Lasting price stability requires coordinated reforms in banking, taxation, supply chains and economic governance.

For millions of Bangladeshis, inflation is measured in smaller grocery bags, postponed medical appointments and savings that disappear before the month ends. Persistent increases in living costs have turned everyday budgeting into a struggle, particularly for households whose incomes have failed to keep pace.

The International Monetary Fund’s renewed emphasis on tight monetary conditions therefore deserves attention. But its broader message is equally important: Bangladesh must strengthen revenue mobilisation, repair its financial sector and implement structural reforms. Higher interest rates cannot carry the entire burden of economic stabilisation.

The country needs a coordinated strategy that controls inflation while protecting productive activity and vulnerable households.

Monetary restraint remains necessary. Higher interest rates can moderate borrowing, encourage saving, reduce demand pressures and support confidence in the currency. They also signal that the central bank will resist persistent price increases.

Dismissing monetary policy because inflation partly originates from supply disruptions would be a mistake. An initial increase in food or fuel prices can spread through transport costs, production expenses and inflation expectations.

Yet monetary policy has clear limitations. Expensive credit cannot improve agricultural storage, clear customs bottlenecks, strengthen competition or recover misappropriated bank funds. When these weaknesses remain unresolved, businesses and households may endure higher financing costs without experiencing sufficient relief at the marketplace.

Bangladesh Bank must therefore assess the overall financial environment, including lending rates, liquidity conditions and banking health. Policy decisions should respond to sustained evidence rather than political pressure or temporary improvements in a few commodities.

The distinction between lower inflation and lower prices also deserves greater public attention. When inflation declines, prices usually continue rising, only more slowly. Households do not automatically recover the purchasing power lost during earlier increases.

A credible recovery must consequently be judged through real incomes, employment and access to essential services, alongside the headline inflation rate.

Bangladesh’s inflation problem requires a careful diagnosis. Currency depreciation, imported costs, supply disruptions, weak competition and domestic demand can operate simultaneously. Their relative importance changes over time.

International price reductions do not necessarily translate immediately into cheaper domestic goods. Exchange rates, freight, taxes, financing costs and previously purchased inventories affect retail prices. However, these legitimate costs must not become permanent excuses for excessive margins.

The government should publish regular comparisons of import, wholesale and retail prices for essential commodities. Unexplained gaps should trigger evidence-based investigation.

Repeated references to “syndicates” are no substitute for effective competition policy. Authorities must establish whether businesses are coordinating prices, restricting market access or manipulating supply. Enforcement should follow evidence and due process.

Equally important is making markets easier to enter. Transparent import procedures, predictable customs clearance and fair access to storage and transport can strengthen competition. Indiscriminate action against intermediaries may disrupt distribution without addressing the underlying problem.

Food price stability also requires investment beyond emergency market interventions. Better rural roads, cold storage, irrigation, agricultural extension and reliable production estimates can reduce losses and improve supply.

Import decisions should respond promptly to credible assessments of domestic shortages. Delayed imports can intensify price spikes, while poorly timed arrivals can depress farmers’ earnings during harvests. Transparent rules for public procurement and stock releases would reduce uncertainty.

Climate resilience belongs within this agenda. Flood protection, drainage and resilient transport infrastructure help prevent local disruptions from becoming national price shocks.

Exchange rate management presents another difficult balance. Defending an unsustainable currency value can exhaust reserves and create foreign exchange shortages. Disorderly depreciation, meanwhile, raises the cost of imported essentials and industrial inputs.

Bangladesh needs a transparent and credible exchange market framework, supported by disciplined public finances and reliable formal remittance channels. Currency stability cannot be sustained through administrative intervention alone.

Banking reform is equally central to inflation control. A poorly governed banking system weakens monetary transmission and directs resources away from productive businesses.

When connected borrowers receive repeated accommodation while viable enterprises struggle for credit, monetary restraint becomes both less effective and less fair.

Authorities must distinguish between banks facing temporary cash shortages and institutions whose underlying losses threaten their viability. Emergency liquidity may help the former; the latter require credible restructuring.

Independent asset quality assessments, honest recognition of bad loans and stronger supervision are essential. Any public recapitalisation should carry enforceable conditions, governance changes and transparent reporting.

Depositors and essential payment services deserve protection. Powerful borrowers and shareholders should not be insulated from responsibility for misconduct. Asset recovery should proceed through credible legal processes, without treating uncertain future recoveries as money already available.

Public finances form another critical part of the solution. Bangladesh’s exceptionally low revenue mobilisation restricts spending on infrastructure, social protection and institutional capacity.

Figures require precision: tax revenue and total government revenue are different measures. The IMF’s January assessment recorded tax revenue at 6.9 per cent of GDP in FY2024–25, illustrating the narrow fiscal base.

Reform should broaden compliance rather than repeatedly increase pressure on existing taxpayers. Unjustified exemptions should be reviewed, their costs published and preferential treatment reduced.

Digital filing and electronic invoicing can help, but technology must be accompanied by simpler rules, reliable refunds, accessible appeals and protection against harassment.

Tax changes affecting essential consumption require careful sequencing. Raising indirect taxes abruptly can increase living costs before stronger public finances deliver benefits.

Expenditure reform must accompany revenue measures. Fiscal discipline should reduce waste and poorly justified projects while preserving healthcare, nutrition, maintenance and productive investment.

Energy subsidy reform requires similar care. Operational losses and procurement inefficiencies should be addressed alongside tariff decisions. Vulnerable households need protection before necessary adjustments take effect.

Targeted social assistance is therefore part of stabilisation itself. Reliable beneficiary lists, accessible payments and effective complaints systems can prevent temporary hardship from causing lasting damage. Benefits should also be reviewed against changing living costs.

A new IMF programme can provide financing and time, but it cannot substitute for domestic ownership. Its value should be judged by the feasibility of reforms and their contribution to durable stability.

The government should publish a coordinated implementation plan with clear responsibilities, deadlines and measurable outcomes. Immediate priorities should include essential commodity transparency, protection for vulnerable households and credible banking assessments. Subsequent milestones should cover restructuring, tax exemptions, customs efficiency and supply infrastructure.

Progress must be measured through household purchasing power, healthier banks, stronger revenue collection and reliable access to essentials.

Bangladesh’s inflation battle will ultimately depend on political choices: whether privileges are challenged, institutions strengthened and public resources managed honestly.

Monetary discipline is necessary. Lasting relief requires a government capable of making the rest of the economy work.

(The writer is a Geneva-based financial crime compliance specialist in private banking, columnist and poet. He writes on economic governance, global financial integrity and international affairs and can be reached at shahidul.alam@bluewin.ch)