Tarique Rahman’s Plan to Revive Bangladesh’s Economy: Challenges and Opportunities in 2026

Explore how Bangladesh’s new PM Tarique Rahman aims to boost GDP growth, manage remittances, and navigate China-US relations amid post-election revival.

When Tarique Rahman finally set foot on Bangladeshi soil after nearly two decades in London exile, the crowds that greeted him weren’t merely celebrating a political homecoming. They were, in a very real sense, betting their livelihoods on him. The BNP’s sweeping two-thirds majority in February 2026 — an election made possible only by the extraordinary student-led uprising that drove Sheikh Hasina from power in 2024 — handed Rahman a mandate that is simultaneously historic and terrifying in its weight. Bangladesh’s GDP stands at roughly $460 billion, growth has decelerated to a sluggish 4%, and a geopolitical tightrope stretches in every direction. The question isn’t whether Rahman wants to revive Bangladesh’s economy. The question is whether the tools he has are equal to the task.

The Economic Inheritance: More Fragile Than It Looks

Bangladesh’s macro story has long been one of development economics’ favorite fairy tales — a low-income country that outpaced neighbors through garment exports, microfinance, and disciplined remittance flows. That story has grown considerably more complicated.

The IMF projects GDP growth to rebound to 4.7% in FY2026, a modest recovery from the post-Hasina political turbulence that rattled investor confidence in late 2024 and through 2025. But 4.7% is not the 6–7% Bangladesh needs to absorb its vast young workforce, reduce poverty meaningfully, or finance the public investment that decades of cronyism left underfunded. The structural gaps are significant: private investment hovers well below the 35% of GDP economists identify as necessary for sustained high growth. Public institutions — tax administration, the judiciary, anti-corruption bodies — carry the scars of 15 years of systematic politicization.

Agriculture still employs roughly 44% of the workforce, a share that underscores both the rural depth of economic vulnerability and the limits of an export-led model that has concentrated prosperity in Dhaka and Chittagong. When a cyclone hits the Sundarbans or global cotton prices spike, nearly half the country feels it in their bones.

Then there’s the remittance lifeline. Bangladeshis abroad sent home $30 billion in 2025 — a remarkable surge driven partly by the depreciation of the taka making dollar transfers more attractive, and partly by the expanded diaspora built up across the Gulf, Malaysia, and Europe. Remittances now rival garment export earnings as the backbone of foreign exchange reserves. That’s a double-edged asset: invaluable as a buffer, but structurally fragile because it depends on labor-market conditions in Riyadh and Dubai, not Dhaka.

The Garment Sector: A Crown Jewel Under Pressure

Bangladesh’s readymade garment industry — a $40+ billion export engine that dresses much of the Western world — faces its most complex moment in a generation. The challenges are formidable: automation threatens lower-skill sewing jobs, Western buyers are demanding ESG compliance that many Bangladeshi factories can’t yet afford, and competitors from Vietnam and Ethiopia are chipping away at market share.

US tariff policy adds another layer of uncertainty. Bangladesh’s garment exports to America — its single largest market — flow under preferences that have never been fully secure and are now subject to the broader unpredictability of Washington’s trade posture. Rahman’s government has signaled it will pursue a formal trade framework with the US, a pragmatic move that would reduce vulnerability but requires diplomatic capital Bangladesh is only beginning to rebuild.

The harder domestic challenge is labor. The 2024 revolution was partly ignited by garment workers and students united by economic grievance. Any BNP government that ignores wage stagnation in the sector risks repeating the political miscalculations that ultimately doomed Hasina. Rahman has spoken of a “social compact” with workers — the test will be whether that translates into enforceable minimum wages and functional unions, or remains campaign rhetoric.

Navigating the Great Power Triangle: China, the US, and India

China: Partner, Creditor, or Competitor?

Bangladesh’s trade relationship with China is the defining economic relationship most Western analysts underestimate. Bilateral trade runs at approximately $18 billion, overwhelmingly weighted toward Chinese exports — machinery, raw materials, electronics — that Bangladesh’s industry desperately needs but can’t yet produce domestically. Chinese firms have also financed key infrastructure, from the Padma Bridge rail link to power plants, creating debt obligations that constrain fiscal flexibility.

Rahman’s stated approach is “multipolar pragmatism” — maintaining strong economic ties with Beijing while signaling openness to Washington and Tokyo. It’s a reasonable strategy, and it reflects a broader trend across Southeast and South Asia. But it requires a diplomatic dexterity that Bangladesh’s foreign ministry has not traditionally needed to exercise. The risk is that both great powers interpret hedging as hostility rather than prudence.

The India Question: Thaw or Freeze?

Relations with India are the most emotionally charged variable in Rahman’s foreign policy inbox. New Delhi was perceived as Hasina’s patron — a relationship Bangladeshi nationalists resented and the BNP stoked for electoral advantage. Border tensions have flared since the revolution, with incidents along the fencing that runs most of the 4,000-kilometer frontier. The Teesta water-sharing agreement, long in diplomatic limbo, remains unsigned.

