Bangladesh’s economy in 2024 faced major challenges, as rampant inflation not only eroded purchasing power but also overshadowed the country’s progress in other areas, underscoring the growing struggle to balance development amid rising economic pressures.
The rising cost of living, driven by domestic and international factors, strained households and tested the government's economic strategies, yet the country maintained moderate growth due to its resilient economic framework.
The inflation rate in Bangladesh reached an alarming average of 11.38% in November 2024, marking the highest level in over a decade. Inflation hit 11.66 percent in July, the highest at least since the 2010-11 fiscal year, driven mainly by food prices reflecting the worsening of the purchasing capacity of people.
This sharp increase was fuelled primarily by escalating food prices, which constitute a significant portion of household expenditure and the Consumer Price Index (CPI). For comparison, the inflation rate stood at 8.56% in 2023, reflecting the worsening situation in 2024.
Food inflation, in particular, hovered around 12%-14% for most of the year, as prices of essentials like rice, cooking oil, and vegetables surged. Non-food inflation also rose steadily, driven by increased transportation costs, higher utility bills, and imported goods becoming more expensive due to currency depreciation.
Several factors contributed to the inflationary pressures in Bangladesh during 2024:
Global Commodity Prices: Fluctuations in global commodity markets, particularly for energy and food products, had a direct impact on domestic prices. The war in Ukraine continued to disrupt global supply chains, leading to higher import costs for essential items like fuel, wheat, and edible oils.
Currency Depreciation: The Bangladeshi Taka depreciated significantly against the US dollar, exacerbating inflationary pressures. The currency weakened by approximately 10% in 2024, making imports more expensive and driving up prices in the domestic market.
Supply Chain Disruptions: Persistent disruptions in global and regional supply chains further aggravated the inflation problem. Delays in shipping and logistical bottlenecks caused shortages of key commodities, leading to price hikes.
Domestic Demand Pressures: Rising domestic demand, particularly during festival seasons, added to inflationary pressures. While increased consumer spending is typically a sign of economic vitality, it also contributed to supply-demand imbalances.
The inflation crisis severely impacted households across Bangladesh, particularly low- and middle-income families.
The increased cost of essential goods such as rice, pulses, and cooking oil eroded purchasing power, forcing many families to cut back on non-essential expenditures. Reports indicated that some households were skipping meals or substituting more expensive foods with cheaper alternatives.
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Urban areas, where reliance on market purchases is higher, faced acute challenges. Meanwhile, rural households, though somewhat shielded by local agricultural production, also struggled with rising input costs for farming.
Real wages for workers in both formal and informal sectors failed to keep pace with inflation, further widening income inequality. The situation underscored the urgent need for targeted social safety nets and measures to protect vulnerable populations.
The queues behind OMS trucks across the country is getting longer and longer as the middle-class and lower-middle class people are feeling the pinch of the inflation at the worst level.
The government and the Bangladesh Bank implemented several measures to combat inflation and stabilize the economy:
Monetary Policy Tightening: The central bank raised the repo rate five times in 2024, reaching 10% in October. This marked a significant tightening of monetary policy aimed at curbing inflation by reducing liquidity in the market. However, higher interest rates also made borrowing more expensive, potentially dampening business investment.
Subsidy Adjustments: The government increased subsidies on food and energy to cushion the impact of rising prices. Special programs were introduced to provide subsidized rice and wheat to low-income families.
Exchange Rate Reforms: In May 2024, Bangladesh Bank adopted a crawling peg exchange rate system to reduce the gap between formal and informal exchange rates. This reform aimed to stabilize the Taka and improve foreign exchange reserves, which stood at around $25 billion by year-end.
Market Monitoring: To control price manipulation, the government intensified market monitoring efforts. Task forces were deployed to prevent hoarding and ensure fair pricing of essential goods.
Social Protection Programs: The government expanded cash transfer programs and food aid schemes to support the most affected households. Initiatives like the Vulnerable Group Feeding (VGF) program were scaled up to reach millions of beneficiaries.
Despite high inflation, Bangladesh’s GDP growth remained positive, albeit slower than in previous years. The Asian Development Bank (ADB) projected a growth rate of 5.8% for 2024, while the International Monetary Fund (IMF) estimated 5.4%. This growth was driven by robust performance in the manufacturing and export sectors, particularly the ready-made garment (RMG) industry, which accounted for over 80% of export earnings.
Read more: Inflation in Bangladesh climbs to 11.38% in Nov
However, domestic consumption and investment faced challenges due to inflationary pressures and higher borrowing costs. Small and medium enterprises (SMEs), a backbone of the economy, struggled with rising input costs and reduced consumer demand.
To address economic challenges, Bangladesh sought international assistance. In September 2024, the World Bank pledged over $2 billion in financing for various initiatives, including flood response measures, healthcare improvements, and air quality management.
Besides, the IMF disbursed $680 million as part of its Extended Credit Facility (ECF) program, supporting fiscal reforms and boosting foreign exchange reserves.
These funds provided much-needed relief and underscored Bangladesh’s strong ties with global development partners.
The well connected interim government is getting various types of budgetary support in different names which are giving little bit relief for the government, which took charge on August 8 after the fall of Awami League regime through a mass movement of students and people.
Bangladesh faces a delicate balancing act for the coming days. The government aims to reduce inflation to below 7% by mid-2025, a target that will require sustained efforts in monetary and fiscal management.
For this it needs to give priorities in some areas. These are:
Strengthening Agriculture: Boosting domestic food production through incentives and technological advancements could help reduce reliance on costly imports.
Enhancing Social Safety Nets: Expanding targeted programs for low-income households will be critical to mitigating the impact of inflation on the most vulnerable.
Structural Reforms: Improving governance, streamlining tax collection, and addressing inefficiencies in public spending are essential for long-term economic stability.
Diversifying Exports: Reducing dependence on the RMG sector by promoting industries like pharmaceuticals, IT, and agro-processing can provide new growth avenues.
The year 2024 was marked by significant inflationary challenges for Bangladesh, testing the resilience of its economy and the effectiveness of its policy responses. While inflation strained households and businesses, the country’s moderate growth and robust export performance offered hope for recovery.