63DA Group-7

Transformation
in Motion
Exploring the
Macroeconomic and
Socio-economic indicators of
Bangladesh over the years
Prepared by
Group 07
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INSTITUTE OF BUSINESS ADMINISTRATION
UNIVERSITY OF DHAKA
Report on
Macroeconomic and Socio-economic indicators of Bangladesh
Course Code: E501
Submitted to:
Ms. Tasneema Afrin
Assistant Professor
Submitted by
Group 07
Tanveer Ahmed Khan - 007
Asif Asgar - 010
Nafisa Tabassum - 024
Samin Arman Khan - 029
Shadatul Haque - 047
Section A
MBA 63D
Date of Submission April 02, 2022
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Letter of Transmittal
April 02, 2022
Ms. Tasneema Afrin

Assistant Professor
Institute of Business Administration
University of Dhaka
Subject: Submission of Term paper report on ‘Macroeconomic and Socio-economic

indicators of Bangladesh’
Dear Madam,
We would like to take this opportunity to present to you our report on ‘Macroeconomic and
Socio-economic indicators of Bangladesh’ as a part of the Managerial Economics (E501)
course requirement. The main purpose of this report is to provide an overview of
macroeconomic and socio-economic indicators of Bangladesh, the effect of the Covid-19
pandemic on them, and suggest the way forward.
We are grateful to you for providing us with detailed instructions and guidelines during the
class lectures. We further express our gratitude for giving us the necessary feedback at various
stages in the class. In the development of this report, we have tried our best to follow your
guidelines and to comply with your impeccable standards. We earnestly hope that this report
meets your expectations.
We declare that this report has been prepared only under your supervision. We further
assure that under no circumstances will this report be produced for any other course ever.
No part of this report will be shared or republished without your authorization.
Sincerely yours,
Group 07
Tanveer Ahmed Khan ZR-007
Asif Asgar ZR-010
Nafisa Tabassum RQ-024
Samin Arman Khan ZR-029
Shadatul Haque ZR-047
MBA 63D
Institute of Business Administration,

University of Dhaka
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Executive summary
In 1971 when Bangladesh gained its independence after a 9-months liberation war, where
more than 3 million people lost their lives, almost all the houses were burnt to ashes, people
were pessimist about the survival of the nation. The infamous Mr. Kissinger the then foreign
secretary to the US ex-President Mr. Nixon, commented that Bangladesh is a bottomless
basket. In the early years of its independence, Bangladesh was largely dependent on foreign
aid even to ensure the necessities. Fast forward 51 years, in 2021 Bangladesh is on its track
to graduating as a least developed country. It is forecasted that by 2030 Bangladesh will be
the 24th largest economy in the whole world. Over the past decades, Bangladesh has been
able to lift the majority portion of the population from the evil clutch of poverty. In 1972 90%
of the population used to live on less than $1.90. In the year 2018, it was only 9%. In terms of
education, women’s healthcare, per capita income, and average life expectancy, Bangladesh
has suppressed its neighboring country. Our story of progress is nothing short of a fairytale.
In this report, we have tried to explore the macroeconomic factors and socioeconomic factors
and then comment on the way forward. We have achieved great results in relation to the
achievement of the Millennium Development Goals (MDG). Based on our findings, we are
confident that Bangladesh is a land of opportunities. Bangladesh showed its economic
strength while fighting against the global pandemic. Even after months-long situations, the
people of our country did not lose hope. In a year where all major economies witnessed
extremely slow growth or even shrinkage, we achieved a growth of 6.94%. Bangladesh is the
only country that has sustained a GDP growth above 7% over the past decades. This has only
been possible due to the coordinated approach of the government, general people, and active
private initiatives. If this continues, we can only expect to see great things unfolding in the
coming days.
“Bangladesh is considered as a role model for other

developing economies in achieving sustainable development.”
-Ban Ki-moon, Ex-General Secretary of the United Nations
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Table of Contents
Introduction: .............................................................................................................................. 1
PART-1: Looking into the Macroeconomic Factors
1. GDP and GDP per capita of Bangladesh: A Story of Resilience ............................................. 3
1.1 Historical trends and Facts ............................................................................................... 3
1.2 Covid-19 Impact on the GDP and GDP per Capita ........................................................... 6
1.3 The Way Forward ............................................................................................................. 8
2. Inflation: Recently on the Rise ............................................................................................. 10
2.1 Historical trends and Facts ............................................................................................. 10
2.2 Consumer Price Index (CPI) ............................................................................................ 10
2.3 Covid-19 Impact on the Inflation ................................................................................... 11
2.4 Most Recent Trend ......................................................................................................... 13
2.5 The Way Forward ........................................................................................................... 13
3. Fiscal policy .......................................................................................................................... 15
3.1 Impact of COVID-19. ....................................................................................................... 16
3.2 Way forward:.................................................................................................................. 17
4. Balance of Payment: ............................................................................................................ 18
4.1 Trade Balance ................................................................................................................. 18
4. 2 Impact of COVID-19 ....................................................................................................... 20
4.3 Way forward:.................................................................................................................. 20
5. Remittance: .......................................................................................................................... 22
5.1. Impact of the COVID -19 ............................................................................................... 23
5.2 Way forward:.................................................................................................................. 24
6. Unemployment Rate ............................................................................................................ 26
6.1 Reasons Behind Unemployment: ................................................................................... 26
6.2 Effect of COVID-19 on unemployment rate: .................................................................. 29
6.3 The Way Forward: .......................................................................................................... 31
PART-2: Looking into the Socioeconomic Factors
1. Purchasing Power Parity of Bangladesh .............................................................................. 35
1.1 Impact of Covid-19 on the Purchasing Power ................................................................ 36
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1.2. The Way Forward .......................................................................................................... 36
2. The Gini Coefficient of Bangladesh ...................................................................................... 37
2. 1. The Underlying Reasons of Inequality.......................................................................... 38
2. 2. Impact of Covid-19 of Income Inequality ..................................................................... 43
2. 3. The Way Forward to Reduce Inequality ....................................................................... 44
3. Health and Development Index ........................................................................................... 50
3.1 Physicians Per 1000 People: ........................................................................................... 50
3.2 Life Expectancy at Birth: ................................................................................................. 51
3.3 Infant Mortality: ............................................................................................................. 51
3.4 Challenges: ..................................................................................................................... 52
Difficulties in Increasing the Number of Physicians: ........................................................ 52
Difficulties in Increasing Life Expectancy Rate: ................................................................ 53
Difficulties in Decreasing Infant Mortality Rate: .............................................................. 54
3.5 Health Situation during COVID- 19:................................................................................ 54
3.6 The Way Forward: .......................................................................................................... 55
4. Education and literacy rate .................................................................................................. 57
4.1 Reasons behind the low percentage of School Going Children: .................................... 57
4.2 The Covid-19 Impact: ..................................................................................................... 66
4.3 The way forward: ........................................................................................................... 68
Conclusion: ............................................................................................................................... 70
References ............................................................................................................................... 73
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List of Figures
Figure 1: GDP Trend of Bangladesh ........................................................................................... 3
Figure 2: Annual GDP Growth Rate Trend of Bangladesh ......................................................... 4
Figure 3: GDP at Current Market price and Constant Market Price. ......................................... 5
Figure 4: GDP per Capita Trend of Bangladesh.......................................................................... 5
Figure 5: The Nominal GDP per Capita of Bangladesh is over India and Pakistan. ................... 6
Figure 6: Top 10 Exports by Bangladesh .................................................................................... 7
Figure 7: Top Export Regions of the RMG Products of Bangladesh .......................................... 7
Figure 8: Historical Point to Point Inflation of Bangladesh with Base Year 2006 .................... 10
Figure 9: Historical Food and Non-food CPI Index of Bangladesh with Base Year 2006 ......... 11
Figure 10: Quantitative Easing by Bangladesh Bank................................................................ 12
Figure 11: Component–wise National Inflation during the Pandemic. ................................... 13
Figure 12: Recent Trend in National Inflation.......................................................................... 13
Figure 13: Bangladesh Budget balance between 2016 to 2026 in relation to GDP ................ 16
Figure 14: The export data of Bangladesh from March 2012 to March 2022. ........................ 18
Figure 15: The import data of Bangladesh from March 2012 to March 2022. ....................... 19
Figure 16: The comparative trade balance data of Bangladesh and India from March 2012 to
March 2022. ............................................................................................................................. 19
Figure 17: Trade balance data of Bangladesh and India from December 2019 to Jan 2022... 20
Figure 18: Country-wise remittance inflow to Bangladesh from 1995 to May 2015 ............. 22
Figure 19: Monthly remittance data from December 2019 to March 2022 ........................... 23
Figure 20: Flow of the remittance in the first seven months of FY 2021/22 ........................... 24
Figure 21: Unemployment Rate of Bangladesh, World Bank .................................................. 26
Figure 22: Unemployment rate of Bangladesh through years (World Bank) .......................... 27
Figure 23: Forecast of Unemployment rate, Bangladesh ........................................................ 31
Figure 24: GDP per capital, PPP ............................................................................................... 35
Figure 25: Implied PPP Conversion Rate .................................................................................. 35
Figure 26: Trend of income inequality in Bangladesh ............................................................. 37
Figure 27: Comparison of real minimum wage growth and labor productivity of some Asian
countries in 2020 ..................................................................................................................... 39
Figure 28: Tax-GDP ratio of South Asian countries in 2021..................................................... 40
Figure 29: Corruption perceptions index 2021 ........................................................................ 42
Figure 30: Gini coefficient and tax compliance ....................................................................... 45
Figure 31: Physicians per 1000 people. Bangladesh. World Bank ........................................... 50
Figure 32: Life Expectancy at Birth, Bangladesh. UN World population prospects ................ 51
Figure 33: Infant Mortality, Bangladesh. UN World population prospects ............................. 52
Figure 34: education structure of Bangladesh......................................................................... 57
Figure 35: Primary education completion rate across gender, area & economic status ........ 58
Figure 36: Education Completion Rate .................................................................................... 59
Figure 37: Poverty situation in Bangladesh ............................................................................. 60
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Figure 38: Employment crisis in South-Asia............................................................................. 61
Figure 39: Teacher Student Ration .......................................................................................... 62
Figure 40: School dropouts in terms of the economic situation ............................................. 63
Figure 41: District wise school going children ......................................................................... 64
Figure 42: Children out-of-school ............................................................................................ 65
Figure 43: Impact of Covid-19 .................................................................................................. 66
List of Tables
Table 1: Labor force participation rate by gender (%), BBS, Labor force surveys ................... 29
Table 2: Labor force survey (in millions) 2016-17, BBS. .......................................................... 32
Table 3: Employment Abroad, Bureau of Manpower, Employment and Training (BMET) ..... 33
Table 4: Gin co-efficient of different socio economic groups ................................................. 38
Table 5: EPI scores of the SAARC countries ............................................................................. 43
Table 6: 8th Five-year plan of Bangladesh ................................................................................ 46
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Introduction:
Bangladesh is one of the developing economies of South Asia, with a population of more than
160 million people. In recent decade, the country's economic ideology and administration
have undergone significant changes. Bangladesh adopted socialism as its economic
philosophy at its inception in 1971, with the public sector playing a significant role. However,
it has been undergoing considerable reorganization since the mid-1970s in order to develop
a market economy with a focus on private sector-led economic growth.
Bangladesh made significant economic development in the 1990s by implementing a number
of structural and economic reforms. The stabilization program decreased inflation as well as
the fiscal and current account deficits, while also establishing a strong foreign exchange
reserve position. The economy performed better in the 1990s, with GDP growth averaging
5% compared to 4% in the previous decade. The current (2021 estimate) GDP growth rate is
above 6.4% despite numerous obstacles like pandemic and continuous skepticism from many
experts. The acceleration of economic growth was followed by a fall in poverty rates and a
significant improvement in a number of key social metrics. In recent years, the country's
economic performance has been marked by rapid expansion in food grain output.
Consequently, the astonishing growth of the country has captured the global attention. In
terms of the size of economy, Bangladesh is now ranked 32 nd in the world, but it is expected
to rise to 23rd position by 2050 as per the World Bank’s estimates.
This term paper examines the movements of Bangladesh's important macroeconomic
indicators, including economic growth in terms of GDP as well as GDP per capita, inflation,
unemployment, the balance of payments, government fiscal and monetary policies and finally
foreign remittance. Besides the macroeconomic indicators this report has also explored the
important socio-economic indicators such as purchasing power parity, Gini coefficient,
Percentage of school going children, Life expectancy at birth, infant mortality rate and
physicians per 1000 people. All these macroeconomic and socio-economic indicators as a
whole determines the trajectory of the economic system of a county.
The first objective of this paper is to explore, review and analyze the trends observable in the
aforementioned indicators in context of Bangladesh. Through the historical data and relevant
information, we will be able to find out the major existing problems within the economy and
identify possible hindrances of progress and poor performances in specific sectors of the
country. Secondly, the paper aims to take a dive into the impact of Covid-19 on the indicators
of consideration and how all these factors possibly interplay among themselves. Finally, based
on the historical trend and recent attributes, a way forward to progress further is discussed
for each individual factor. Hence, an overview of the Bangladeshi economy in terms of its past
performance, present operations and future possibilities are illustrated through this report.
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PART 1
.
Looking into the

Marco-economic Indicators
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1. GDP and GDP per capita of Bangladesh: A Story of Resilience
1.1 Historical trends and Facts
The economic growth story of Bangladesh has made it earn the badge of ‘New Asian Tiger
Economy’ of South Asia (Smith, 2021). Since its independence from Pakistan in 1971,
Bangladesh constantly proven all of the skeptics wrong and eventually proven itself as the
center of excellence in terms of economic growth and increasing prosperity. The progress is
so solid that from being termed as a ‘Bottomless Basket’ by US National Security Advisor
Henry Kissinger in 1971, the country is now termed as the ‘Soon to be one of the most
influential countries in Asia’ by the US officials (Sujan, 2020).
Figure 1: GDP Trend of Bangladesh

(Source: The World Bank Group, 2022)
Bangladesh has accomplished incredible successes, going from a bottomless basket to serving
the world with its array of top-notch textile and knitted items, exporting medications to
various areas of the world, and supplying the world with roughly 2.5 million employees. Soon
after independence, the country was hit by a slew of crises, including hunger, natural
calamities, political unrest, and mounting diplomatic pressure. Despite this, Bangladesh has
recently lifted millions of people out of poverty, ensured food security for a growing
population, and provided basic education to almost all of its younger generations, and
continues to outperform growth forecasts by multilateral development partners and
international monitors.
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Figure 2: Annual GDP Growth Rate Trend of Bangladesh
As per the World Bank, the poverty level headcount ratio in 1983 was 38.8% (in PPP values).
In 2016, this dropped to 14.3 percent. Because to tremendous advancements in child
healthcare, nutrition, and women empowerment, life expectancy at birth has increased from
46.5 years in 1972 to 72.5 years now. Bangladesh exported $356 million to the rest of the
world in 1972. In 2019, the United States contributed $46.3 billion in exports to the rest of
the globe. Despite repeated large-scale disasters, political turmoil, policy regime changes,
local geopolitical turmoil, and one of the world's greatest population densities, Bangladesh
has preserved macroeconomic stability and average growth rates of over 6% over its five
decades of independence.
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Figure 3: GDP at Current Market price and Constant Market Price.
(Source: Bangladesh Bank)
Bangladesh's economy has expanded from $6.2 billion in 1972 to $324.2 billion now (2020
Estimates). Although its population climbed from 66 million in 1972 to roughly 165 million in
2020, per capita national income increased from $120 in 1973 to $1970 in 2020. Goldman
Sachs included the country to its "Next Eleven" list in 2012, citing its potential to become one
of the world's major economies by 2050. Bangladesh was also named one of the "Frontier
Five" by JP Morgan Chase.
Figure 4: GDP per Capita Trend of Bangladesh

