Sri Lanka, Bangladesh: Who is Fuelling Instability in Asia?

Bangladesh’s economic growth over the past few years under the administration of Prime Minister Sheikh Hasina (the head of government in Bangladesh is the Prime Minister) has been notable. Key points include:

1. Robust GDP Growth: Bangladesh has experienced strong GDP growth, consistently surpassing 6% annually, and even reaching around 8% before the COVID-19 pandemic. This growth has been driven by robust performances in the textile and garment industry, remittances from overseas workers, and a growing service sector.

2. Infrastructure Development: The government has invested significantly in infrastructure projects, including the Padma Bridge, metro rail projects in Dhaka, and the expansion of road networks. These developments aim to improve connectivity and support economic activities.

3. Social Progress: Under Sheikh Hasina’s leadership, Bangladesh has made considerable progress in social indicators, such as reducing poverty rates, improving healthcare, and increasing literacy rates.

4. Economic Resilience: Despite the challenges posed by the COVID-19 pandemic, Bangladesh’s economy showed resilience, with a quick rebound in economic activities, particularly in the manufacturing and export sectors.

5. Digital Transformation: The government has also focused on digital transformation initiatives, aiming to boost the IT sector and encourage digital innovation across various industries.

6. Robust Manufacturing Sector: The ready-made garments (RMG) industry has been a major driver, making Bangladesh one of the largest exporters of textiles and garments globally.

7. Strong Remittance Inflows: Remittances from Bangladeshis working abroad have provided a steady flow of foreign currency, boosting the economy.

8. Agricultural Productivity: Improvements in agricultural techniques and productivity have supported food security and rural income.

9. Transport and Energy Sector Development: Significant investments in infrastructure, including transportation and energy projects, have facilitated economic activities.

10. Demographic Dividend: A young and growing workforce has been beneficial for economic activities.

Overall, Bangladesh’s economic trajectory under Sheikh Hasina has been positive, marked by strong growth, infrastructure development, and improvements in social welfare.

According to the World Bank April, 2024 release, Bangladesh has a strong track record of growth and development, even in times of elevated global uncertainty.  A robust demographic dividend, strong ready-made garment (RMG) exports, resilient remittance inflows, and stable macroeconomic conditions have supported rapid economic growth over the past two decades. 

Bangladesh tells a remarkable story of poverty reduction and development. From being one of the poorest nations at birth in 1971, Bangladesh reached lower-middle income status in 2015. It is on track to graduate from the UN’s Least Developed Countries (LDC) list in 2026. Poverty declined from 11.8 percent in 2010 to 5.0 percent in 2022, based on the international poverty line of $2.15 a day (using 2017 Purchasing Power Parity and a comparable welfare series). Similarly, moderate poverty declined from 49.6 percent in 2010 to 30.0 percent in 2022, based on the international poverty line of $3.65 a day (using 2017 PPP). Moreover, human development outcomes improved along many dimensions, like a reduction in infant mortality and stunting, and an increase in literacy rates and access to electricity. Despite these gains, inequality has slightly narrowed in rural areas and widened in urban areas.

Challenges

Bangladesh’s post pandemic recovery faces continued headwinds. Real GDP growth slowed to 5.8 percent in FY23, down from 7.1 percent in the previous year. The introduction of a multiple exchange rate regime in September 2022 disincentivized foreign exchange inflows, leading to a financial account deficit. Foreign exchange rationing measures were implemented to restrict imports, which resulted in shortages of key intermediate goods, capital goods, gas, and energy.

Real GDP growth is projected to remain relatively subdued at 5.6 percent in FY24, compared to the average annual growth rate of 6.6 percent over the decade preceding the COVID-19 pandemic. Persistent inflation is expected to weigh on private consumption growth, and shortages of energy and imported inputs combined with rising interest rates and financial sector vulnerabilities are expected to dampen investor sentiment. Growth is expected to increase gradually over the medium-term as monetary, exchange rate, financial sector policy adjustments are implemented.

