (FY2005-
FY2008)   6.4
Steps towards Change: NSAPR II (FY2009-
FY2011) - 6.3
7.3 (revised from
Sixth five year plan (FY2011-FY2015) 8) 6.3
Seventh five year plan (FY2015-FY2020) 8.0 -
Common Problems in Economic Sector in BD
 POLITICAL INSTABILITY: Political instability is probably a never ending problem
for Bangladesh. The instability of politics has imparted severe problems in education
system, economy and poverty reduction.

 INEQUALITY: Growth and equality are the important factors for the development
objectives. There are different logics regarding linkage between growth, income
distribution and poverty. 31.5 percent people in Bangladesh still lives below the
poverty line.

 CORRUPTION: Corruption is one of the major barrier to economical development of

a nation. The cancer ‘’corruption’’ is a global problem, heavily in under-developed and
developing nations.

 Over POPULATION: The population of Bangladesh has been one of the major
problems to the economical growth. Policies and programmers by GOB and NGOs
have been constantly trying to reduce the birth and growth rate.

 NATURAL CALAMITIES & ENVIRONMENT PROBLEM: Environment and natural

calamities plays a vital role against the economical and infrastructure development of
Bangladesh. The disastrous effect of several cyclones and hurricanes are still
imparting pressure on the national economy.
Some Measures for Economic Development of
BD
 Avoiding political mudslinging.
 Reform in taxation structure
 Proper uses of the budget in every sector.
 Increase labor force in the industrial sector.
 Increase market expansion by promotion of trade.
 Need more economical advancement and integration.
 Build national & international cooperation.
 Develop political harmonies in the world.
 Increase remittances & intellectual investment.