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1.2 Covid-19 Impact on the GDP and GDP per Capita
Even during the Covid-19 outbreak, the country has surpassed World Bank and Asian
Development Bank growth estimates (ADB). Bangladesh's GDP growth was expected to be 1.6
percent in 2021 and 3.2 percent in 2022, according to the World Bank. GDP growth is
expected to be 6.8% and 7.2 %, respectively, according to the ADB. During the same time
period, per capita GDP growth was predicted to be 5.5 percent and 5.8 percent, respectively.
The actual reported GDP growth reported by World Bank in the Fiscal Year of 2021-22 is 6.4%
which satisfied the expected value. The GDP per capita is reported to have reached over
$2590 by BBS. Bangladesh will move from its position as a "least developed country" to that
of a "developing" nation by 2024. This delta has had a spectacular trip over the previous five
decades, and Bangladesh's immediate future appears to be much better. Bangladesh have
now surpassed its powerful neighbor India and other neighbor Pakistan in term s of nominal
GDP per capita.
Figure 5: The Nominal GDP per Capita of Bangladesh is over India and Pakistan.
(Source: IMF)
This incredible feat in terms of the growth of GDP has been possible by Bangladesh due to its
massive export facilities in terms of dominant sectors like RMG. According to the ‘World Top
Export’s’ website Bangladesh has major export products to the world which include: Knit,
Accessories, Clothing, Footwear, Various Textiles, Paper Yearn, Woven Fabric, Fish, Leather,
Headgear and plastic derivatives.
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Export Products from bangladesh (Percentage of Total Exports)
0.70% 0.30% 0.20% 4.00%
0.80%
1.20%
1.30%
2.20% 2.40% 44.50%
42.40%
Knit and Accessories Clothing Footwear

Miscellaneous Textiles Paper Yarn and Woven Fabric Fish
Leather Headgear Raw Hides and Related Products
Plastics and Plastic Products Others
Figure 6: Top 10 Exports by Bangladesh

(Data Source: Workman, D., 2021)
However, Because of the lockdown, the immediate shock was significant, as it would be in
any other country. The restriction began in late March, and the April, RMG exports figure was
exceedingly low, as was the May one. But then came the recovery. By July and August, exports
had surpassed those of the same time in 2019. In that regard, the recovery is impressive.
However, if one looks at the entire time, from April to August 2020, Bangladesh was still at
roughly 80% of previous year's (2019) similar six-month period. From this point onward given
the lockdown is removed, the industry is only expected to be better along with contributing
significantly to the GDP growth.
Figure 7: Top Export Regions of the RMG Products of Bangladesh

(Source: Smith, N., 2021)
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1.3 The Way Forward
In order to carry forward the progress of the GDP and GDP per capita growth in the coming
future, Bangladesh need to adopt certain policy changes and reformations suggested by
various think tanks and independent bodies as described below.
Reforms in the Power Sector
This would necessitate extensive power sector changes, such as resolving bottlenecks at all
levels of electricity production and distribution and lowering reliance on imported fossil fuels.
The paper advocates for more efficient gas pricing and usage. Bangladesh can cut idled gas
capacity by 8% and energy shortages by 15% per year by prioritizing more efficient facilities.
Furthermore, the government should work on smarter power pricing via a cost-based pricing
structure, greater load management, and enhanced electricity generating efficiency.
Improved load management alone may save $1.65 billion in gasoline costs per year (World
Bank Group, W.B., 2018.).
Reforming the Banking Sectors
Another area in need of restructuring is the banking industry, which is now beset by non-
performing loans. Furthermore, the central bank is unable to carry out its responsibilities and
take action against willful defaulters due to political pressures that threaten the bank's
autonomy. This asks for the establishment of an impartial financial sector reform commission
to conduct a thorough and fair analysis of the sector and give suggestions for enhancing its
governance. To promote financial openness, the function of the watchdog Anti-Corruption
Commission must be reinforced (Khatun, F., 2018).
Reducing Income Inequality
Increased public investment for more and better job creation is one possible way to alleviate
inequality. Furthermore, more financing for social safety net initiatives for marginalized
people are required. For the government's development objectives to be implemented,
strong and effective public administration necessitates institutional reforms (Khatun, F.,
2018).
Boosting Regional Trade
Bangladesh's ability to produce more and better employment for the 2 million young people
who enter the labor market each year depends on international and regional commerce,
particularly with its South Asian and East Asian neighbors. According to a World Bank
research, foreign direct investment can assist Bangladesh expand its emerging sectors like
medicines, bicycles, and shipbuilding by bringing much-needed technology. Bangladesh's
strategic location allows it to access into neighboring big economies such as China and India,
as well as other Asian nations such as Japan and South Korea. Bangladesh must guarantee
that the Chittagong port, the Dhaka-Chittagong Road and rail connectivity, customs
clearances at land and sea borders, and access to financing are all improved (World Bank
Group, 2015).
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Retaining and Increasing Trading Partners
Experts say that after graduating from the classification of least developed country (LDC),
Bangladesh has to execute robust trade agreements with its major partners in order to
maintain preferential access to important international markets. Due to its LDC classification,
Bangladesh presently gets zero-duty, preferential trade, and regional trade benefits on
exports to 38 nations, including 28 in the EU. Bangladesh should seek to establish
Comprehensive Economic Partnership Agreements (CEPA) in most circumstances, which
include not just duties but also investment, logistics, services, and other vital problems. To
begin strategic trade contacts with key trade partners, a high-powered trade representative
or negotiator's office should be established (Mirdha, R.U., 2020).
Diversification of Export Portfolio
Export diversification is an imperative strategy to guarantee economic stability, which may be

achieved by establishing and executing appropriate policies. Government policy, such as
monetary subsidies, tax holidays, and other policy support, must stimulate investment in and
export of innovative goods. Foreign direct investment should be solicited simultaneously by
the public and private sectors, and banks and other non-bank financial institutions should
enable simple access to funding for small and medium enterprises (SME) exporters.
Policymakers should emphasize the improvement of training and learning institutions to
ensure a constant supply of quality and qualified human resources. Nonetheless, effective
currency rate management by the 'Bangladesh Bank' must be assured because it improves
the country's competitiveness (Nahar, M.A., 2020).
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2. Inflation: Recently on the Rise
2.1 Historical trends and Facts
One of the main objectives of any central bank in the world is to establish price stability.
According to W. Poole and David C. Wheelock, price stability indicates that prices are
"sufficiently low and stable so as not to impact household and firm economic decisions."
According to the authors, the primary purpose of every central bank should be to maintain
an optimal inflation rate (Poole, W. & Wheelock, D.C., 2008).
High inflation has been empirically proved in the case of Bangladesh to have a detrimental
influence on economic output growth. Inflationary pressures raise input prices, making
government spending more expensive and widening the budget imbalance. High inflation
affects net exports by making local items more costly to outsiders, widening the trade
imbalance. Both occurrences can occur at the same time, exacerbating twin deficiencies (Paul,
B.P., 2012).
Bangladesh had a period of high inflation shortly after gaining independence. The Middle East
oil crisis, a war-torn economy, starvation, and political instability were the main causes of
hyperinflation in 1973 and a decade of high inflation. Inflation, on the other hand, appeared
to be within the control of the central bank in the decades after that.
Figure 8: Historical Point to Point Inflation of Bangladesh with Base Year 2006
(Data Source: BBS).
Inflation rose to 10 percent in fiscal year 2007-2008, significantly above the 6-percentage-
point ceiling. The sky-high price of oil on the worldwide market, however, was not the only
determining factor. The price spike was exacerbated by the demand pressure during
Ramadan and the flood, which reduced the country's food reserve to a new low. As a result,
food inflation reached 11.6 percent. From fiscal year 2014-15 to fiscal year 2015-16, point-to-
point inflation fell below the central bank's target of 6%.
2.2 Consumer Price Index (CPI)

Bangladesh's consumer price index (which measures point-to-point inflation), measure
has used a base year of 2005-06. The index's underlying basket is based on the private
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consumption behavior reported in the Bangladesh Bureau of Statistics' Household Income
and Expenditure Survey 2005-06 (Bangladesh Bureau of Statistics, 2020). In terms of age, the
basket's composition is nearly 15 years old. The present CPI basket fails to include the true
change in cost of living since, with technology advancements and people's average income
more than doubling, the consumption pattern currently seems to be very different than it was
15 years ago.
Figure 9: Historical Food and Non-food CPI Index of Bangladesh with Base Year 2006
(Data Source: BBS).
Food accounts for 58.8% of the weight in the basket of goods and services used to calculate
the CPI. It is seen that, due to the larger weight, any change in food inflation has a
significant influence on overall inflation. Rice, in particular, contributes for 20% of all food
inflation. As a result, when natural disasters such as floods and cyclones devastate rice
harvests, food inflation soars, and national inflation soars as well. Food inflation has always
been considered as greater as and more erratic than non-food inflation in Bangladesh.
2.3 Covid-19 Impact on the Inflation

Because there are influences driving inflation in different ways, the function of Covid-19 on
inflation appears to be ambiguous conceptually. When high fiscal deficits and expansionary
monetary policy force inflation up, factors like falling commodity prices, faltering oil prices,
and a weak labor market may drag inflation down.
The budget deficit hit a new high of 6.1 percent of GDP in FY21, and it has been raised to 6.2
percent of GDP in FY22. The rising budget deficit is expected to have a negative impact on
inflation. In addition to the growing budget deficit, the Bangladesh Bank pursued quantitative
easing by lowering the Cash Reserve Ratio (CRR), Repo Rate, Reverse Repo Rate, Bank Rate,
and raising the Advance Deposit Ratio (ADR) from 85% to 87 percent for conventional banking
and from 90% to 92 percent for Islamic banking to absorb the shock of Covid-19 on the
economy. This might lead to even higher inflation.
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Figure 10: Quantitative Easing by Bangladesh Bank.
On the other perspective, lower domestic demand for non-food products during the
epidemic, along with lower international food and oil prices, was predicted to lower inflation
in Bangladesh. For example, the world food price index fell from 93.87 in January 2020 to
85.43 in May 2020, while the average crude oil price fell from USD61.63 per barrel in January
2020 to USD30.38 per barrel in May 2020. (The Pink Sheet-World Bank). As a result, at the
start of Covid-19, two opposing factors are at work in Bangladesh to influence inflation
dynamics.
Prior to February 2020, inflation was rather stable, but after then, it became clearly erratic,
suggesting that Covid-19 might have a large influence on inflation, given there was no big
economic shock other than Covid-19 during the mentioned time. Covid-19 changed
Bangladeshi consumers' spending patterns by causing them to avoid restaurants, shopping
malls, public transportation, and recreational areas, among other things. This has the
potential to reshape Bangladesh's inflation structure because the regular typical combination
of consumption basket items was altered, at least for a while.
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Figure 11: Component –wise National Inflation during the Pandemic.
2.4 Most Recent Trend

Bangladesh's annual inflation rate increased to 6.17 percent in February 2022, up from 5.86
percent the month before. It was the greatest rate of inflation since October 2021, because
to rising food costs (6.2 percent vs. 5.6 percent in January). Non-food costs, on the other hand,
rose at a slower pace (6.1 percent vs. 6.3 percent). Consumer prices increased 0.39 percent
on a monthly basis, down from 0.72 percent the previous month.
Figure 12: Recent Trend in National Inflation.

(Source: BBS)
2.5 The Way Forward

The Ukraine-Russia conflict is widely blamed for the resurgence of inflation, however this is
only partially accurate. Because of industrial disruptions and supply chain concerns associated
to the Covid-19 outbreak, inflation has been simmering in several nations for quite some time.
Several policy reforms and high-level measures needed for the inflation check.
Strong Market Intelligence
There needs to be a strong market intelligence present and controlled directly by the
government. Unscrupulous market participants have always been active in taking advantage
of tough circumstances by hoarding commodities and feigning a market crisis, only a strong
market intelligence may eliminate that. This will be the part of effective market management
of the government (The Financial Express ed., 2022).
Open Market Sale
Government should increase the quantity of essential commodities that will be sold under
the open market sale (OMS) specially targeting the families that are struggling financially
and for the low income groups (The Financial Express ed., 2022).
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Effective Distribution
Distribution of necessity good must be monitored strongly by the government in every level
of the logistics to ensure no corruption and eligible personnel need to be given the
responsibility with distributing the low-priced items to the deserving group of people as part
of the subsidy programs by the government (The Financial Express ed., 2022).
Cash Incentives
For the people below the poverty line group, government should provide some level of cash
incentives and temporary employment options to ensure that during he difficult times they
can survive and contribute eventually in the economic growth (The Financial Express ed.,
2022).
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3. Fiscal policy
The business cycle dictates that every economy has its own growth and decline. The economic
growth, in general, is not very stable. It is constantly moving upward and downward, as has
been seen in the earlier part of this report. The upward and downward movement of the
economy can influence the unemployment rate, people’s quality of life, etc. Now, following
the principles of a free-market economy, the government should not interfere in the market
and let the market participant decide on their own. It is also argued that when government
intervenes it can create inefficiency leading to a worse-off situation for all. However,
throughout history, we have seen that letting the economy operate on its own without any
regulations or control does not always work. Hence, the government has to step in when
necessary. One of the primary tools through which the government intervenes on a regular
basis is fiscal policy.
The fiscal policy of Bangladesh comprises the activities that are carried out with the objective
of obtaining and usage of resources to provide services while ensuring the efficiency of the
economic units. The key objective is to ensure a stable macroeconomic environment for the
country. The primary tools the government uses in this regard are tax and government
spending. In times of slow economic growth, the government can offer larger tax cuts so that
the disposable income of the people increases which can ultimately increase their spending
to stimulate the economy. The government can also increase its spending to create job
opportunities for the people which will further increase economic activities. However, if the
government feels that it needs to slow down the economic growth it can do so by imposing
taxes. As a result of additional taxes, people will have lower disposable income leading to
lower consumption and hence, slowing down the economic activity.
After the independence of the country in 1971, the primary objective of the country was to
improve its infrastructure from scratch. The per capita income of the general people was very
low. Hence, for the major portion, the government had to rely on foreign aid to support its
development activities. The tax structure of the country slowly started to develop from the
1990s and the government started to undertake comprehensive steps to improve the fiscal
front of the country.
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Figure 13: Bangladesh Budget balance between 2016 to 2026 in relation to GDP
(Source: statistica.com, 2022)
The government has a 5-year plan program followed by 1-year annual development goals to
support the five-year plans. Keeping all these in mind the fiscal policy is implemented each
year. The most common indicator to assess the stance of fiscal policy is overall balance, which
measures the difference between revenues and grants, and expenditure and net lending. The
success of the fiscal policy of the government of Bangladesh can be observed from the fact
that the current budget deficit of the country has been lower than 5% over the past decade
on average.
3.1 Impact of COVID-19.