To achieve its vision of attaining upper middle-income status by 2031, Bangladesh needs to create jobs through a competitive business environment, increase human capital and build a skilled labor force, build efficient infrastructure, and establish a policy environment that attracts private investment.

Development priorities include diversifying exports beyond the RMG sector; resolving financial sector vulnerabilities; making urbanization more sustainable and strengthening public institutions, including fiscal reforms to generate more domestic revenue for development. Addressing infrastructure gaps would accelerate growth. Addressing vulnerability to climate change and natural disasters will help Bangladesh to continue to build resilience to future shocks. Pivoting towards green growth would support the sustainability of development outcomes for the next generation.

Support to Fight COVID-19

Within three weeks of the detection of the first COVID-19 case in Bangladesh, in March 2020, the World Bank approved $100 million to help Bangladesh ramp up testing and treatment as well as strengthen the public health system. In March 2021, the World Bank approved additional $500 million to support the national vaccination program. The financing helped Bangladesh vaccinate nearly 50% of the total population with 68 million doses of vaccines and 110 million syringes. In addition, the project helped set up liquid medical oxygen system at 30 public hospitals across the country, which is vital for treating COVID-19 cases; installed 300 ventilators at public hospitals; set-up intensive care units at 23 public hospitals across Bangladesh; built a vaccine testing laboratory in the Directorate General of Drug Administration; created disease control or epidemiological units in each of the country’s 64 districts; and created additional technical capacity through hiring of around 1,200 staff (doctors, laboratory consultants, medical technologists, data operators) who have been placed at public health facilities dealing with COVID-19 cases. The financing also made available large quantities of personal protective equipment for the frontline workers and COVID-19 testing machines and kits used by laboratories dealing with COVID-19 samples.

In addition to $600 million financing to the health sector, the World Bank have committed over $3.3 billion for Bangladesh to help create quality jobs, improve water and sanitation services, develop skills, accelerate economic recovery, and build resilience to future crises, support reforms to create jobs and build economic resilience.

Education

IDA is the largest external funder in the education sector covering the primary, secondary, and tertiary levels, paired with technical and vocational education and training, as well as education for the hard-to-reach children and youth not in education, employment, or training.

These funds have gone a long way towards preparing children and youth to become competent citizens. Almost all children today step into a classroom. In 2022, the country’s net enrollment rate at the primary school level reached above 97.6 percent, and that at the secondary school level, above 73 percent.

With nearly 6.9 million girls in secondary schools (Grade 6-10) in 2022, Bangladesh is among the few developing countries to achieve gender parity in school enrollment and has more girls than boys in secondary schools. To realize Bangladesh’s aspirations of becoming an upper middle-income country by 2031, improving school to work transition and producing higher skilled professionals toward a green and sustainable economy remain a challenge.

The World Bank is supporting the government all levels to create a green, inclusive and resilient education system through new and existing operations.

Health, Nutrition and Population

Bangladesh has made impressive progress in advancing its population’s health. A Bangladeshi born today is likely to live a quarter of a century more, than a child born in 1972.Maternal mortality rate in the country decreased from 574/100,000 live births in 1990 to 153/100,000 live births in 2022. The under-five mortality rate was reduced from 273/1,000 live births in 1970 to 30.68/1,000 live births in 2022. Between 1990 and 2022, stunting among children declined steadily, from 63.4 percent in 1990, 41 percent in 2011, 31 percent in 2017 to 24 percent in 2022. The achievements were due to expanded coverage of essential health services that has almost doubled from being 23 percent in 2000 to 50 percent in 2019. Today, nearly 96% of Bangladeshi children receive vitamin A supplements and over 89% are fully immunized, assisted deliveries by skilled birth attendants increased from 13% in 2001 to 31.3% in 2020. The total fertility rate declined from 5 births per woman in 1990 to 2.20 in 2022.

