Bangladesh's stubbornly high inflation is rooted in deep structural weaknesses and flawed policymaking — not merely global commodity swings or transient supply disruptions — according to a new report by The Business Standard, a Dhaka-based publication. The findings come as the Asian Development Bank (ADB) projects annual average inflation reaching 8.7% in fiscal 2025–26 and climbing further to 9% in 2026–27.

Structural Drivers Behind the Inflation Surge

The report identifies a cluster of entrenched problems fuelling price pressures: weak market competition, supply-chain bottlenecks, inadequate transport and storage infrastructure, excessive market concentration, and delayed macroeconomic adjustments. Food prices, exchange-rate depreciation, and higher imported fuel costs are also cited as significant contributors.

Particularly notable is a recurring asymmetry in Bangladesh's markets — prices rise sharply when input costs increase but fail to ease at the same pace when cost pressures subside. The report attributes this to weak market monitoring and ineffective competition policy, a pattern that systematically disadvantages consumers.

Fiscal Pressures Compounding the Problem

Bangladesh's fiscal position adds another layer of risk. The budget for 2026–27 projects a deficit of Tk 2.26 lakh crore, with plans to finance Tk 1.25 lakh crore from domestic sources. Revenue mobilisation remains structurally weak, even as government expenditure on social protection and public-sector salaries continues to expand.

'Higher government borrowing can put pressure on domestic liquidity and raise the cost of financing. If deficit financing becomes excessively accommodative, it can also intensify inflationary pressures,' the report warned.

A tighter monetary policy could offer limited relief, the report acknowledged, but stressed that fiscal discipline must accompany any monetary tightening for it to be effective.

Energy Sector Inefficiencies in Focus

The report called for what it described as 'serious discussion about inefficiencies in the energy sector, the mechanism for setting prices, the tax burden on petroleum products and the financial weaknesses of the institutions involved.' Energy shortages are also identified as a key reason private investment remains depressed, with businesses citing policy uncertainty, regulatory complications, and institutional weaknesses as additional deterrents.

What the Report Recommends

The publication urged the Bangladeshi government to develop a credible medium-term fiscal plan that explicitly links new spending commitments to sustainable revenue sources. Without such a framework, the country risks entering a cycle in which deficit financing perpetuates the very inflationary pressures it is trying to suppress. Analysts watching South Asia note that Bangladesh's inflation challenge echoes similar structural fault lines seen in Pakistan and Sri Lanka in recent years — where supply-side rigidities and fiscal slippage proved far harder to unwind than initially anticipated.

With the ADB's revised forecasts pointing to worsening price pressures through 2027, the window for preemptive policy correction is narrowing.