The budget deficit of the country increased to 5.94% in 2021 and 6.11% in 2022. The main
reason behind this rise was the fact that the government is trying to support the economy to
recover and gain back the momentum it lost due to the COVID-19 pandemic. The government
has implemented large stimulus packages targeting the general people of the country and the
business so that it can reduce the impact of the pandemic as much as possible. The
government also had to offer tax benefits to the business in order to support them. However,
it can be seen that as the country slowly recovers from the economic downturn due to the
pandemic, the government will again reduce the deficit in the coming years. The reason why
the government of Bangladesh takes on a deficit budget is that currently, we have an
expansion policy in place. At this stage, our vision is to expand our economy as much as
possible within the shortest possible time but also at a sustainable rate.
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3.2 Way forward:
The country has already implemented the majority of the targets it set during the 7 th five-year
plan that was implemented during the year 2015 to 2020. Currently, the 8th Five Year Plan is
in motion where the main target of the government is to attain an 8.51% GDP growth rate
and reduce the poverty rate to 15.6%. This is a very ambitious target. To successfully
implement this, the government is expected to follow its current strategy to maintain a deficit
balance. That means, in partnership with the private and public, the government will try to
support the infrastructural development of the country to ensure the sustainable growth of
the economic environment. The government will try to provide extra benefits to certain
industries so that they can flourish further.
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4. Balance of Payment:
In today’s world, almost all economies are dependent or connected to some other economies.
For example, a European consumer might purchase a sweatshirt from Adidas that is actually
produced in Bangladesh, while the manufacturer of the sweatshirt perhaps procured the raw
materials from China. As a result of this dependency, the flow of economic resources is
observed between the countries and economies. The balance of payment refers shows the
difference between the payments made to the country and the payment the particular
country made to other countries over a specific period of time.
A net positive balance of payment refers to the fact that economic resources have flowed into
the economy from other economies while a net negative position denotes those economic
resources have flowed out of the economy.
There are two main accounts of the balance of payments. These are the current account and
the capital and financial accounts. The current account shows the receipts and payments from
trade, transfer payments, and income flows over a given period of time. These transactions
are irreversible as once these transactions occur, they cannot be undone. The capital and
financial account accounts for recording the borrowing, lending, sales, and purchasing of
assets. One of the components of the current account is the trade balance which shows the
difference between the exports and imports of a country. For the purpose of this report, we
will be focusing on the trade balance primarily.
4.1 Trade Balance

Before exploring the trade balance of Bangladesh, we start with the export trend. Exports
from Bangladesh reached BDT 360.39 billion in December 2021. Over the past decade, export
has increased significantly. The major export items of Bangladesh are the RMG and Knitwear,
home textile products, leather and leather goods, jute and jute products, agricultural goods,
fish and shrimps, ceramic tableware, etc.
Figure 14: The export data of Bangladesh from March 2012 to March 2022.
(Source: tradingeconomics.com, 2022)
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Similarly, taking a look into the import data of the country it can be seen that the import
follows a very similar trend. The major imported items include petroleum and oil, textile raw
materials, food items, iron and steel, edible oil, chemical, yarn and plastic, and rubber articles.
Bangladesh is greatly dependent on import items from consumer goods to luxury goods.
Figure 15: The import data of Bangladesh from March 2012 to March 2022.
By comparing the balance of trade between Bangladesh and India it can be seen that the net
trade balance of Bangladesh is in a better position than that of India. Bangladesh has
maintained its net position in a better way in this regard. Even in recent times after the
pandemic, the balance of trade of the countries has been very similar.
Figure 16: The comparative trade balance data of Bangladesh and India from March 2012 to
March 2022.
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4. 2 Impact of COVID-19
After the pandemic started in the 1st quarter of 2020, the trade deficit slowly started to
decrease. Now it needs to be mentioned that due to the pandemic, the government had to
force lockdown which took a toll on international trade. Hence, it is the primary reason why
the trade deficit was falling in the 1st half of 2020. However, in the latter part of 2020, as the
economic activities slowly started to resume, the trade deficit grew significantly. On January
2022, the new trade balance is a negative 256.6 billion BDT.
Figure 17: Trade balance data of Bangladesh and India from December 2019 to Jan 2022.
4.3 Way forward:

It is hard to say that within a short period of time the net negative position of the trade
balance is negative for the economic growth of the country. However, if the trade deficit
continues to exist over a very long period of time that will not be desirable. Because as it has
been said that the negative trade balance will mean that economic resources have flown out
of the economy.
To ensure that the government of Bangladesh has taken various initiatives. Firstly, the
government is trying to diversify its export and trying to explore new opportunities so that
the country can reduce its dependency on the RMG sector. The government is trying to
support the IT sector as much as possible. They are providing training to freelancers so that
their skills and competencies can be enhanced. The government is also trying o support the
leather products industry so that the export earnings can increase from this sector.
On the other hand, to control imports, the government has placed high taxes on luxury goods.
The private sectors have been encouraged to seek strategic partnerships with global
companies so that they can manufacture and assemble the goods in the country rather than
bringing in the finished goods as imports. This has created employment opportunities and has
stimulated industrial growth. For example, Fair group in partnership with Samsung electronics
is assembling Samsung products in Bangladesh. Honda motors have opened up its assembly
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plant in Bangladesh. So looking into the future, we can say there are a lot of strong potentials.
However, only time will tell whether we will be able to capitalize on these. If we can, surely,
we might create nothing short of a fairytale.
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5. Remittance:
The International Monetary Fund (IMF) has defined remittance as the value of monetary
transfers that workers working abroad send to their home country. In simple words,
migrant workers send their savings to their home country for investment purposes or for
their loved ones at home. This amount is accounted for as remittance for the home
country. Remittance can be a great source of external funding and an instrument for
capital accumulation.
Bangladesh has a large workforce that is currently working in foreign territories.

According to the International Labor Organization (ILO) report, every year on average
400,000 workers leave Bangladesh for overseas employment. The primary destination of
these people in the Middle East and Malaysia which accounts for almost 90% of the entire
workforce from Bangladesh working on foreign land. In total it is estimated that
Bangladeshi workers are engaged in 143 countries (Organization, 2022). Though most
people are engaged in blue-collar jobs, this large workforce is sending home large
amounts of money ensuring a steady flow of foreign currency to Bangladesh. In addition
to the contribution of these migrant workers, in recent times we can see the rise of
freelancers who are earning their living through providing various services online like
website development, mobile application development, data entry services, etc.
3%
2%2%
2%
3%
4% 30%
5%
8%
9%
16%
15%
KSA UAE USA Kuwait UK Malaysia Oman Qatar Bahrain Singpore Italy Others
Figure 18: Country-wise remittance inflow to Bangladesh from 1995 to May 2015
(Source: Akhter, 2016)
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In 2017, Bangladesh was the 8th largest remittance-receiving country in the whole world.
The steady growth of the remittance of the country over the past decades has ensured
that we hold a strong forex reserve and hence, the currency has been very stable in
comparison to some other countries of the world. Though the strong flow of remittance
is not the only factor that affects the stability of a currency, it can ensure that the central
bank will always have the ability to settle the payments in the required foreign currency
without much difficulty. Remittances help raise national savings, reduce constraints
related to the foreign exchange and balance of payments, facilitate new investments, etc.
According to the neoclassical theory of migration, what stimulates the migration of

workers is the income difference. It dictates that in a free world, workers will migrate
from low-wage countries to high-wage countries. This negatively affects the productivity
of the country the workers are migrating from and is commonly referred to as brain drain.
This results in the loss of human capital which can negatively impact the overall economic
growth of the country.
Similarly, remittances can also negatively affect the economy. A very high flow of
remittance can make a currency very powerful against foreign currency, that is the
appreciation of the currency. In case of a currency appreciation, the exporters of the
country lose their competitive advantage as the cost of production increases. Another
very interesting food for thought about the negative impact of the remittance is that
being a non-labor income, it can reduce the labor supply of the receiving household
(Rodriguez & Tiongson, 2001).
5.1. Impact of the COVID -19
Figure 19: Monthly remittance data from December 2019 to March 2022
(Source: Trading Economics: Monthly Remittance Data of Bangladesh, 2022)
The pandemic that started in the first quarter of 2020 has tremendously impacted every
sphere of our lives. As governments around the world had to force lockdown and restrict
the movement to contain the situations, economic activity slowed down significantly. As
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many businesses could not operate, they had to fall into financial distress and were
forced to liquidate. Support from the governments was not enough. Hence, many people
lost their job and had to rely on government financial aid. This can also be seen that at
the beginning of the pandemic, the remittance inflow of Bangladesh declined sharply.
However, it saw a significant surge in July and after the surge in July 2020, it has been on
a downward trend.
Amount in Million USD
$2,000.00
$1,800.00
$1,600.00
$1,400.00
$1,200.00
$1,000.00
$800.00
$600.00
$400.00
$200.00
$-
July August September October November December January
Figure 20: Flow of the remittance in the first seven months of FY 2021/22
(Source: Bangladesh bank website, 2022)
It can be seen from the above figure that the remittance flow has been slowly picking up
after a sharp decline from July to November. However, one area of concern can be that
due to the Russia and Ukraine War, inflation is increasing in Europe which can reduce the
flow of remittance from these countries in the future.
5.2 Way forward:

The government of Bangladesh has taken various steps to ensure the steady flow of
remittances. The most prominent ones are discussed in the following:
Cash incentive:
To encourage the steady flow of remittances through the legal system, the government
has been awarding cash incentives. However, in January 2022, the government further
increased the cash incentive for remittance from 0.5% to 2.5%. In addition to the
government, many banks are even providing a 1% cash incentive on their own to
encourage people to use their bank for remittance services.
Tax benefits and incentivizing investment:
The government is providing additional tax benefits to the remittance providers including
higher tax-exempt income and investment opportunities where they are eligible for tax
credits. The government is regularly arranging trade and investment fairs to
communicate this with them.
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Providing training
To improve their earning ability, the government is providing various training. This
includes teaching language, teaching job-specific skills, building communication skills,
etc. Many of these training is free of cost and open to everyone.
Financial aid:
The migrant workers are supporting their families and our economy tremendously by
sending large amounts of remittances each month. They try to send their hard-earned
money to the country even if they are to live miserably. This does not mean that they do
not have their difficult days. For example, due to the pandemic, a large number of
migrant workers had to stay home and hence were not able to earn much. To reduce
some of their burdens and support them during difficult times like the pandemic, the
government has set up a Probashi Kalyan Bank (PKB) whose sole purpose is to serve these
people and provide their loans.
In all and all, it can be seen that the government is trying to help the migrant workers as
much as possible. To help the freelancers, the government has also taken various
initiatives like providing training, loans to purchase computer and office setups, setting
up software and IT parks, etc. However, the government has been imposing a tax on
computers and technology accessories which can hamper the growth of this emerging
technology. We need to realize that the dependency on the blue-collar job cannot be a
sustainable strategy, we need to diversify into other areas.
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6. Unemployment Rate
The term unemployment refers to individuals who are employable and actively seeking jobs
but are unable to find so. Unemployment is considered as one of the indicators of economic
status of a country and is closely related to poverty. Bangladesh is one of populous countries
of the world. With ever growing population, the percentage of labor force is rising as well as
the unemployment rate.
Figure 21: Unemployment Rate of Bangladesh, World Bank

Through the years the unemployment rate has gone through ups and downs. In recent years
it got up to 5.0 in 2009. At that time the world was going through a recession which also
impacted the economy of the country. Also, in the 1990s’ and 2000s’ Bangladesh faced
frequent changes in political policy as the government was changed every five years between
two main political groups. Change in government also resulted in a change in fiscal policy and
investments in the market which created a shortage of job opportunities.
In the last decade the unemployment rate gradually declined and at one point came down to
4.3. This is due to stability in the government policies. After the COVID-19 hit, due to
restrictions on movement, many people lost their work. As a result, the rate rose to 5.3 in
2020.
6.1 Reasons Behind Unemployment:

From the 1990s’ to the present, the unemployment rate has gone up significantly. Some
factors are responsible for the increase. Some of them are described below:
Overpopulation:
Bangladesh is an over the populous country. The population is at present near 16.5 Crore
(2020) and most of them live below or just over the poverty line. The rate of population
growth is not as same as investment increasing in different job sectors. So, unemployment is
on the rise.
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Shortage of Capital:
Bangladesh has an underdeveloped economy and has a lower per capita income. This results
in small to none of the new investments by people in business and also in self-employment.
Without new investments, it is impossible to bring in new employment opportunities.
Improper Technical Education:
Most of the people in the workforce lack the technical knowledge and skills to join in new
employments. As they have poor education, switching jobs to stay employed is not possible.
Political Instability:
Since the beginning of this century, Bangladesh has seen some ups and downs. Due to this
many work sectors faced difficulties which resulted in rising in unemployment rate
Figure 22: Unemployment rate of Bangladesh through years (World Bank)
As we can see in the data unemployment rate increased frequently in the first decade and in
2009 it rose up to 5%. In the last decade, it decreased and stayed inside 4.3 to 4.5 until COVID-
19 hit the globe. The rate became 5.3% in 2020, a record highest in Bangladesh.
Agricultural Dependency:
The economy of Bangladesh mostly depends on agriculture. So, most of the workforce is
engaged in agricultural jobs. But it is not possible to ensure jobs for all people through
agriculture as we lack resources and investments. Also, agriculture is becoming more tech-
based day by day, decreasing job opportunities for labor workers. They lack the technical
knowledge to shift to a new tech-based environment.
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Natural Disasters:
For its geographical location, Bangladesh is prone to face more natural disasters such as
cyclones, floods, droughts, etc. River erosion is frequent in places near the rivers. These
disasters have an effect on people and agriculture. People lose their houses. Lose their savings
due to the calamities. Being dependent mostly on agriculture, these calamities can cause
unemployment as they hamper crops and lands.
Excess of Graduates:
The number of Universities in Bangladesh has significantly gone up over the years. Each year
a huge amount of people graduates from these universities. But most of them fall right into
unemployment as there are fewer opportunities and vacancies for graduates in Bangladesh.
Though employment in services increased from 19.8 million to 23.8 million in 2018, 66% of
graduates remain unemployed in the present day. Most of the graduates are not willing to
contribute to the agricultural sector which is the highest work pool in the country. They look
for services in the government or corporate world. So, the percentage of educated
unemployed youth is increasing per year. More than 2.3 million graduates are unemployed.
350,000 graduates enter each year in the job market in almost 200,000 are remaining jobless.
The graduate unemployment rate rose to 47% in 2019, but it was 32% in 2015 in which the
rate of unemployment among female graduates (45%) was 2.4 times that of their male
counterparts (19%).
Market Uncertainty:
It is not easy for new entrepreneurs to start a new business in Bangladesh. Fewer
opportunities are available to be self-employed and most people are not skilled enough to be
self-employed. Also, big brands like Aarong have taken the market of products of cottage
industries, therefore making people to shift other jobs. Most people are unsuccessful in that
process and fall into unemployment.
Dhaka Stock Exchange Crashes:
In 1996 and 2011, Dhaka Stock Exchanges crashed. In both years the fall of the market was
greater than ever in history. Many people lost their savings, lost their jobs, and went broke.
The effect of the share market can be seen in the spike in the unemployment rate in 1997
where it rose more than double. From 2011, the rate stayed the same for some years
afterward due to the government taking action to stabilize the market as soon as possible.
Gender Inequality:
Gender inequality is prevailing also in the workforce. Though the percentage of men and
women in the country are almost the same, there is a huge gap in the number of participants
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in the active work field. Women were not allowed in the workforce for many years. Most of
them work as a household helper which is not considered in the workforce traditionally.
Labor Force
Period Male Female
Participation
1974 43.8 80.4 4.1
1981 44.3 - 4.3
1984 43.9 78.5 8.0
1985 43.9 78.2 8.2
1986 46.5 81.4 9.9
1989 47.0 - -
1991 48.8 - -
1996 52.0 87.0 15.8
2000 54.9 84.0 23.9
2003 57.3 87.4 26.1
2006 58.5 86.8 29.2
2010 59.3 82.5 36.0
Table 1: Labor force participation rate by gender (%), BBS, Labor force surveys
In recent years, the picture is changing. More and more women are joining different
workforces, which is also resulting in a higher unemployment rate as most of the
working opportunities are held by men.
6.2 Effect of COVID-19 on unemployment rate:

