Resolving the Banking Sector’s Distressed Portfolio Problem

May 15, 2024

By  Sadiq Ahmed

Banking sector reforms between 1997 and 2012 vastly improved the banking landscape of Bangladesh, converting the sector from an unhealthy public sector dominated enterprise to a more healthy, private sector-dominated competitive industry. This transformation played a key role in enhancing private investment, exports and GDP growth, which helped Bangladesh to climb from a low-income economy to a lower-middle-income country and set the stages for an aspiration to attain upper-middle-income country (UMIC) status by 2031. 

The feasibility of this optimistic 2031 milestone hinges on the ability to implement reforms throughout the economy. Instead, progress is being challenged by ongoing serious macroeconomic instability. In banking, drift in policy making since 2012 has created substantial negative pressure on the health of the banking sector. This in turn is complicating the restoration of macroeconomic stability and jeopardising the restoration of the UMIC growth path. 

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Sadiq Ahmed

Sadiq Ahmed is the Vice Chairman of the Policy Research Institute of Bangladesh. He was previously at the World Bank, serving as country director for Pakistan and Afghanistan and chief economist for the South Asia region. He also led key missions to Egypt, South Asia, and Southeast Asia. He completed his PhD in Economics from Boston University. He has worked on topics of poverty reduction, governance, private sector, trade and macroeconomic. He has authored more than 30 books, policy research papers and articles on various development issues.