Bangladesh is facing a perfect storm. Businesses continue to struggle under persistent inflation, a weakening taka (BDT), widening gaps between official and market dollar rates, and US tariffs threatening the ready-made garment (RMG) sector. For many business owners, costs have spiraled into an untenable crisis, while private investment stagnates and foreign direct investment (FDI) remains historically low.
Devaluing Currency & Dollar Shortages: Since mid 2022, the taka has depreciated sharply-from around Tk86/USD to Tk110/USD by February 2024. This devaluation has strained importers, making essential inputs like machinery, raw materials, and fuel significantly more expensive. Foreign exchange reserves have dropped substantially as businesses compete for limited dollars. The result? A dual exchange-rate system: a widening official/market gap forces companies to pay premiums just to source basic imported goods.Impact on SMEs: Local industries-particularly agro-processing, pharmaceuticals, and manufacturing-are faced with a painful choice: pass higher costs to consumers or take a hit on margins. Many SMEs, already squeezed between rising costs and limited price flexibility, risk closure.
Inflation Pressure & Persistent Uncertainty: Bangladesh’s inflation remains high-9% overall as of May 2025, with food inflation even steeper. For businesses, this means unpredictable increases in utility costs, wages, and logistics. Analysts warn such inflationary pressure erodes consumer demand and complicates long-term investment planning.
Corporate sentiment: Many companies report a lack of confidence. As one mid-sized firm owner in Dhaka told us, “We don’t know what input costs will be next month-it’s impossible to sign three-month contracts.” Import Dependency & Supply Constraints: Bangladesh’s reliance on imports-capital machinery, electronics, textiles, feedstock-has left its industries vulnerable. According to Bangladesh Bank, capital machinery imports fell over 23% year-on-year in FY2025. The combination of depreciating currency and scarce dollars means many factories are unable to upgrade equipment or replenish inventories, stunting productivity and growth.In the agro-processing sector, experts highlight how processing shortages lead to wasted produce and reduced agricultural returns.
While the government is encouraging foreign investment in agro-processing, sustained investment depends on a more stable macroeconomic environment.
Private Sector Investment at Historic Lo-w: Private investment has plummeted, reaching a historically low level. The combination of high and erratic financing costs, policy unpredictability, and macroeconomic volatility has scared off local entrepreneurs. Meanwhile, FDI inflows  remain bleak. Despite initiatives to attract foreign capital-such as showcasing agro-processing and digital economy at the 2025 Bangladesh Investment Summit-global investors remain wary.
A top economist commented: “Foreign inflows may come once fundamentals improve; but right now, Bangladesh’s fragile economic conditions are discouraging risk-hungry investors.” Without active private and foreign investment, Bangladesh is struggling to generate the capital needed for infrastructure, technological upgrades, and new job creation.
Employment and Investment Freeze: The investment slowdown ripples directly into jobs. With no fresh investment, few new ventures are launched; companies freeze expansion plans; and employment generation stalls. Youth unemployment remains a concern. Bangladesh’s unemployment is around 3.5%, but this masks underemployment in rural and informal sectors.
In the RMG sector-employing over 4 million-the threat of US tariffs has already triggered order cancellations and layoffs. Workers like Raimoni Bala from Ashulia report being on edge every day.
US Tariffs & RMG Threat: U.S. “reciprocal tariffs,” including a 35% levy on RMG exports, have shattered industry confidence. A recent Reuters report described how factories are seeing US brands halt orders, citing tariff uncertainty.
Economist Selim Raihan of SANEM warns:”Such tariff measures could significantly hurt exports-particularly the RMG sector, which is over 80% of our export earnings,” Reports from BIPSS note that even a temporary tariff suspension requires Bangladesh to offer concessions, like purchasing more U.S. goods, to maintain access. But these commitments, while possibly buying relief, do not resolve Bangladesh’s deep structural vulnerabilities.
Expert Perspectives: Selim Raihan (SANEM / Dhaka University):”A tariff hike on Bangladeshi apparel could push up costs for U.S. buyers, potentially leading to fewer orders… Investors may hesitate to expand operations in Bangladesh… Bangladesh could struggle to maintain its competitive position, affecting job creation and long-term industrial growth.” 
Mohosina Mostofa (BIPSS): The recent U.S. tariff imposition “shaken confidence across Bangladesh’s export?driven economy… risks include erosion of price competitiveness, potential factory closures, job losses… macroeconomic strain.” She notes Bangladesh is working within a 90-day tariff pause to negotiate.
SM Nurul Hoque (The Daily Star):Describes the 35-37% tariff as “an urgent wake?up call for the RMG industry.” He notes RMG must pivot-offering premium, sustainable apparel and targeting niche segments in the EU and online marketplaces.
Government Steps & Way Forward: Bangladesh has responded with diplomacy, including a wheat-import agreement with U.S. Wheat Associates designed to offset trade imbalance as a gesture of goodwill.
Experts recommend Bangladesh use any temporary tariff reprieve to:Diversify export markets (EU, Canada, Australia, Africa). Invest in agro-processing, pharmaceuticals, IT and niche textile segments. Strengthen economic diplomacy and bilateral trade relations. Institutionalize reforms: streamline customs, improve labor and environmental compliance, and build reliable regulatory frameworks.
Despite macroeconomic headwinds, there is strategic opportunity: Bangladesh has strong fundamentals-large population, a growing middle class, rising female labor participation, and regional integration potential. Stakeholders stress that with decisive policy reforms and trade strategy shifts, Bangladesh could emerge stronger post?crisis.
Outlook: Challenges & Cautious Hope: Short?Term: Expect continued cost pressures, production slowdowns, and job losses, especially if US tariffs take effect fully. The gap between official and market exchange rates will likely remain, prolonging supply chain disruptions.Medium?Term: The 90?day tariff reprieve provides breathing room. Bold moves-like export diversification, diplomatic outreach, regulatory reform-are critical. However, poor private investment and FDI, unless reversed, will limit recovery potential.
Long?Term: Possible stabilization if structural reforms take hold. Bangladesh’s demographic advantages and rising global demand for garments, food products, and digital content can be harnessed-if the government and private sector collaborate effectively.
Voices from the Ground: Raimoni Bala (RMG worker): “Whenever anyone visits the factory, my chest aches. I feel like they’ve come to tell me I’ve lost my job.” BIPSS
SM Nurul Hoque: Highlights need for quality and niche segmentation: “We must produce value?added products in small and medium quantities… establish sales and design offices in the USA and EU.” 
Bangladesh’s economic crisis is multi-dimensional-ranging from currency devaluation and inflation to supply constraints, historic lows in investment, and dire RMG outlook. But it also presents a moment for recalibration.To emerge resilient, Bangladesh must:Stabilize macro fundamentals-taming inflation, closing FX gaps, enabling predictability.Diversify exports-beyond RMG, tapping into pharmaceuticals, agro-processing, digital industries. Reinvigorate investment-by simplifying regulations and reassuring both local entrepreneurs and foreign investors.Engage strategically-with trade partners, especially the U.S., building stronger ties to secure market access and manage tariff risks.Failure to act risks deeper stagnation. But a proactive, coordinated strategy could transform today’s crisis into a platform for resilient, sustained growth.