As soon as COVID-19 hit Bangladesh, the whole country went into lockdown in March 2020.
Because of the restrictions, people were not allowed to leave their houses. It hampered all
aspects and sectors of the economy of Bangladesh. Many people went unemployed
immediately whose livelihood depended on daily labor work. Everything came to a standstill
for several months. People in services were able to continue their work from home through
an online network. Though all of them were not fortunate enough to save their jobs.
Companies cut massive number of employees to generate a significant revenue. The services
sector employs around 44 per cent of the entire workforce and people who depended on
them were affected by the cuts. It got hard for poor people who were dependent mostly on
daily labor work, RMG sector, garments workers and local retailers. With the passage of time
as the COVID effect went down the scenario started to change but the initial impact on
economy is still noticeable in the unemployment rate as it went up to 5.3% in 2020.
Due to diminishing demand from global fashion businesses, Bangladesh's RMG sector, which
employs over 4.1 million people, had to terminate more than a million people. According to
the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), foreign clients
have canceled and delayed export orders worth US$2.95 billion from 933 factories across the
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country (Reza et al., 2020). Fair Wear (2020) stated that cancellations of scheduled orders
totaled roughly US$1.7 billion from April to December 2020, citing BGMEA data. Around 2.3
million RMG workers (47% of total sector employment) were at risk of being laid off since
present export orders were canceled and future export orders were uncertain (Mahmud et
al., 2020).
It got hard for freshly graduates as recruitment was on hold when the pandemic started. The
rate of graduate unemployment increased from 47% to 58% in 2020 with an expected annual
loss estimated at $53 million. The startup businesses of Bangladesh have also been affected
by COVID-19. 24% of businesses stopped operating and 50% reported a drop in revenue which
includes 1.5 million in employment.
During the pandemic when the world got shut down, many Bangladeshi labor workers lost
their job there. Even if they were not fired, they could not afford to live there as most of the
workers sent all of the money to their families and kept none to nothing for them. As a result,
most of them returned to Bangladesh. The amount of remittance decreased and people
became unemployed for more than 6-8 months.
If we try to summarize the rise in the unemployment rate due to COVID-19, we can point out
some causes.
Strict Restrictions:
The strict lockdown was implemented to control the wide spreading of the COVID virus. Due
to this people in professions such as rickshaw pullers, daily labor workers, transportation, and
vehicle drivers went unemployed. Factories got shouted down. So, workers in those factories
had to be let go by the manufacturing companies. RMG sector got shut down. As a result,
garments workers lost their job. Most of the workers were struggling already before the
COVID-19 as owners do not pay them properly. After they lost their job, it got even harder to
cope with the situation. 4.8 million people were estimated to be unemployed in 2020 as a
consequence of the COVID-19 pandemic. Companies stopped recruiting new employees.
Fresh graduates lost the opportunity to enter the workforce immediately.
Less Investment:
Investment is important to grow a business and create more job opportunities. During the
pandemic, both domestic and foreign investments got reduced. Companies tried to cut their
costs. So, they did not invest much in business during the pandemic. As a result, job
opportunities decreased and people remained unemployed.
Change in Consumer Behavior:
As the world shut down during COVID-19, people struggled to earn their livelihood. Retailers
and shops got shut down. People reduced their spending and went into survival mode, only
spending on necessary things like food and medicine. Due to the situation production of
products got hampered. Manufacturing companies strategized their priorities and worked
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accordingly. Most of the companies generated a lower revenue than expected. To cope up
with the situation many companies adopted a lay-off strategy which resulted in
unemployment for not only the workers but also the corporate employees.
6.3 The Way Forward:

The unemployment problem is directly related to the economy of a country. Bangladesh has
a high economic growth rate but the unemployment rate is high here also. After the
pandemic, it got harder. Public and private policies were changed to cope with the effect of
COVID-19 which worsen the rate. The unemployment rate in Bangladesh is expected to reach
6.00 percent by the end of 2021, according to Trading Economics global macro models and
analysts’ expectations. In the long-term, the Bangladesh Unemployment Rate is projected to
trend around 5.40 percent in 2022 and 4.70 percent in 2023, according to the econometric
models.
Figure 23: Forecast of Unemployment rate, Bangladesh
After the pandemic, public and private efforts are needed to improve the unemployment
rate. Some suggestions are given below:
Improvement of Education:
It is critical to raise people's educational levels in order to combat unemployment. This

education should begin in elementary school, with constant monitoring to ensure proper
academic growth. Furthermore, children from low-income households should be supported
through community programs and financial help so that they have a fair chance to improve
their education and find a good career when they grow up. Vocational training programs
should be introduced to make people efficient in skills which will improve their chances of
jobs.
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Increase Agricultural opportunities:
Bangladeshi economy is agriculture-based, so it is not a surprise that most of the employment

opportunities lie in this sector. During the pandemic, various subsidy and stimulus programs
were introduced to the workers of different sectors including farmers, fishermen, and daily
laborers in the agriculture sector. This practice should continue after the pandemic. People
should be granted government money to start hatcheries, farms, and tech-based agro-
business. Bangladesh government already has programs to train people who like to start
hatcheries, nurseries and egg and milk farms. The government also buys and transports crops
and vegetables to ensure that people are getting paid properly. To encourage youth who are
technically competent, the government has taken measures to help people to enter the new
agro-tech business model. Competitions are arranged to encourage them to bring new ideas
and help them with money and opportunities.
Diminish Gender Inequality:
More and more women are joining in the employment field. It has become important to use
this opportunity. To ensure this we need to eliminate gender inequality in job opportunities.
More jobs need to be created where women can join easily. Most of companies are not
interested to take women employees as they think it is a short-term involvement. Public and
private sectors should introduce more women-friendly policies such as paid leave during
pregnancy, special vacation policies for mothers, and ensuring kids’ place in the workplace.
These policies can help women to continue their jobs without any hindrance.
Encouraging Entrepreneurship:
The number of unemployed people is increasing day by day. One of the reasons is number of
unemployed graduates is rising faster than the opportunity created for those people in the
public and private sectors.
Labor force characteristics 2010 2013 2015 2016-2017

Economically active population 56.7 60.7 62.1 63.5
(15+)
Employed Population (15+) 54.1 58.1 59.5 60.8
Unemployed Population 2.6 2.6 2.6 2.7
Table 2: Labor force survey (in millions) 2016-17, BBS.
Entrepreneurship can help immensely to be self-employed and also create new job
opportunities for the graduates. More and more people are starting tech-based business
firms as it has opportunities for work being outsourced. The government has understood this
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and also providing monetary help for potential new businesses. Agricultural sector can also
be a field of self-employment as it has immense opportunities and also non-graduates can be
trained to be an entrepreneur through this.
Stable Fiscal and Monetary Policies:
In times of financial crisis, it's critical for the central bank to take appropriate actions to avoid
excessive unemployment rates. By implementing fiscal and monetary policy measures, the
central bank can help to alleviate the pandemic situation. These policies might assist to
stabilize the economy and prevent it from falling further, resulting in even higher
unemployment. In order to alleviate unemployment, industrial activity must be decentralized.
There will be fewer job prospects in underdeveloped areas if industrial operations are
centered in one location. As a result, the government should implement measures that
promote industrial decentralization. Some policies are currently being implemented.
Employment in Abroad:
Remittance gained from labor workers in abroad is the biggest factor after agriculture which
helps to grow our economy. Every year the amount of remittance is growing and other
countries are interested to take our workers.
Year Employment Million (USD)

2016 757731 13609.77
2017 1008525 13526.84
2018 734181 15544.68
2019 700159 18354.94
2020 217669 21752.27
Table 3: Employment Abroad, Bureau of Manpower, Employment and Training (BMET)
The government has taken different policies to train people with vocational education and
sent them in different countries to work. Also, it has made other countries take skilled
workers from Bangladesh. This should continue as we have a huge population.
Control Population:
A large population is at the core of every problem and as a developing country, it works as a
curse for Bangladesh. Before implementing any plan, the population is a thing of concern. The
population is around 20 Crore at present. So, it needs to control. The government has taken
different policies to encourage people to take fewer children and people are also interested
to take few children as the infant mortality rate is much lower now.
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PART 2
Looking into the
Socio-economic Indicators
Page | 34
1. Purchasing Power Parity of Bangladesh
Purchasing Power Parity (PPP) is a theory that compares the purchasing powers of currencies
from different countries around the world. PPP theory aims to look at differing world
economies as if they were on a single currency, creating parity between different world
currencies. Inflation decreases a currency’s purchasing power as the price of goods and
services goes up.
GDP per capita, PPP (current international $)

$6,000
$4,955 $5,139
$5,000 $4,547
$4,161
$3,849
$4,000 $3,368 $3,556
$2,938 $3,144
$3,000 $2,439 $2,621
$2,000
$1,000
$0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GDP per capita, PPP (current international $)
Figure 24: GDP per capital, PPP

Source: The World Bank
According to the World Bank, the per capita income was 2,439 in international dollars, which
increased to 5,139 in 2020. The risk of considering this is that this index does not reflect
inequality. Per capita income can arise when rich people’s income increases, but poor
people’s income decreases. Combining this trend with Bangladesh’s high Gini coefficient, we
can conclude that the rich are reaping the rewards of increased purchasing power.
Implied PPP Conversion Rate

35 31 32
30 30
27 28
30 26
24 25
25 22 23
20
15
10
5
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Implied PPP Conversion Rate
Figure 25: Implied PPP Conversion Rate

Source: IMF Economic Outlook 2021
Page | 35
According to the IMF Economic Outlook of October 2021, the implied PPP conversion rate of
BDT has been increasing in recent years as a result of inflation, and it is projected to continue
this trend in the future. As a result, the purchasing power of BDT will continue to diminish in
the future. The government has to control inflation and appreciate the value of BDT through
effective monetary policies to prevent this trend from going on.
1.1 Impact of Covid-19 on the Purchasing Power

In 2021, the purchasing power of the vast majority of the people declined significantly as their
cost of living outpaced their marginal income growth. Individuals, particularly those in the
low- and lower-middle-income brackets, have pointed out that their expenditure on basics,
utilities, and other services has climbed higher than their income. The people’s economic
predicament was exposed in a news survey conducted by The Financial Express among a
cross-section of people. It discovered that most low- and lower-middle-income families’
monthly expenditures increased by 10% to 13% in 2021, compared to their income growth of
4% to 6%. (Wardad, 2021).
1.2. The Way Forward

Some steps from the government that can increase purchasing power include:
• Expansion of the government’s safety-net programs like open-market sales of essentials

(OMS) by Trading Corporation of Bangladesh (TCB). The TCB’s product list must be
broadened, and its distribution should be expanded beyond Dhaka.
• Revision of price of fuels to prevent further price hike of essentials and services as well as
boosting of farm mechanization to reduce the production cost of food
• Reallocating public funds for subsidized purposes to maintain price stability for power,
fuel, food, and fertilizer
• Raising employment through regular development programs, rural infrastructure
development and safety-nets to help people struggling to survive
• Reducing import duties on products like edible oil, sugar, milk, and other import-
dependent essentials to relieves consumers
• Taking efforts to prevent the taka from depreciating due to the impact on imported
inflation and managing interest rates to alleviate loan strain on the low-income people
left behind
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2. The Gini Coefficient of Bangladesh
The Gini index evaluates how far an economy’s income or consumer spending distribution
deviates from a perfectly equal distribution among individuals or households. It primarily
refers to the income disparity among a country’s people.
Despite numerous positive successes, the rise in economic disparity is a major source of
concern for Bangladesh’s economy. Bangladesh is expected to be among the world’s top
three fastest-growing economies by 2022 (Ahmed Z., 2021), while economic inequality is high.
One of the driving factors of our liberation fight was the desire for economic emancipation by
reducing economic disparity. Regrettably, since the mid-1980s, the degree of income
inequality has increased. Bangladesh Bureau of Statistics (BBS), in the most recent Household
Income and Expenditure Survey (HIES), pointed out that the country’s Gini coefficient
increased to 0.482 in 2016, up from 0.458 in 2010, which is a concerning development
(Bangladesh Bureau of Statistics, 2016).
Inequality has long been a looming and troubling characteristic of Bangladesh’s

socioeconomic structure. In the lack of a comprehensive support package and social safety
program, the fast economic expansion of the previous few decades has left excluded
communities chronically destitute. Economic growth has not been evenly distributed.
Trend of Income Inequality in Bangladesh

0.6
0.482
0.5 0.467 0.458
0.451
0.432
0.388
0.4
0.3
0.2
0.1
0
1992 1996 2000 2005 2010 2016
Gini Coefficient
Figure 26: Trend of income inequality in Bangladesh

Source: HIES 1992,1996,2000,2005,2010,2016
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HEIS 2016 HEIS 2010
House Group
Total Rural Urban Total Rural Urban
National 100.00 100.00 100.00 100.00 100.00 100.00
Bottom 5% 0.23 0.25 0.27 0.78 0.88 0.76
Decile -1 1.02 1.06 1.17 2.00 2.23 1.98
Decile -2 2.83 2.99 3.04 3.22 3.53 3.09
Decile -3 4.05 4.36 4.10 4.10 4.49 3.95
Decile -4 5.13 5.52 5.00 5.00 5.43 5.01
Decile -5 6.24 6.58 6.15 6.01 6.43 6.31
Decile -6 7.48 7.89 6.88 7.32 7.65 7.64
Decile -7 9.06 9.52 8.44 9.06 9.31 9.30
Decile -8 11.25 11.80 10.40 11.50 11.50 11.83
Decile -9 14.86 15.51 13.47 15.94 15.94 16.08
Decile -10 38.09 34.78 41.37 35.85 35.85 34.77
Top 5% 27.82 24.19 32.09 24.61 24.61 23.39
Income gini co-efficient 0.482 0.454 0.498 0.458 0.431 0.452
Table 4: Gin co-efficient of different socio economic groups
Source: HIES 2016
According to HIES 2016, the income share of the bottom 40% of persons was 13.03%, while
the richest 10% earned 38.09%.
2. 1. The Underlying Reasons of Inequality