Despite the remarkable progress made, there remains a significant unfinished agenda with regards to essential maternal, child health, and nutritional services. One in four children (24 percent) under 5 years of age are stunted: In 2022, 55 percent of children under 6 months were exclusively breastfed – down from 65 percent in 2017. Only three out of ten (29 percent) children age 6 – 23 months old receive appropriate infant and young child feeding (IYCF) practices. IYCF practice was slightly better in 2017 (35 percent).

At the same time, the country needs to address the rapid increase in non-communicable diseases and be prepared for emerging infectious diseases such as the COVID-19 pandemic. For tackling these challenges, the country’s health system needs to be strengthened for improving both quality and equity of health services through an increase in public spending on health, improvement in governance and stewardship, enhancement in human resource and embracing multisectoral approaches to address social determinants of health.

Since the mid-70s, the World Bank have been supporting the country’s health sector development. The World Bank is aligning financial and technical support to Bangladesh to meet these challenges. The Bank supports the government’s fourth Health Nutrition Population sector program through health system strengthening and expanding essential health services.  Under the Urban Health, Nutrition, and Population (HNP) Project for Bangladesh, the Bank is providing support in selected urban areas, through the Ministry of Health and Family Welfare to improve delivery of essential health services, and through Local Government Division (LGD), Ministry of Local Government, Rural Development, and Cooperatives (MoLGRD and C) improving the public health services such as environmental health and preventive services. The Bank has been preparing a new operation in order to strengthen the health systems in the country under the 5th Health, Population and Nutrition Sector Program.

Energy

The World Bank has $1.45 billion of ongoing support in the energy sector to enhance capacity, generate clean energy, improve efficiency in generation and transmission and system operation, reduce technical losses, improve transmission and rural distribution network as well as increase access to both grid and renewable electricity.

The access to electricity in Bangladesh has reached to 100% (grid and off-grid) and the current installed generation capacity is 30,067 MW including captive power and renewables. IDA support has so far added 2,634 MW of electricity to the national grid, and 185 MW through renewable energy sources, including solar home systems, solar irrigation pumps, solar mini-grids, and grid-tied rooftop solar.  World Bank ongoing operation in Bangladesh will add will add another  260 MW grid tie solar PV capacity by July 2025.

The World Bank supports promoting power sector policies and institutional capacity building within the Government, power and gas utilities, and key agencies to improve the financial health, investment, and service quality.

Agriculture

Despite the high population density, decreasing arable land, and frequent natural disasters, Bangladesh has made remarkable progress in achieving food security. Almost half of the population are employed in the agriculture sector. Agriculture has also been a key driver in poverty reduction in Bangladesh over the past two decades although the growth of sector has slowed down since 2011. The sector is highly vulnerable to climate change and is under pressure to cater to an increasing population and changing diets. There is potential to increase inclusive economic growth for millions of smallholders, women, youth, and educated entrepreneurs, particularly as value addition and diversification become more dominant.

The World Bank is supporting the Government of Bangladesh in ushering in a new wave of reforms and investments to continue the agriculture transformation process towards higher crop productivity and diversification, as well as higher income earning potential for Bangladesh’s 22.7 million rural households through a comprehensive sector-wide program. A new project is helping drive diversification, food safety, entrepreneurship, and climate resilience across agri-food systems.

The World Bank also supports two million farm households, as well as small and medium-scale agro-entrepreneurs in improving livestock production sustainably, with higher productivity and better market access. During the COVID-19 pandemic, it helped business continuity for 680,000 most vulnerable households in the livestock sector.

The World Bank is helping Bangladesh build a modern food grain storage by constructing modern steel silos in eight strategic locations with a total storage capacity for 535,500 Metric tons of rice and wheat. Further, the World Bank supported 500,000 households to increase grain reserves to meet their post-disaster needs and is helping the country improve the quality and efficiency of grain storage management.

Climate Change & Disaster Risk Management

The Global Climate Risk Index ranks Bangladesh as the world’s seventh most climate-affected country over the period 2000-2019 (Germanwatch 2021).

The World Bank continues to help Bangladesh address climate change impacts and disaster risk management. The country has built stronger disaster-coping mechanisms which helped to reduce cyclone related deaths by 100-fold since 1970.