And yet the economics of India-Bangladesh interdependence are powerful enough to compel engagement regardless of political temperature. Indian goods flood Bangladeshi markets via both formal and informal channels. Bangladesh’s northeast-facing connectivity — ports, power grids, transit routes — cannot be optimized without Indian cooperation. A sustained chill with Delhi would cost Rahman more than it costs Modi. The smart money is on a gradual, face-saving thaw: enough symbolism to satisfy nationalist sentiment at home, enough pragmatism to keep the border economy functioning.

ASEAN: The Aspiration That Requires Homework

Bangladesh’s ASEAN aspirations have been discussed for years with more enthusiasm than strategy. Joining ASEAN — even as a dialogue partner — would require institutional reforms, trade liberalization, and a regional diplomatic posture that Dhaka has not historically prioritized. Rahman’s team has floated ASEAN engagement as part of a broader Indo-Pacific pivot. It’s an appealing vision. Translating it into policy requires, first, getting the basics right at home.

The Political Economy of Reform: Who’s Really in the Room?

Any honest assessment of Bangladesh’s economic outlook has to grapple with the coalition Rahman is governing within. The BNP’s two-thirds majority is a powerful instrument — but it came partly on the back of Jamaat-e-Islami’s organizational muscle in constituencies where the BNP had been weakened during the Hasina years. Jamaat’s social conservatism and ambiguous attitude toward Bangladesh’s secular liberal elite creates real tension with the reform agenda that investors and multilaterals are expecting.

Youth are the other critical constituency. The students who brought down Hasina want jobs — real ones, not patronage positions — transparency, and an end to the culture of political violence that has made Bangladeshi politics so costly to its own institutions. Rahman’s government has promised a crackdown on corruption and civil service reform. These are not merely good governance talking points; they are the precondition for private investment to grow toward that 35% of GDP target. Foreign capital follows institutional credibility, and Bangladesh’s institutional credibility is currently being rebuilt from a low base.

The Awami League, despite its electoral collapse, commands deep roots in parts of the bureaucracy, the military officer class, and civil society. A wise BNP government manages this not through purges — which historically backfire — but through transparent accountability processes that don’t look like victors’ justice.

LDC Graduation: The November 2026 Cliff

Looming over everything is Bangladesh’s scheduled graduation from Least Developed Country status in November 2026. This is, in development terms, a success story — Bangladesh has met the income, human assets, and economic vulnerability thresholds for graduation. But success brings a cost: the erosion of preferential trade terms that have underpinned garment export competitiveness for decades.

Duty-free access to the EU under the Everything But Arms initiative will phase out. WTO-TRIPS flexibilities on pharmaceuticals will tighten. The IMF and World Bank have urged Bangladesh to negotiate transition arrangements and diversify its export base before the preferences expire. Rahman’s government has approximately two years of post-graduation transition runway — time that must be used to move up the value chain, attract technology-intensive investment, and build the trade infrastructure that makes Bangladeshi exports competitive on merit rather than preference.

This is where the $460 billion economy’s future is genuinely being written. Not in political speeches, but in whether Chittagong port gets the upgrades it needs, whether the power grid can reliably supply the industrial zones, and whether the education system starts producing graduates with skills the 21st-century economy demands rather than the 20th.

Opportunities and Pitfalls: A Forward Look

Where the optimists have a point:

• The remittance surge provides a genuine foreign exchange cushion that buys reform time.
• Bangladesh’s demographic dividend — a young, urbanizing population — is a real asset if youth employment programs gain traction.
• The global supply chain diversification away from China creates an opening for Bangladesh in electronics and light manufacturing if the enabling environment improves.
• The BNP’s large majority, paradoxically, gives Rahman room to absorb short-term political pain from reform — a luxury narrow coalition governments rarely have.

Where the pessimists may be right:

• Jamaat-e-Islami’s influence in the coalition could slow liberal economic reforms and deter Western investors with ESG mandates.
• India-Bangladesh tensions, if they deepen, could disrupt the connectivity projects that unlock northeastern Bangladesh’s economic potential.
• LDC graduation without adequate preparation could trigger a garment sector shock that reverberates across the 4 million workers — mostly women — who depend on it.
• Institutional rebuilding takes longer than election cycles. The IMF’s 4.7% projection is predicated on policy continuity and reform progress that is far from guaranteed.

The Bottom Line

Tarique Rahman inherits a Bangladesh that is more resilient than its critics acknowledge and more fragile than its boosters admit. The $460 billion economy has real foundations — a hardworking diaspora, an adaptable garment sector, a tradition of pragmatic policymaking that survived even the Hasina years’ worst excesses. But those foundations need serious maintenance: institutional reform, investment in human capital, and a foreign policy sophisticated enough to manage great power competition without becoming a casualty of it.

The students who made this government possible are watching with the same energy they brought to the streets in 2024. They are not an audience to be managed with press releases. They are Bangladesh’s most important economic asset — and its most demanding constituency. Getting the economy right, for Rahman, is not just a technocratic challenge. It’s the condition of his political survival, and the measure by which history will judge whether the 2024 revolution delivered on its promise.