1. Sluggish Growth of Jobs and Real Wages: While the BBS estimates that GDP growth has
accelerated in recent years, job growth has stalled (ILO, 2020). Moreover, real minimum wage
growth was negative for Bangladesh in 2020. One underlying reason is the disconnect
between economic growth, wage growth, and job creation (Byron & Parvez, 2019). Poor
people do not have enough opportunities to engage in constructive income-generating
activities. Over the past few years, the high GDP growth has been unable to lead to large scale
job creation, and the country is witnessing a phase of jobless growth.
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Comparison of real minimum wage growth and labor
productivity of some Asian countries in 2020
8.00%
6.00%
4.00%
2.00%
0.00%
-2.00%
-4.00%
-6.00%
-8.00%
Nepal India Pakistan Sri lanka Bangladesh
Real Minimum Wage Growth 4.70% 3.90% 3.50% -4.50% -5.90%
Labor Productivity Growth 4.30% 5.50% 2.20% 4% 5.80%
Real Minimum Wage Growth Labor Productivity Growth
Figure 27: Comparison of real minimum wage growth and labor productivity of some
Asian countries in 2020
Source: Global Wage Report 2020-21
2. Low Expenditure on Education and Health: In Bangladesh, public spending on education

and health is relatively low. Out of Tk 603.7 thousand crores total proposed national budget
for FY21-22, Tk 72 thousand crores or 11.9% had been allocated to education which was lower
than 12.3% in the previous fiscal year (Riyasad, 2021). The allocation has been around 12% in
recent years. However, the demand from the education community has been for 15-20% of
the national budget and between 4-6% of GDP, which is the allocation recommended by
UNESCO to meet the education priorities of developing countries (UNESCO, 2021). The
proportion of GDP share for public education has hovered around 2% in Bangladesh, the
lowest in South Asia and among the world’s developing countries (Ahmed M. , 2021).
Furthermore, numerous studies have revealed real challenges with the quality and equity of
public spending on health and education (Ahmed S. , 2018).
A range of studies projecting the financial resource requirements to achieve universal health
systems, using detailed health service cost data and modelling techniques, indicate that public
health expenditure should be 6-7% of GDP (RESYST, 2017). The government of Bangladesh
allocated only 0.95% of GDP as a health expenditure budget for FY 2021-2022 (Jasim, Tajmim,
& Devnath, 2021). Health and educational outcomes for underprivileged populations
continue to be much lower. Such modest spending does not contribute to worker productivity
and is inconsistent with efforts to eliminate poverty and inequality.
3. Weak Taxation Policies: Tax revisions during the last three decades have made little
difference because the difficulties linked with Bangladesh’s taxation policy are systemic
(Mahmood, 2020). The system of direct taxes is far from progressive, and tax evasion is
widespread. As a result, the policies benefit the better off than the poor on the growing
inequality. A key reason for Bangladesh’s low public spending on education, health, and social
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protection is the country’s low revenue levels due to a lack of solid tax effort. The European
countries have the tax revenue to GDP ratios of 35-45% (Ahmed S. , 2018). For Norway, it was
38.6% in 2020 (OECD, 2021). In Bangladesh, due to a negative revenue collection growth
during the pandemic, the ratio came down to 7.9% in the fiscal year 2020-2021, although the
7th five-year plan had projected the tax-GDP ratio to be 13.7% in the 2020-2021 fiscal year
(Mithu, 2022). Even among South Asian countries, this is one of the lowest income
mobilization initiatives (Dhaka Tribune , 2022). The tax-GDP ratio in Bangladesh stood at 9.3%
in 2018-19, much below the average for developing countries at 15% (Mahmood, 2020).
Tax-GDP ratio of South Asian countries in 2021

25.00%
20.50% 20.30%
20.00%
15.00%
10.90% 10.50% 10.20%
10.00% 7.70%
5.00%
0.00%
Maldives Nepal Pakistan Sri Lanka India Bangladesh
Tax-GDP ratio
Figure 28: Tax-GDP ratio of South Asian countries in 2021

Source: Dhaka Tribune, 2021.
One of the primary reasons for poor government revenue is a deficient collection of income
taxes. The government collects only 2.4% of GDP through income taxes (Mala, 2021); (BBS,
2021). While attempts are being made to increase income tax collection, the focus is on low-
income people. Personal income from businesses, capital gains, and stocks, for example,
frequently escapes paying their due amount of taxes (Siddiqui, 2021). Similarly, there is little
effort made at the municipal government level regarding taxation. Surprisingly, there is no
practical method for collecting property taxes.
4. Inequal Initial Distribution of Wealth and Income: Children born into wealthy households
have significant wealth and human capital advantage, multiplying over time (Davenport,
Levell, & Sturrock, 2021). As a result, the prospects for social advancement for the poorer
segments of society are typically far more limited than those for the wealthy. This initial bias
is a significant impediment to poor people’s social mobility. Additionally, the effect of the rise
in income inequality is increasingly leading to the concentration of wealth. The New York-
based research firm Wealth-X showed that Bangladesh would record the third quickest
growth in the number of high-net-worth individuals in the next five years (UCA News , 2019).
In a system in which the wealthy have superior education and health care, inequality may not
decrease but increase. Thus, a girl from an urban kindergarten may end up in software
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services, while a girl from a rural school may groan working in a garment factory. Society must
establish uniform school types and curricula to nip educational disparity.
5. Inadequate Social Protection Programs: The government’s social protection programs are
insufficient to reduce poverty and regional disparity. Spending on social protection has played
a significant role in improving income distribution in European countries. They typically spend
between 12% and 19% of GDP on social security, primarily through income transfers to the
poor and vulnerable (Ahmed S. , 2018). Norway spent 25.3% of its GDP on social spending in
2019 (OECD, 2022). In Bangladesh, social protection spending was 2.9% of GDP in 2019, but
it slightly rose to 3.1% in 2021 (GED, Government of Bangladesh, 2022); (MOF, 2021).
Additionally, substantial concerns have been raised concerning the quality and effectiveness
of this spending. The expenditure programs targeted to the poor suffer from serious leakages
appropriated by the wealthier classes. A significant increase in the allocation to and leakage-
free payout of the social protection fund is required.
6. Poor Governance: Poor governance and the absence of robust institutions are significant
weaknesses in Bangladesh’s existing development policy framework, contributing to income
inequality. Corruption is widely regarded as a severe issue in Bangladesh, and worldwide
comparisons vividly reflect this development obstacle (Transperancy International , 2021).
Four significant corruption sources stand out: land transactions; public banking; taxation; and
public procurement (Ahmed S. , 2018). The wealthy benefit significantly from corruption. The
poor, in particular, frequently lose the most inland transactions handled by rich and strong
real estate businesses. As urbanization spreads and land values increase, many powerful real
estate corporations acquire enormous tracts of agricultural land at rock-bottom prices from
farmers. The poor usually have minimal physical or financial assets. Those amongst the
fortunate few have small landholdings in the rural areas. Land disputes and land grabbing by
powerful elites, often with a small compensation, are frequent events in Bangladesh. Land
speculation is similarly rampant, especially in urban areas. Inequitable access to land, often
through subsidized land distribution by Rajuk to the wealthy elites and through illegal land
grabbing of public land in collusion with corrupt public officials, has created massive wealth
and income inequality.
While corruption in public banking, public procurement, and taxation does not directly harm
the poor, it does assist the wealthy in amassing vast amounts of resources, which leads to
income disparity. In general, rent-seeking behaviour for political access and influence is too
big in Bangladesh, allowing a few prominent people to accumulate vast amounts of wealth in
a short period. The adverse effects of rent-seeking behaviour on economic disparity are
evident.
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Figure 29: Corruption perceptions index 2021
Source: Transparency International 2021
Using public office for personal gain is something that the poor can never be involved in or
benefit from. Additionally, the poor are excluded from the government’s benefits to
businesses and interest groups in the form of bailouts, loan renegotiation, tax relief, subsidies,
licenses, etc.
The narrative of Non-Performing Loans (NPLs) in Bangladesh’s banking sector is a compelling

instance of the absence of public scrutiny and the resultant government action (Islam T.,
2020). In June 2020, 9.16 % of disbursed loans are currently categorized as NPLs (Hasan,
2020). It is widely known that NPL levels in Bangladeshi banks are under-reported (CPD,
2021); the decline from 2019 levels was achieved by loan rescheduling and modifications in
the Bangladesh Bank’s definition of what qualifies as an NPL. The concentration of NPLs in a
few banks also speaks volumes about the issues of inadequate governance that have resulted
in this devastating situation. NPLs, like they are in other countries such as India, are a strong
indicator of the extent of political intervention in the banking sector and, more broadly, a
system of collusion and favoritism between political leaders and business leaders.
7. Environmental Degradation: Another area of severe neglect that threatens Bangladesh’s

ability to grow towards an equal society is the state of its natural environment. Bangladesh is
ranked 162 out of 180 countries on the Yale Environment Protection Index, which provides a
quantitative framework for comparing, assessing, and comprehending environmental
performance (Yale University , 2020). The consequences of environmental degradation are
apparent in everyday life. Polluted air and rivers, coastal erosion, mangrove destruction, and
other factors disproportionately affect the poorest segments of the population, who are
typically the most reliant on natural resources and the most exposed to the adverse effects
of natural disasters. This is a complicated issue because the path of wealth creation and
industrial progress that has fueled the country’s GDP growth has also resulted in unregulated
extraction of finite natural resources and environmental deterioration.
Page | 42
Country Rank EPI Score 10-Year Change
Bhutan 107 39.3 -9.6
Sri Lanka 109 39.0 -0.6
Maldives 127 35.6 6.7
Pakistan 142 33.1 6.1
Nepal 145 32.7 -8.1
Bangladesh 162 29.0 -0.1
India 168 27.6 -
Afghanistan 178 25.5 5.0
Table 5: EPI scores of the SAARC countries
Source: EPI, 2020
8. Lack of Decentralization of Population: The capital city now houses 10% of the country’s
population, up from 2% in 1980. The growing spatial inequality in income wages results from
a lack of decentralization. People in Dhaka and Chottogram earn more than those in other
cities (Jehangir, 2021).
2. 2. Impact of Covid-19 of Income Inequality

It is now commonly recognized that the outbreak has exacerbated wealth disparity and
increased poverty levels in Bangladesh. Even in this trying time, the benefits of growth do not
appear to be shared by the poor and very low-income earners such as RMG workers. The
country’s vast poor and middle-class population is badly suffering because of unemployment,
income losses and disruption in economic activities. According to joint research released by
the Power and Participation Research Centre and the Brac Institute of Governance and
Development, the economic shock caused by the pandemic has pushed 2.45 crore people into
new poor in a year (BIGD, 2021). With the emergence of the new poor, the number of the
poor living on less than a $2 daily income rose to 6.45 crore, who account for more than one-
third of the country’s population, the study mentioned.
On the other hand, according to a report by Prothom Alo, the selling of luxury products rose
during the corona period (Ahmed R., 2022). For instance, private automobile sales climbed by
29% in 2021. Luxury car, sport utility vehicle, or SUV sales surged by 55%. Apartment sales
increased as well.
The COVID-19 pandemic severely and disproportionately impacted Bangladesh’s

underprivileged people. It has been seen that the decline in demand for manufactured goods
and services has been caused by a lot of government control measures, especially in sectors
such as agriculture, export-oriented ready-made clothes, and other labor-intensive industries.
This has affected the jobs and incomes of people who aren’t very well-off (Genoni et al.,
2020). According to Khondker (2019), the informal sector accounts for 43% of Bangladesh’s
GDP. Workers in the informal sector have lost income due to the severe economic downturn.
About 20 million people who solely rely on the informal sector jobs for their livelihood have
already lost their jobs and become temporarily unemployed due to the measures taken by
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the government to contain the spread of COVID-19 (Riaz, 2020). According to the LNOB
Network’s study, Dalits and ethnic minority persons who worked in barbershops or as
rickshaw or van pullers suffered the most because they were forced to close their businesses
while receiving no food or cash aid. They lost all their savings (LNOB Network Bangladesh,
2021).
According to Hossain (2021), income disparity, which was already alarmingly high before the
Covid outbreak, has been exacerbated further by the viral pandemic, mainly affecting the
overwhelmingly poor and middle-class population. While the GDP per capita of the country
increased to $2,227 in the fiscal year 2020–21, up from $2,064 in the fiscal year 2019–20, the
wealthiest section of the society has been the ones reaping the benefits, not the poor
(NewageBD, 2021). Available Bangladesh Bank data shows that the number of bank accounts
with over Tk 1 crore in deposit continued to grow even in the first year of the virus outbreak.
In 2020 the banks tallied 10,051 such new accounts, with the figure rising to 93,890 from
83,839 in 2019 (NewageBD, 2021). The stimulus packages worth over Tk 1.24 lakh crore,
announced by the government in April 2020 to overcome the economic fallout from the Covid
pandemic, had barely helped the affected informal and small entrepreneurs. The
government’s stimulus program for 2020-2021 did not reach small and medium-sized
businesses, small farmers, and the poorest affected by the pandemic to the level expected
(Ahmed N. , 2021). On the contrary, the Tk 30,000 crore stimulus package for prominent
industrialists was exhausted by December 2020, showing an unequal distribution of
government assistance (NewageBD, 2021).
The government has taken some measures to implement a combination of fiscal and
monetary stimulus to tackle the aftershock of Covid-19 (IMF, 2020). However, a jobless
recovery might put socioeconomic progress at risk, especially in a county with many marginal
residents who rely on their daily income. More sector-specific stimulus is required to protect
informal jobs and create new low-skill, low-income jobs.
2. 3. The Way Forward to Reduce Inequality

Inequality is not a necessary by-product of economic growth. Instead, long-term economic
and social stability are two of the most strong reasons to prioritize equity. A stronger focus
on reducing inequality more quickly, particularly in a nation like Bangladesh, with a sizable
proportion of the population continuing to live in poverty, will amplify the ability of economic
progress to transfer into poverty reduction and improve opportunities for all. Some steps that
can alleviate this issue include:
1. Redistributive Fiscal Policies: Europe’s experience, particularly that of the Scandinavian

countries, demonstrates how public finance policies, such as taxation and spending, can be
an effective tool for reducing income disparity. These countries usually levy high taxes on the
wealthy while funding various social services, including health care, education, and social
protection for the poor and disadvantaged. (Ahmed S. , 2018). According to a research, better
tax compliance with a greater focus on personal income taxation and redistribution of these
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resources through public expenditures targeted to the poor can improve income distribution
(Khondker & Jalal, 2021). Three simulations were carried out in this research: (i) Base (poor
compliance) simulation suggests high growth rates of 8 to 9% with poor fiscal distribution may
likely have negligible effects on Gini. (ii) Base high compliance of the personal income tax
where all eligible taxpayers pay according to their marginal rates may significantly improve
the inequality situation in Bangladesh. (iii) Reduction in Gini is dramatic when the revenue
gains through better tax compliance are effectively transferred to the bottom 50% of the
population. The simulation outcomes are derived from a micro-simulation model based on
the latest household income and expenditure survey (HIES 2016) linked to the macro
projections of the Bangladesh perspective plan (2021 to 2041).
Figure 30: Gini coefficient and tax compliance