IDA has an ongoing portfolio of $1.4 billion supporting Bangladesh to build resilience against natural disasters and climate change impacts. Key interventions so far include: 1,586 repaired or newly constructed multi-purpose disaster shelters that operate as primary schools during normal weather; 656 km of all-weather climate-resilient roads built for last-mile connectivity; rehabilitation of 905 km of coastal embankments; restoration or construction of 532 hydraulic structures for sustainable water management; and 700 hectares in 10 coastal polders afforested with 1,705,200 seedlings, following a social afforestation approach. All of these are benefiting 6.5 million people in climate-vulnerable coastal Bangladesh. Furthermore, cropping intensity increased from 140 percent to 192 percent with the improved water resource management and reduction of saline water intrusion from storm and tidal surges in the selected project polders.

Environment

Since 1980, the World Bank helped Bangladesh to conserve nature and prevent environmental degradation.

The Bank is supporting the government of Bangladesh to implement its green growth strategy through afforestation, regeneration, and deforestation prevention. World Bank projects have helped improve 255,000 hectares of forest land in Bangladesh. Around 2.4 million beneficiaries from 46,000 forest-dependent households from 815 forest villages, including ethnic communities, have received alternative livelihood support, to reduce their dependencies on forest. The World Bank is also helping improve productivity of marine fisheries and helped 54,000 poor climate vulnerable coastal fisher families in 450 fisher villages to seek alternative livelihoods. The Bank is providing training and competitive conditional grants to 7,500 farmers under 300 shrimp farming clusters for further business development and growth. During the COVID-19 pandemic, it mobilized funding for cash transfers to 77,826 coastal fish and shrimp farmers.

The Bank is supporting 54,472 microenterprises (of which 84% are female led) to adopt environmentally sustainable practices. About 29,905 micro-entrepreneurs have improved their environmental and occupational practices.

The Bank is also helping Bangladesh to improve air quality management and create new financing mechanisms to reduce emissions in key sectors, such as transport, industry and waste management. Through lending and technical assistance, the Bank is supporting the Department of Environment to develop new policies and regulations, improve its infrastructure, analytical and monitoring capacity, and pilot an environment endowment funds. The Bank is also supporting the construction of five vehicles inspection centers and an e-waste management facility. Through a new green credit guarantee facility, the Bank will support activities that can reduce 1.1 million metric tons of GHG emissions, and 1.7k metric tons of particulate matter (PM) emissions from targeted sources.

By supporting green and climate resilient policy reforms, the Bank is supporting Bangladesh to prioritize green and climate resilient investments in public planning and financing at both national and local levels; strengthen its environmental enforcement capacity; reducing air pollution, including by a 5 percent increase in households using clean fuels for cooking. The supported policies will also contribute to reduce the Government’s expenditure on fuel subsidies for diesel (HSD), heavy fuel oil (HSFO), and octane by 67%. These efforts aim to embrace a future that is both clean, efficient, and prepared for the challenges of climate change.

Water & Sanitation

IDA support has helped build piped and non-piped water sources that provided safe water to nearly 1.5 million beneficiaries. In Chattogram, the second largest city in Bangladesh, almost 780,000 people now have access to water supply, including those in the urban slums.

A total of 20,475 deep tube wells, rainwater harvesting structures, pond sand filter and ring wells were constructed. In addition, 540,000 people received improved sanitation access from 120,000 new latrines.

Additionally, 140,463 beneficiaries have so far been provided with access to improved water sources (piped water supply) and about 38,821 people have been benefited with improved sanitation services, across 30 municipalities.

Across rural Bangladesh, 1.2 million beneficiaries now have access to  basic sanitation facilities  at household level of which 512,163  are safely managed, in addition 939  public toilets and 700 hand washing stations have been constructed in high pedestrian traffic locations and community clinics,  Through piped water 19,908  beneficiaries now have access to safe water in rural areas.