Source: Khondker et al. (2021)
A significant factor contributing to resource constraints is low tax collection, particularly from
personal income taxes. This will require closing loopholes that let capital gains escape the tax
net, introducing a modern property tax system, and improving tax administration and
compliance. As per the 8th FYP, the effective income tax rate is about only 4%, which is very
low. Raising the effective income tax rate to even 10% on the top 10% of earners who possess
35% of national income in the next 3-5 years would generate 3.5% of GDP instead of the
current 1.4%. So, along with corporate income taxation, the total tax on income and profit is
projected to grow from 2.6% in FY2019 to 4.5% by FY2025. Modernizing the VAT system and
increasing its productivity can result in an additional 1.8% of GDP. Additionally, implementing
a modern property tax and allocating it to local governments can significantly enhance fiscal
autonomy while providing budgetary resources.
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Table 6: 8th Five-year plan of Bangladesh
Source: 8th FYP
According to studies, countries with the greatest tax-GDP ratios have been more successful
at reducing income inequality (Ahmed N. , 2021). Income inequality and insufficient income
taxation are strongly intertwined. Therefore, direct tax can increase government revenue to
cover the cost of high-quality education and health care, subsidized food and electricity for
the poorest households, and expand social protection programs.
2. Introduction of Wealth Tax: The discourse on raising tax revenue extends beyond calls to
raise income tax for the rich to incorporate a wealth tax- an annual tax on everything an
individual owns. A wealth tax refers to a tax on the market value of owned wealth. This tax
applies to various asset types, including (but are not limited to) cash, bank deposits, shares,
fixed assets, personal cars, assessed value real property, gifts, pension plans, money funds,
owner-occupied houses, and trusts. Wealth taxes remain a principal means for promoting
social equity in a highly socially stratified society like Bangladesh by reducing disparities of
wealth holdings.
French Economist Thomas Piketty in his book “Capital in the Twenty First Century”, claimed
that rising income and wealth inequality posed a major crisis for advanced economies and
proposed that countries impose annual wealth tax (Piketty, 2014). There is a growing
awareness that any reliance on income and consumption taxes alone will not adequately
reverse the increasing concentration of wealth in the country. Therefore, the wealthy should
be made to pay much, much at higher income tax rates and on their wealth. This will also help
Bangladesh achieve a higher tax/GDP ratio which is much below the average for developing
countries.
Much of the wealth of the wealthy segments of society is not taxed and is not currently
subject to public scrutiny (Khatun, 2021). Only slightly more than a third of potentially eligible
taxpayers pay taxes (FE Report, 2019). This should be a top priority for a country with a sizable
absolute number of impoverished people and a considerable shortage in developmental
expenditure on public infrastructure, service delivery, and social protection systems.
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3. Building Human Capital of the Poor: Because assets and human capabilities are historically
unequally distributed in Bangladesh, the benefits of growth in a market economy tend to
favor those who begin with a greater endowment of assets and human skills. Thus, the long-
term plan for reducing income disparity must prioritize closing this early gap. A human
development plan that places importance on closing the access gap for the poor is one
effective tool. As jobs become increasingly reliant on modern technology, the necessity for
skill adaptability to technological innovation grows. Demand for highly skilled labor drives up
wages, while those with less training and abilities face job loss or poor compensation. The
government can help alleviate this situation by making faster progress in developing the
poor’s human capital. This will enable the impoverished to obtain better and more lucrative
employment. An educated and healthy labor force can enhance GDP growth while improving
income distribution. Further, more emphasis on technical and vocational training can reduce
the skill gaps of the wealthy and the poor while also enhancing human capital. Long-term
commitment from the government is necessary to introduce a range of policies that will equip
the poor with human capital while improving their opportunities to engage in economic
activities.
4. Expenditure Reallocation: Higher public spending on education, health, rural

infrastructure, and social protection by an estimated additional 4.2% of GDP is a seemingly
tall order in the current environment of public resource constraint. As per the 8 th FYP, the
government spends some 3.4% of GDP on subsidies and transfers, of which 1.4% of GDP is on
subsidies and transfers to power and other State-Owned Enterprises (SOEs), including public
banks. A core fiscal reform of the 8th FYP is to convert the SOEs, including the power sector
and public banks, to profit-making enterprises. Therefore, these subsidies will be drastically
reduced and re-channeled to priority social spending. This combination of spending
reallocation (1% of GDP) and increased taxation on personal income, VAT, and local
government revenues (4% of GDP) can pay the additional 4% of GDP required to fund critical
social programs while also providing a 1% surplus for additional infrastructure investment.
This fiscal policy package has the potential to be a powerful tool for redistributing income,
given the tax and expenditure package’s impact is anticipated to be pretty progressive.
An important area for reducing inequality relates to increased spending on social protection.
While few would argue that social protection spending is necessary for addressing inequality,
there are serious questions regarding the quality and targeting of this spending, which require
urgent evaluation and adjustment. Presently the government spends 1.2 % of GDP on social
protection, excluding civil service pensions (GED, 2020). The 8th FYP projects this to grow to
2.0% of GDP over five years.
5. Increased Public Spending on Education and Health: Those with higher educational levels
have better employment opportunities and earnings. Therefore, the topmost policy priority
should be to raise the share of public spending on education and health. In addition, major
improvements in the delivery of public education and health services through education
policies, governance and institutional reforms are necessary. According to the 8th FYP, the
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government aims to raise the share of public spending on education and health to at least 3%
and 2% of GDP, respectively. This will also necessitate significant enhancements to the
delivery of public education and health services via educational policy, governance, and
institutional reforms. Scandinavian countries like Sweden and Norway spend higher, 6.8% and
6.5% of GDP, respectively (Ahmed S. , 2018).
6. Increased Public Spending on Rural Infrastructure: Public spending must increase in rural
infrastructure development that includes rural roads, rural electricity, irrigation, and flood
control. As per 8th FYP, government investment in this field has aided farm productivity and
food output growth. Despite the fast population increase, Bangladesh’s near-self-sufficiency
in food demonstrates the policy’s effectiveness. Nonetheless, a sizable portion of the labour
force remains engaged in low-productivity, low-wage agriculture. There is a need to diversify
agriculture into higher-value-added enterprises and assist surplus labour in rural and urban
areas to transition from agriculture to non-farm activities. This transformation will support
GDP growth and income distribution by helping increase average labour productivity in the
economy.
7. Increased Availability of Rural Credit: In addition to public spending on rural infrastructure,

the availability of rural credit is an important tool for developing human capital. Evidence
suggests that microcredit has helped lower poverty by building up the assets of the poor and
by supporting the smoothing of their consumption (Khan, 2020). Yet, the average loan size is
small, and the interest cost is high compared to formal sector credit. Scaling up formal credit
to the rural economy continues to be a major difficulty. The public sector’s role in rural credit
provision has remained marginal. Still, one-third of rural borrowers obtain credit from
informal sources such as money lenders, dealers, and friends/relatives; two-thirds receive
credit from non-governmental organizations (NGOs). Around one-tenth obtain credit from
government and private banks. (Bayes, 2020).
8. Effective Land Administration: There is a crucial need to strengthen the land

administration regime and related land projects through institutional, regulatory and fiscal
policy reforms. These reforms include proper land ownership surveys and land titling,
computerization of land records; simplification of land transactions and land registration; and
streamlining land transaction fees. These measures will defend poor farmers against
opportunistic land grabbers and act as a significant disincentive to the accumulation of
windfall profits from land transactions. A well-implemented capital gains tax on land
transactions will be another critical tool for reducing windfall capital gains. It will also assist
in stabilizing land values by deterring property speculation and providing significant money
to the government for social service investment.
9. Better Governance of Public Institutions: The government can also help improve income
distribution through better governance. This requires the rule of law, proper regulations and
letting institutions grow and work. Rent-seeking behaviour through discretionary access to
public bank loans, non-repayment of these loans, insider trading and other manipulations in
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stock markets, evasion of taxes, corruption in public procurement and public spending, illegal
land grabbing are all examples of how massive income transfer has happened to the top 10%
of the population based on political patronage in different periods. Improved governance that
makes vital public institutions like the Central Bank, banks, enterprises, the Tax Department,
the Rajuk, the municipalities, the Land Administration work based on defined rules of business
and accountabilities rather than through political directives is likely to help Bangladesh
achieve a better income distribution than presently.
10. Decentralization: According to the 8th FYP, the central government collects 98% of all
revenues and spends more than 90% of all public funds. This demonstrates unequivocally that
Bangladesh, with a population of 165 million, is significantly more centralized than it should
be. Decentralization of funds, functions, and personnel is critical for strengthening local
governments in Bangladesh. Significant investments in political and administrative
decentralization would be necessary to improve local governments. Reforms in this area will
take time, but the government must make a concerted effort.
In conclusion, addressing inequality in society is widely agreed upon, not just as a social duty
but also to maximize people’s productive potential to accelerate economic progress.
Additionally, it was recognized that growth alone is insufficient to alleviate inequality if not
accompanied by investments in social protection programs, simple access to credit for the
poor, and sensible fiscal and monetary policies. The free-market system cannot secure the
elimination of all impediments to full employment, the maintenance of universal minimum
salaries, the provision of basic needs for every household, and universal access to healthcare,
excellent education, and housing. Several empirical studies have demonstrated that
prolonged increases in income disparity can undermine economic growth performance; as a
result, we should work to minimize inequality urgently and act in the long-run economic
interests of our country. We need to prioritize the challenge more urgently regarding the
Covid-19 pandemic, as its impacts will continue affecting our economy for several years.
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3. Health and Development Index
Bangladesh has come a long way to reach its health outcome expectations, despite the fact
that there are still some bumps in the road. Its health outcomes are outstanding in contrast
to previous allocations and expenditures in the sector. According to the Worldwide GHS
index, Bangladesh ranks 95th with an index score of 35.5. It has a health care index of 42.25
which puts the country in the lower bottom of the list. It has increased in the recent years but
not enough. To understand the health situation, we will focus on three different indicators
which are physicians per 1000 people, infant mortality rate and life expectancy at birth.
3.1 Physicians Per 1000 People:

In Bangladesh, there are around six physicians per 10,000 people, or 0.6 per 1,000. This brings
the overall number of people to slightly more than a hundred thousand. However,
government-sponsored research estimates it to be around 77,000. In 2019, the ratio of
physicians per 1000 people was reported to be 0.637. This is an increase from the previous
year's figure of 0.581 Ratio.
Figure 31: Physicians per 1000 people. Bangladesh. World Bank
When compared to other adjacent nations, Bangladesh has a lower ratio of patients to
doctors, which makes it difficult to provide good and timely healthcare. Bangladesh also falls
short of the World Health Organization's recommended minimum of one doctor for every
10,000 people. From 2019 dataset, we see the doctor-patient ratio in other South Asian
countries are, 7.77 in India, 9.75 in Pakistan, 9.5 in Sri Lanka, 6.5 in Nepal, 8.6 in Myanmar,
and 22.3 in Maldives. Only Bhutan is placed behind Bangladesh in maintaining the ratio.
Bhutan has 3.7 doctors to every 10,000 population where the ratio in Bangladesh is 5.26.
In 2010, the World Health Organization designated 49 nations as priority countries, with a
minimum of 23 physicians, nurses, and midwives per 10,000 people required to provide basic
maternal and child health services. According to the WHO website, Bangladesh is among the
nations emphasized by the UN Global Strategy for Women's and Children's Health. The
Bangladesh Medical and Dental Council, which regulates doctors and medical education, has
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86,800 registered MBBS doctors and dentists. According to a health advisory, roughly 20,000
doctors work for government facilities, resulting in a ratio of 1.29 doctors per 10,000 people.
As most of the people live under or just over the poverty line, they depend on government
health facilities where cost is cheap. The rate being low puts a pressure on the physicians
which makes it difficult to give quality care to each patient properly.
3.2 Life Expectancy at Birth:

Expectation of life at birth is a summary measure of mortality that portrays the average
longevity of life of an individual. The overall life expectancy is 72.72 years in 2020. The
expectations of life at birth for males and females were 55.3 and 54.5 in 1981. These increased
to 71.2 and 74.5 years in 2020 over a period of 40 years, implying an average annual increase
0.41 years for males and 0.51 years for females.
Figure 32: Life Expectancy at Birth, Bangladesh. UN World population prospects

Life expectancy of people is rising each year. Though it was less before 1980, female life
expectancy is larger than the male life expectancy at present. Health facilities for female have
been prioritized so the number of females dying giving birth has decreased in the last decade.
Overall improvement of education, health care and economy are the contributors behind
rising life expectancy rate.
If we see the neighboring countries, in 2019, life expectancy for India is 69.66, for Pakistan is
67.27, for Sri Lanka is 76.98, for Nepal is 70.78 and for Maldives is 78.92. Comparing the
numbers, Bangladesh has a moderate life expectancy rate than the neighboring countries.
3.3 Infant Mortality:

The infant mortality rate is an important marker of the overall health of a society. It indicates
the number of infant deaths for every 1000 live births. In 2020, Bangladesh had an infant
mortality rate of 24.3 overall where it 25.9 for male infants and 22.7 for female infants. The
infant mortality rate for Bangladesh in 2020 was 24.3 deaths per 1000 live births, a 4.1%
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decline from 2019 and in 2019 was 25.788 deaths per 1000 live births, a 3.94% decline from
2018.
Figure 33: Infant Mortality, Bangladesh. UN World population prospects
Infant mortality rate is directly related with women’s health care and education. It is found
that mortality rate is lower among educated mother. Also, it is much lower when the mother
is more educated than the father being the one with more education. Male literacy does not
play much part in this. Due to the education barrier, infant mortality in rural areas is much
lower.
If we see the neighboring countries, the infant mortality rates are: India (27.69), Pakistan
(58.46), Sri Lanka (6.67), Nepal (28.287), Maldives (5.568). Here we see that Bangladesh is in
the mid-range in South Asia.
3.4 Challenges:
Difficulties in Increasing the Number of Physicians:
Administrative Incompetency:
Overly-centralized health system, weak governance structure and regulatory framework,
weak management and institutional capacity in the Ministry of Health and Family Welfare
(MoHFW), fragmented public service delivery, inefficient allocation of public resources, lack
of regulation of the private sector (which employs 58 percent of all physicians), absenteeism
of health workers, and poor maintenance of healers are among the major administrative
challenges present in the health sector. Bangladesh seems to have attained an adequate
number of physicians though the number is still not enough to cover the whole country.
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Corruption:
Corruption in the health department is also a cause of difficulty in implementing the policies
properly. The operations in offices are conducted by non-medical officers who are prone to
corruption. Corruption plays part in inadequate number of physicians in a place. Also, it
hampers increasing the number of hospitals and health workers.
Geographical Dispersion:
Bangladesh has a physician shortage as well as a geographic dispersion problem. Despite the
fact that 70% of the population lives in rural regions, health staff are concentrated in urban
secondary and tertiary facilities. Moreover, most of the private physician clinics are situated
in cities or urban areas. In a recent survey, conducted by health and family welfare ministry,
it is found that only 11.8 per cent is serving 65 per cent of the rural population of the country
of all the available health workers. Rural areas also lack in quality ICU facilities and number of
surgeons. Many physicians are not willing to serve in rural areas.
Financial Management:
According to WHO, a country needs to invest 2.3 percent of its GDP in health care system to
grow its activities and quality. But in 2019-2020 financial year it was less than one percent for
Bangladesh. This budget allocation only covers the operational costs but does not provide any
significant growth in the quality and quantity. As a result, the rate of increasing the number
of physicians in field is slower.
Difficulties in Increasing Life Expectancy Rate:

Providing Basic Needs:
It is hard to ensure basic needs for everyone for a developing country. Life expectancy
depends on quality of life, income, safe water and hygienic living place. It is difficult to provide
these things as most of our population live under or just over the poverty line.
Ensuring Health Care:

To increase life expectancy, we need to provide quality health care to people. But a dispersion
is seen in the health care given in urban and rural areas, also in public and private sector. As
most of the people cannot afford private service, they depend on public health care. But in
the public sector we have inadequate number of physicians, health workers and facilities.
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Economic Growth:
Financial and economic growth can help to provide quality health care services. To expand
the facilities, we need economic growth. We also need financial growth so that people can
afford the services. Being a developing country, it is hard to increase facilities quickly.
Difficulties in Decreasing Infant Mortality Rate:

Education:
An educated mother is more likely to have a safe and healthy child birth than an uneducated
one. Female literacy rate is directly linked with the infant mortality rate. But it is difficult to
ensure education to girls because of social and financial constraints of the family. Due to
implementing some policies such as stopping child marriage and providing financial helps to
poor students, government has ensured increase in the literacy rate of females in recent
years.
Ensuring Proper Health Care:

In rural areas, still most of the child birth is conducted by unregistered midwives. They are
not certified and will fail to deliver a child safely if operation is needed. Also, most of the
mothers do not seek medical help during pregnancy.
3.5 Health Situation during COVID- 19:

The pandemic has affected the health care sector immensely. During the restrictions,
inadequacy of physicians and facilities was seen throughout the nation. Available physicians
worked relentlessly but could not provide proper treatments to all. Lack of ICUs, Oxygen and
medical beds were also seen by the people. The inadequacy in number of physicians were
seen both in public and private sector. To cope with the pressure, only those who needed
immediate care were admitted and told to seek treatment in the hospital. This type of
physician shortage was never felt before. Even employing medical students were not enough.
Corruption was also a big issue during the pandemic as it was uncovered that some officials
were involved in looting money allocated for providing facilities. The dispersion of physician
number was felt more during the restrictions as rural areas already had less physicians
available for them. During the pandemic physicians were employed in the public sector and
also many doctors graduated and joined private clinics. So, we can assume that the number
of physicians increased than previous years.
Many people died during the pandemic. People of all ages suffered the COVID-19. But the life
expectancy improved during the pandemic times. The Overall average of life expectancy was
72.60 years in 2019 and 72.8 years in 2020 by the government. The male life expectancy
changed from 71.1 to 71.2 years and female life expectancy changed from 74.2 to 74.5.
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Though the overall mortality rate declined, the infant mortality rate remained same during
the pandemic. Lack of data can be a limitation in calculating this. But the infants were not
severely affected by the COVID-19 virus and there was no significant amount of infant
reported who died because of COVID-19.
3.6 The Way Forward:

Increase the number of Physicians:
More physicians should be appointed in the public hospitals. We have seen an increase in
number of physicians in recent years in the public sector due to taking special BCS for doctors
along with the regular ones. As the medical students increase, more people are willing to
serve the public sector in the recent years. Government also became interested to ensure
health care for all. As a result, more and more doctors are joining the health sector. Increased
number physicians also ensure better infant mortality rate and life expectancy.
Ensuring Physicians in Rural Facilities:

Government has taken measures to ensure that adequate number of physicians are available
in the rural areas. After joining the public sector, all the physicians need to work in the Upozilla
health complex and most of them join a rural hospital as their first posting.
Increasing Number of Hospitals:

Increasing the total number of hospitals will ensure that people all over the country can afford
quality treatments. Government has already taken many projects to establish health complex,
mother and child care institutes and hospitals with better facilities. It increases the
opportunities to appoint more doctors.
Financial Investment:
The budget allocated for the health sector is inadequate and only covers operational costs.
To expand facilities and quality of service government need to invest more in the health
sector. Compared to the neighboring countries we fall far behind in the investment.
Increase Managerial Competency:

Corrupt Mangers in the offices hamper the improvement works of the government. Medical
advisers can solve this problem. Also, they can suggest where to invest and point out where
improvement and expansion is needed. Government can also incorporate private sector and
make their service available for the people with an affordable price with the help of
competent managers.
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Training and Developing Skills:
Proper training can improve the skills of midwives and health workers. Also, during the
pandemic, we have seen a surge in telemedicine service. So, more people should be given
proper and useful training so that they can help in the time of shortage and distress.
Ensuring Female Education:

Female education directly effects the infant mortality rate as educated mothers are more
informed about safe birth. Also, educated female can contribute in the family which increases
the quality of life and life expectancy. Government has taken measures to ensure female
education throughout the country. People are given incentives to send their girls to schools,
early marriage has been prohibited. Already we can see the results as female literacy is above
70 percent in the present which is 20% increase from 2015.
Financial Growth:
Financial and economic growth can help a family to afford quality food, quality health care
and homes. So, it is important to decrease the power parity among different level of people.
Increasing Quality of Services:

Quality of services should be increased in the hospitals situated in both rural and urban areas.
Increased facilities can help improve the health care quality for old people, pregnant females
and provide them proper medications and services. Ensuring vaccines for every child should
also be prioritized.
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4. Education and literacy rate
4.1 Reasons behind the low percentage of School Going Children:
The percentage of school-going children refers to the number of children going to school
among the total population consisting of children. Bangladesh has a huge population of 160
million living within a limited premise of 148,460 km², making the country the most densely
populated country in the world. Bangladesh is currently the 7th largest country in terms of
population and the most densely populated country in the world. Along with such a huge
population, comes a lot of challenges, especially in a developing country like Bangladesh. The
net primary school attendance in 2019 stood at 86 percent when it was 65 percent in 1990.
One of those challenges is the ability to provide basic amenities like food, medical facilities,
accommodation, and most importantly, education to the people of the country. As a result,
many children who do not have the economic stability to afford education are often deprived
of a basic level of education which inevitably creates social discrimination among various
economic classes. At present, 4.3 million children aged between six and 15 years are still out
of school in Bangladesh. With a population of over 160 million and a country that has over 18
million primary school students, Bangladesh has shown great improvements. The country has
achieved near-universal net primary enrollment, with approximately 98 percent of children
of primary school age enrolling in school. Bangladesh has also achieved gender parity in
access to education, and 50.9 percent of all enrolled students were girls in 2016.
Figure 34: education structure of Bangladesh

Source: Benbeis, 2008
The education system of Bangladesh is made up of three steps. The first five years of school
are defined as primary education and then children move up to secondary education, then
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higher secondary and eventually become graduates and postgraduates. Due to the lack of
resources and s certain portion of the population living below the poverty line, the percentage
of school-going children is still low despite certain economic developments in the country.
According to research published in 2018, 48% of women in India, 75% in Nepal, 69.6% in
Pakistan & 58% in Bangladesh of women have completed primary education. Bangladesh is
performing better in female literacy rate. The country with the highest literacy rate in South
Asia is Maldives followed by Sri Lanka (USAID, 2020). The total literacy rate in Bangladesh is
73.9%.
Dense Population:
Bangladesh is the most densely populated country in the world. The unchecked population
growth inevitably impacted the education system of the country, as it is nearly impossible to
provide access to quality education to every child born in the country with the limited
resources of the government. Being a developing country (BBS, 2020), it often becomes
difficult for the government to ensure education for all, especially when nearly one-fifth of
the population are still living below the poverty line.
Figure 35: Primary education completion rate across gender, area & economic status
Source: UNICEF, 2016
As the section of the population living under dire economic conditions cannot afford to send
their children to primary school, this led to a decrease in the percentage of school-going
children. The number of educated and school-going children has not increased in leaps and
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bounds in comparison to the rapidly increasing population. For example, in the Barisal
division, the average annual growth rate of the population was 0.9 percent (1991-2001) which
has been decreased to 0 percent from 2001-to 2011. This might be responsible for the higher
school enrolment in the Barisal division (91.04 percent). On the other hand, in the Sylhet
division, the average annual growth rate of the population has increased to 2.1 percent (2001-
2011) from 1.6 percent (1991-2001) (BBS, 2010) where the school enrolment is lower (73.12
percent). Around 83% of the children complete primary education but children completing
next-level education decrease as the age of the children increases. Only 65% complete higher
secondary education and 29% complete higher secondary.
Figure 36: Education Completion Rate

This lower rate of completion at higher levels implies that compared to primary education,
lower and especially upper secondary education feature higher rates of dropout, repetition
or delayed conclusion. Regional and socioeconomic disparities impact the share of children
completing a level of education. There is also a vast difference depending on the area the
children live. 35% of urban & 28% of rural children complete a higher level of education. While
girls have consistently higher rates of completion at both primary and lower secondary levels,
this dynamic is reversed in upper secondary education, where males complete at a nearly 50
percent higher rate than females.
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Economic Struggle of Impoverished Areas:
Bangladesh is on the way to graduating from LDC (Least developed Country) within 2024 and
doing exceptionally well in many social indicators such as life expectancy, infant mortality
rate, female participation in the workforce, literacy rate, fertility rate, and unemployment
rate (BANK, 2019). However, the country still has a humongous challenge of uplifting almost
a 22million people still living below the poverty line. According to the report published by
World Bank, depending on the international poverty line of $1.90 per person per day, poverty
declined from 44.2% to 13.8% from 1991 to 2017 time. In 2015 the country graduated to
lower-middle-income national and in 2024 is expected to graduate from LDC status. The
proportion of the employed population below $1.90 purchasing power parity in a day was
5.6% in 2019 and 20.5% of the total population lived below this poverty line. The poverty line
is referred to that section of the population whose daily earnings are less than $1.90 and is
deprived of affording basic amenities for a healthy life. Approximately 14.3% of the
population is living below the $1.90 purchasing power parity a day and 6.2% of this population
is mostly female. Despite the recent developments and several support projects to facilitate
education among children of impoverished families, the rise in
Figure 37: Poverty situation in Bangladesh

Source: BBS, 2019
Necessary commodity prices, dependency on agriculture, and the cost of living in city slum
areas are still among the key barriers to developing the education situation in Bangladesh.
Due to a lack of family income, many children are still forced to work at an early age and suffer
from the dire circumstances of child labor. People living below the poverty line spend 80% of
their income on food and living expenses which makes education a luxury to them. Extreme
poverty is eventually leading to unemployment as lack of education is depriving a huge
portion of the population to learn any skills suitable for earning a livelihood.
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Figure 38: Employment crisis in South-Asia
Source: The Business Standard, 2020
In areas where children from poor families do not get the opportunity to get facilities from
government-funded education projects, are mostly left to remain illiterate and engage in child
labor. Almost 22.9% of children suffer from child labor and 68.9% of them are working in dire
conditions to earn a livelihood. The unemployment situation in the South Asia region is
deteriorating the crisis. Although Bangladesh has a higher literacy rate than its powerful
neighboring nations like India & Pakistan, to cope with the increasing population, steps need
to be taken to turn this population into a resource for the country (Education, 2019).
Weak Infrastructure:
Bangladesh has recently upgraded its position from a least developed country to a developing
country but the country has yet not been able to solve its infrastructure problem. Mega
construction projects of different types have been undertaken by the government to improve
the overall infrastructure of the country. The low teacher-student ratio in Bangladesh
compared to developed countries reflects the core problem in the education system of the
country. Moreover, the lack of skilled teachers & proper infrastructure has worsened the
weak education system of the country, and people living in underprivileged circumstances are
the major sufferers of this situation.
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Figure 39: Teacher Student Ration
Source: World Bank, 2019
Due to time constraints, these projects take a long time to complete which eventually
worsens the situation. The adverse impact of lack of proper infrastructure eventually impacts
the educations system also. The lack of properly built schools, access to study materials,
unavailability of the required number of chairs & tables for taking classes, and lack of clean
water and proper sanitation facilities are also plaguing the primary education system in
Bangladesh. Only 5% of primary schools in rural areas of Bangladesh have clean toilets and
only 14% of them have more than one toilet in the entire school. The schools also lack a
sufficient number of qualified teachers for teaching them as on average the teach student
ratio is approximately 50:1, which is extremely low considering the number of young children
eligible for a primary school in the country. Therefore, special attention must be given to
remedy the situation as this dissuades teachers from leaving cities and working in rural and
suburban areas. Thus the student-teacher ratio varies greatly between urban and non-urban
schools.
Social Biases & Income Inequality:
The education system of Bangladesh is currently plagued by the social and income inequality
that persists in the country. Income inequality and social discrimination that is created from
it deprive the children of lower-income families getting access to quality education despite
having the merit and intelligence required for it.
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Figure 40: School dropouts in terms of the economic situation
Economic inequality is still a part of the social structure (UNICEF, 2019). This enables to create
discrimination among the children belonging to the higher spectrum of the society have
better access to good schools, qualified teachers, and educational materials which created an
invisible line separating the children from underprivileged backgrounds to have the same
facilities with less income. Children from working-class families lack the economic stability
and affluence to afford quality education and the social inequality and discrimination deprive
them of getting the education they deserve as people from upper-class families are not
comfortable with the concept of sending their children to school with children from the lower
caste. Although this issue cannot be quantified this type of social discrimination is creating a
barrier to ensuring quality education for all. On the other hand, children with disabilities are
also deprived of formal education as the education system of Bangladesh is not equipped with
providing education facilities to children with disabilities. A major issue with a disability is that
many children in low-income countries who suffer from a physical or psychological
impediment are denied access to education. When disabled children do have access to
education, their chances of completing a full cycle are severely limited due to the
unavailability of resources, specially trained teachers, and clear school policy guidelines
regarding disabled children. On the other hand, child marriage, child labor, and social taboo
forces girls to drop out of school, and often girls are not even enrolled in school at first
because parents are often not keen on educating the girls. This creates vast discrimination in
educated children as girls often get fewer opportunities in educating themselves. Due to the
rise of the garment industries of Bangladesh, young girls are forced to join the workforce
leaving their education midway. Very few girls even get the opportunity to complete their
primary education and are married off at an early age as girls are mostly seen as a burden in
lower-income families or rural areas.
Geographical Challenges:
Although Bangladesh is a relatively small country, geographic isolation is one of the key
barriers to providing access to primary education to every child living in every corner of the
country due to weak infrastructure, strong government, and lack of proper education
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structure in the primary level. Not every location in Bangladesh has the same educational
facilities similar to city areas. Although the big cities of Dhaka & Chittagong have plenty
number of schools at primary and secondary levels, rural or remote areas in the country still
lack the required number of schools considering the number of children eligible to go to
school. All the eight divisions are divided into 64 districts in Bangladesh. All the districts are
not equally equipped with primary and secondary education. Sylhet district has the lowest
primary school-going children enrollment as only 64.16% in the lower economic class and
82.08% in the middle-income section. Due to economic deprivation, social inequalities,
geographical isolation, and unequal income distribution create unequal primary education in
certain districts of this area although the economic situation is better than in the other
Divisions of the country (Raihan, 2018).
Figure 41: District wise school going children

Even children living in slum areas do not get the opportunity to go to school due to the lack
of a proper number of schools near their living areas and the socio-economic discrimination
present in the country. Geographic isolation is creating an imbalance between access to
education between the city dwellers and children living in rural areas.
Lack of Awareness:
Lack of awareness among the parents is another key reason that deprives children of
education. There is a positive correlation between net enrolment and parental education. The
proportion of never schooled parents decreased from 47% to 45.4% in the 1990s, 35% in
2005, and 33% in 2008. The net enrolment rate increased for the children of both never and
ever schooled parents during 1998-2005, which became stagnant in 2008 for both groups. If
the parents remain unaware, the progress in the child’s education would remain elusive.
Some other Studies from Bangladesh suggest that when there is a lack of parental interest
and engagement with schooling it is often the case that parents cannot understand school-
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related work; so parents are unable to support their children. Therefore parental education
is important to support children’s schooling. To absenteeism, grade repetition, and dropout.
Parents who are interested in pedagogical matters and who discuss these with teachers are
more likely to boost the chances of school success for their children (CHILD, 2017).
Extreme Weather Conditions:
Bangladesh is a country prone to natural disasters. Shunamgonj’s haor area is the most
deprived area where students have to suffer much in the dry season. The sufferings become
acute in the rainy season. Extreme weather conditions are also one of the core reasons which
deprive children of certain geographic areas of access to education. As Bangladesh has vast
lands covered in rivers or sea and mostly plain lands, the country mostly suffers from natural
disasters such as floods, and cyclones. Due to being susceptible to natural disasters like these,
the people of these disaster-prone areas are deprived of education facilities. Schools,
colleges, & buildings often get washed away due to river erosion, due to which established
buildings cannot be made in those vulnerable areas.
Figure 42: Children out-of-school