Governance

The World Bank has supported the Government of Bangladesh to transform the entire procurement process to online through an electronic government procurement (e-GP) system. The country’s e-GP system has contributed so far, an average annual savings of approximately $1.4 billion with an overall investment of only $70 million. The e-GP system also decreased CO2 emission by eliminating use  of millions of tons of paper. It has also significantly increased accessibility, efficiency, integrity, accountability and transparency in the public procurement process in Bangladesh.

During the COVID-19 pandemic, the e-GP system worked as the backbone to continue day to day development operations in the country and enabled procuring agencies to process all procurement activities from procurement planning to contract management, including payment. The citizen portal has been launched for public procurement and contract implementation monitoring. The citizen engagement in contract implementation monitoring has taken place in 48 sub-districts with positive feedback. The less tangible but an important impact of the reform has been a shift in mindset. Through extensive training, capacity building, awareness raising and dialogue, the relationship between the government procuring entities and private sector bidders has been carefully nurtured and trust has been built.

Since 2006, IDA has been supporting a nationwide program that augments the government’s block grants provided to all 4,561 Union Parishads (the lowest tier of elected local government). The block grant enables Union Parishads to decide and spend on local priorities. Since 2006, the discretionary funds that a Union Parishad receives annually have grown by more than ten-fold and have benefited 130 million people.

Hundreds of community schemes generating employment for the poor have been implemented, including construction or rehabilitation of rural roads, culverts, drainage, and embankment systems; water and sanitation facilities; and schools and clinics. Thirty percent of the schemes are women-preferred schemes. Under the current project, the third of the three consecutive projects, IDA is assisting to institutionalize the block grants with the government’s own resources and supporting a pilot for an urban fiscal transfer system in 16 municipalities, to be scaled up across all Urban Local Bodies through future World Bank operations.

Social Protection and Jobs

The Bank has been a long-time partner, providing financing and technical support to help Bangladesh enhance its social protection and jobs programs.

The Bank uses a combination of policy and investment lending, to improve efficiency, transparency, and shock-responsiveness in the sector, and has helped establish and adopt common digital platforms to enhance service delivery of social assistance programs across three key ministries in the sector. The Bank uses a combination of policy and investment lending, to improve efficiency, transparency, and shock-responsiveness in the sector, and has helped establish and adopt common digital platforms to enhance service delivery of social assistance programs across three key ministries covering 12.3 million beneficiaries. Bank financing has supported the full-scale adoption of digital payments for over 11 million poor and vulnerable elderly, widows, and persons-with-disabilities, with the collaboration of local-level public-private partnerships, agent banking services, and Bangladesh’s vast network of mobile money agents.

In responding to shocks Bank financing supported continuity of social assistance for over 4 million poor and vulnerable households under the Old Age Allowance, Widow Allowance and Disability Allowance programs, and recovery loans for 50,000 microentrepreneurs, during the COVID-19 crisis, enabled short-term employment for 100,000 households in selected districts affected by climatic and forced displacement crises, and provided self-reliance opportunities for over 200,000 displaced Rohingya persons in Cox’s Bazar district.

To address the large working age population in low productivity jobs, the Bank is helping the Government improve access to services to enhance livelihoods of 325,000 low-income urban youth and returning migrants through tailored economic inclusion programs. To promote similar economic inclusion opportunities serving as a pathway for graduation from poverty for more vulnerable populations, the Bank is supporting innovations to the abovementioned Allowance programs aiming to reach 10,000 elderly, widows, and persons-with-disabilities.

Investing in early childhood development to improve nutrition and cognitive development leads to healthy, productive adults, and can help prevent the intergenerational transmission of poverty. The Bank is supporting the expansion and strengthening of the nationwide Mother and Child Benefit Programme to reach up to 2 million pregnant women and mothers of children under four years, including improved field outreach and monitoring systems, to create opportunities for all children to grow up with adequate nutrition, good physical health, and cognitive development, as well as nurturing care for their human capital development.

World Bank Last Updated: Apr 11, 2024