This pushes the people living in those areas to migrate to city areas for finding work. Being
one of the most vulnerable nations in the world to climate change, almost 40% of the
vulnerable population is children. Cyclones and storm surges are common phenomena in the
daily lives of the people living in the coastal areas of Bangladesh and these have devastating
effects in these areas where about 25% of the population is living. Three districts located in
southwestern Bangladesh -Khulna, Satkhira and Bhola are gravely impacted areas by climate
change in terms of severity, frequency, and distribution of hazards. On the other hand, on the
coast of the Bay of Bengal, a rising sea level is deteriorating the problems. Another problem
is Saline intrusion which has impacted many areas. Another type of danger of climate change
is extremes of heat with the potential of destroying livelihoods in Bangladesh. Major droughts
affect the country almost every five years, with the north-western part being most vulnerable.
As for children living in these communities, the risks are higher than adults. They are less able
than adults at adapting to the heat and other climate-related exposure. Due to lower
functional immunity, children are at higher risk of contracting deadly vector-borne and
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diarrheal diseases as well as under-nutrition. Disasters tear down schools, social institutions,
and livelihoods.
4.2 The Covid-19 Impact:

The education system is also impacted by the devastating impact of the Covid-19 pandemic.
Along with the effect on the economy and employment, the pandemic has also affected the
education system as all educational institutes closed due to the countrywide lockdown. As
schools & colleges were closed, students of urban area schools were able to continue classes
through online platforms but students from rural area schools or belonging to lower class
families were not able to afford that due to lack of access to required equipment and internet
connection.
Figure 43: Impact of Covid-19

Source: The Business Standard
The infographic given below states the major disadvantages faced during the covid-19. Due
to the closure of schools and colleges in rural areas, girls faced the risk of early marriage and
increased domestic abuse. The introduction of online classes increased social inequality to a
greater extent. 58% of the students do not have access to the equipment required for
attending online classes. The student faced huge learning losses even after attending these
online classes as 90% of those who regularly attended online classes could not remember
things they learned through online platforms. As a result, 19% of primary, and 25% of
secondary school-going children are at risk of learning loss due to Covid-19. Studies have
shown that a greater portion of secondary school students was out of school, approximately
21% than primary, which is approximately 14%. Children living in the slum areas of urban
areas suffered more from the lockdown in comparison to a student in rural areas that too in
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both primary and secondary levels. It created a greater risk of learning loss and it even created
discrimination among privileged and underprivileged students as privileged students were
equipped to join online classes where underprivileged ones had to sit and home and lag in
education. The risk of learning loss was, as a result, greater in the urban secondary group, as
26% of female & 30% of male students suffered from learning loss in this period. In poorer
groups, secondary male school students are at the highest risk of 33% due to the Covid-19
induced economic shock.
A significant portion of school-going children is at risk of learning loss. Thus, school reopening
must be coupled with a set of remedial measures to cover the learning loss and help children
to cope. The survey also revealed very low access to distance learning through both public
and private, with only around 10% of students who had access to it or used distance learning
opportunities to compensate for school closure. Even government promoted initiatives failed
as only 2% students gained educational benefits from viewing government-owned TV channel
educational shows. At the same time, 51% in primary and 61% in secondary went to coaching
or private tuition, which has been the dominant coping mechanism. Hence, 95% of parents
are eager to send their children back to school.
The economic costs of education post-pandemic have been significantly higher. From June
2020 to March 2021, out-of-pocket expenditure for education increased twelve-fold. The
crisis has increased the opportunity cost of investing in education. At least 8% of school-going
boys and 3% of school-going girls are engaged in some form of income-earning activity. The
psychological costs of the pandemic are even more devastating. Studies revealed that
children aged between 10 and 20 in urban slums are twice as stressed like those in rural areas.
Approximately 15.7% slum dwelling children are more stressed than 8.4% of rural children.
Another study also reflected that 55% of students sitting at home were becoming more
unhappy. Research studies have shown that staying at home for such a long period has
resulted in extreme mental pressure. This also resulted in eating disorders and malnutrition
as due to the pandemic 40% of children suffering from malnutrition. So, the three core
disadvantages of a covid-19 pandemic on the education system are learning loss, the
opportunity cost of increased education expenditure, and social isolation.
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4.3 The way forward:
Education is the backbone of the nation. Until and unless the education system has been
strengthening enough to benefit every child belonging from every economic background.
Although the rate of literacy rate and school-going children is increasing, better steps should
be taken to overcome barriers and ensure education is accessible to everyone. Government,
UNICEF, USAID, WORLD BANK, etc. major non-profitable organizations are all working
together tirelessly in creating a balanced educational system that will overcome the current
barriers and improve the educational system and contribute largely to the economic
development of the country. The steps that can be taken to improve the education system of
Bangladesh are or are already taken are given below:
USAID Initiative for Out-of-School Children:
As a citizen of Bangladesh, every child has a right to education. Although the education system
and rate increased rapidly till 2019 and showed massive growth, due to the pandemic the
growth stalled despite gains in access to education. Due to barriers created by the pandemic,
equal access to quality education for all is hindered. Many non-profitable organizations have
taken key initiatives in improving this situation such as USAID partners with the non-
governmental organization BRAC to establish and execute 1,000 one-room schoolhouses for
children in urban slums where there was previously no access to schooling. Through an
accelerated curriculum, these students are brought back into the education system and
allowed to learn and excel.
Developing Skills for Primary School Students
Another key initiative undertaken by USAID provides intensive support to government
primary schools to improve early grade skills required by every student. The reading program
was launched by USAID to improve the basic skills of students. Important skills such as reading
in the Bengali language, including teacher and headteacher training, the provision of
supplementary reading materials, and classroom assessment are now taught to the
underprivileged students under this program. In addition to outside of school, programming
also includes the creation of community reading camps where children practice reading
alongside community volunteers. The program reduced social discrimination by providing
customized program facilities to smaller communities living in Bangladesh such as
understanding that not all students speak the Bangla language. The reading program also
developed supplementary reading materials in three languages spoken in the Chittagong Hill
Tracts.
Sesame Street Bangladesh:
Since 2006, USAID has supported Sesame Workshop to develop the television program
“Sisimpur” (“Sesame Street”), which is viewed weekly by over 10 million children. The
episodes teach critical pre-literacy skills, such as letter recognition and vocabulary. The
episodes also include thematic messages related to other development objectives of
USAID/Bangladesh, such as nutrition, hand-washing, the environment, and peace and conflict
resolution.
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Development of Infrastructure:
Infrastructure development is one of the key benefits needed to improve the education
systems. The government along with a partnership with World Bank has taken many
initiatives to improve the overall infrastructure. Under this project, almost 800 km of new
roads have been constructed, 4,500 km of rural roads in 26 districts maintained and 47 km of
rural waterways dredged. On the other hand, road safety engineering measures implemented
and a community road safety awareness-building campaign is ongoing. Approximately 1.1
million people will benefit from this with access to clean water in rural areas. This project’s
support for rural roads has helped people access schools and health facilities with reduced
transport costs and less commute time; increased rural non-farm incomes; and created jobs
for both women and men.
Page | 69
Conclusion:
Bangladesh has emerged as an influential economy in the South-East Asia with its prosperity
in the economic sectors. Even with the constant threat of natural calamities and poverty,
Bangladesh has outdone itself in every sector which helps to grow our GDP. Bangladesh has
goodwill in export market having quality RMG products, textile and knitting products,
medicine and lather products in its hand and recently crossed the expected export margin in
RMG sector even though the sector was shut down during the pandemic. COVID-19 also
showed us that we need to diversify our export portfolio and also look for opportunities in
less popular sectors such as the plastic and lather sector where export rate is lower. We also
need to rearrange our power sector to financially and management wise to increase the
efficiency. Banking sector needs to be reformed as it is difficult for Central Bank to manage
this many banks.
Though Bangladesh has achieved growth in GDP, it is affected immensely by the high inflation
rate in recent years. From 2007 to 2013, Bangladesh faced high fluctuation in the inflation.
From 2014 to onwards, inflation had a steady decline. Inflation depends on food inflation and
non-food inflation. The food fluctuation is the one which controls the overall inflation as it
has higher weightage. Being prone to natural calamity, food inflation has higher fluctuation
than non-food fluctuation. Because of pandemic and the recent Russia-Ukraine war inflation
has been the highest in the last 17 months. To tackle the high inflation, we need highly
efficient market intelligence and effective market distribution. Increasing open market sale
and giving cash incentives can help in this situation.
A strong fiscal policy can help to allocate resources and control inflation. Although the
government has been able to keep the budget deficit below 5% for over a decade through
fiscal policies, it reached 6.11% in 2022 due to the various stimulus packages launched by
them to recover the economy. They are fully focusing on driving economic growth as high as
possible.
As a matter of fact, Bangladesh has been in a favorable position compared to India in terms
of overall trade deficit, but still, the number is substantial. The government has taken
initiatives to reduce this deficit, such as promoting freelancers, increasing the competency of
various industries for higher export earnings, and taxing luxury products more. Additionally,
they are providing incentives to multinational brands to open up assembly plants in
Bangladesh, which can significantly contribute to the country’s earnings.
The highest contribution in the yearly earnings comes from foreign remittance after the
agriculture sector. Remittance earnings have played a huge role in increasing the country’s
foreign country reserve, national savings, and foreign investments. The remittance flow
slumped in the initial stage of the Covid-19 pandemic, but it went back after the government
announced a cash incentive on the remittance money. To further incentivize the flow, the
government is focusing on the well-being of the remittance earners through increased
subsidies, training programs, and financial aids.
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During the COVID-19 period remittance earnings was at risk as foreign workers were sent
back home. This caused a boom in unemployment rate. Before COVID-19, unemployment rate
remained steady from 2013 to 2019 and after the pandemic, it got to record high with 5.3
percent. Even before pandemic unemployment rate was a huge problem for Bangladesh.
Overpopulation, political instability, and natural disasters were some common causes. In the
recent years it has increased more as more graduates become eligible for jobs but being an
agro-based economy, there are less opportunities in the technical side. Also, as the literacy
rate grows, more women are seeking jobs but facing inequality in the field which ultimately
results in unemployment. During the COVID-19 period low-income workers such RMG
workers and daily labors faced difficulties. Freshly graduates could not enter job market as
recruitment was closed. These factors resulted in a high unemployment rate in 2020.
Government is encouraging entrepreneurship efforts in the agriculture by granting money to
potential business. This will help to reduce youth unemployment in the future. Steady policies
and increased investments can help to increase job opportunities. As we have a huge capable
population, developing them as highly skilled workers can help us in getting more foreign
remittance.
Till now we discussed about the macroeconomic indicators. If we concentrate on the socio-
economic factors, the Gini coefficient has been on an uptrend as per the latest HIES report.
The major underlying causes include sluggish growth of jobs, low expenditure on health and
education, weak taxation policies, corruption, and inadequate spending on social protection
programs. Due to Covid-19, this situation has worsened as the rich were better off than the
poor. Therefore, steps like focusing on redistributive fiscal policies, building the human capital
of the poor, and increased spending on education, health, and rural infrastructures are
necessary.
As for purchasing power parity, the implied conversion rate of BDT to the international dollar
has been going up over time due to inflation. Additionally, Covid-19 has reduced purchasing
power of the poor since their diminished income has not been able to keep up with the surge
in inflation. The government must control inflation and expand social safety programs such
as TCB’s open market selling of products. Moreover, they should subsidize expenditure on
power, fuel, food, and fertilizers and lower the import duties on essential consumer items.
If we consider educational growth factors, Bangladesh has improved drastically in both total
literacy rate and female literacy rate and even surpassed its powerful neighboring countries
such as India and Pakistan in terms of female literacy rate. The current 73% literacy rate of
Bangladesh has been achieved through Combined efforts of the government and some
national and international nonprofit organization. International organizations such as USAID,
& World Bank has supported the education system of Bangladesh and contributed in
improving it. Due to the COVID impact, the school dropout rate drastically increased as many
urban slum dwellers were not able to continue their regular education. Other key barriers
which hindered Bangladesh government's vision of education for all and achieving 100%
literacy rate have deteriorated due to the drastic negative impact of the nationwide
Page | 71
lockdown. Government has undertaken megaprojects to develop country's infrastructure
that will eventually contribute in improving education system and reducing school dropout.
Inclusive education curriculum has been development so that people with disability and
indigenous groups also get the opportunity to education.
Health index is one of the most important determinants of socio – economic situation of a
society. Bangladesh ranks 95th in the GHS index with a score of 35.5. Index score is directly
related with the number of physicians available, life expectancy and infant mortality rate.
Bangladesh has inadequate number of physicians available for people, life expectancy is
moderate and it has a relevant but improvable infant mortality rate. The inadequate number
of physicians became a problem during the pandemic as people suffered without having
proper treatments. Life expectancy became higher and infant mortality rate remained same
during COVID-19. Government has already started implementing projects to increase the
number of both hospitals and physicians and taken measures to ensure quality health care
service in rural areas. With the betterment of educational and financial situation, specially of
women, it is expected that the life expectancy and infant mortality rate will become much
better in the future.
Page | 72
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Course Code: E501

Date of Submission April 02, 2022

Ms. Tasneema Afrin

Subject: Submission of Term paper report on ‘Macroeconomic and Socio-economic

Institute of Business Administration,

“Bangladesh is considered as a role model for other

Looking into the

Figure 1: GDP Trend of Bangladesh

Figure 4: GDP per Capita Trend of Bangladesh

Knit and Accessories Clothing Footwear

Figure 6: Top 10 Exports by Bangladesh

Figure 7: Top Export Regions of the RMG Products of Bangladesh

Export diversification is an imperative strategy to guarantee economic stability, which may be

2.2 Consumer Price Index (CPI)

2.3 Covid-19 Impact on the Inflation

2.4 Most Recent Trend

Figure 12: Recent Trend in National Inflation.

2.5 The Way Forward

3.1 Impact of COVID-19.

4.1 Trade Balance

4.3 Way forward:

Bangladesh has a large workforce that is currently working in foreign territories.

According to the neoclassical theory of migration, what stimulates the migration of

5.1. Impact of the COVID -19

5.2 Way forward:

Figure 21: Unemployment Rate of Bangladesh, World Bank

6.1 Reasons Behind Unemployment:

Improper Technical Education:

Figure 22: Unemployment rate of Bangladesh through years (World Bank)

Dhaka Stock Exchange Crashes:

6.2 Effect of COVID-19 on unemployment rate:

Change in Consumer Behavior:

6.3 The Way Forward:

Figure 23: Forecast of Unemployment rate, Bangladesh

It is critical to raise people's educational levels in order to combat unemployment. This

Bangladeshi economy is agriculture-based, so it is not a surprise that most of the employment

Diminish Gender Inequality:

Labor force characteristics 2010 2013 2015 2016-2017

Stable Fiscal and Monetary Policies:

Year Employment Million (USD)

GDP per capita, PPP (current international $)

GDP per capita, PPP (current international $)

Figure 24: GDP per capital, PPP

Implied PPP Conversion Rate

Implied PPP Conversion Rate

Figure 25: Implied PPP Conversion Rate

1.1 Impact of Covid-19 on the Purchasing Power

1.2. The Way Forward

• Expansion of the government’s safety-net programs like open-market sales of essentials

Inequality has long been a looming and troubling characteristic of Bangladesh’s

Trend of Income Inequality in Bangladesh

Figure 26: Trend of income inequality in Bangladesh

2. 1. The Underlying Reasons of Inequality

Real Minimum Wage Growth Labor Productivity Growth

2. Low Expenditure on Education and Health: In Bangladesh, public spending on education

Tax-GDP ratio of South Asian countries in 2021

Figure 28: Tax-GDP ratio of South Asian countries in 2021

The narrative of Non-Performing Loans (NPLs) in Bangladesh’s banking sector is a compelling

7. Environmental Degradation: Another area of severe neglect that threatens Bangladesh’s

2. 2. Impact of Covid-19 of Income Inequality

The COVID-19 pandemic severely and disproportionately impacted Bangladesh’s