Bangladesh’s job crisis – Will the government’s policy package backfire?

On 16 September, the government unveiled a sweeping list of economic, energy, welfare and infrastructure initiatives. Among other things, these initiatives are expected to create jobs for young people. Job initiatives include youth financing, education and overseas employment.

The youth financing scheme includes a 50 crore taka special loan fund from Bangladesh Bank for an upazila-based programme under which 5,000 promising entrepreneurs are expected to receive start-up capital annually; collateral-free, interest-free digital “e-loans” for marginal and small entrepreneurs; and nationwide access to an online start-up fund.

Technical education will become compulsory from Grade Six and for National University students, while the “Alpha” project will provide practical employment skills to around 45 lakh people. Also, technical education will be modernised under an agreement with China to meet industry needs.

Earlier, on 2 August, the government instructed the state-owned banks to fill vacant posts within 180 days. On 11 August, Bangladesh Bank announced a 1,000 crore taka special fund – 500 crore taka for low-interest loans and 500 crore taka for grants – with the aim of creating 5,000 youth entrepreneurs.

As part of its strategy to fulfil its election promise to end the country’s unemployment crisis within five years by creating 1 crore new jobs, the government has fast-tracked the filling of vacant posts in public enterprises and corporations. 

It has recently launched a fresh initiative to fill around 5.2 lakh vacant posts across various government institutions and regulatory bodies, such as the Microcredit Regulatory Authority and the Office of the Comptroller and Auditor General.

The government’s accelerated job initiatives also include a 60,000 crore taka stimulus package for the private sector – 20,000 crore taka for reopening closed factories; 10,000 crore taka for agriculture and rural economic activities; 5,000 crore taka for the cottage, micro, small and medium enterprise (CMSME) sector; 3,000 crore taka for export diversification; and 3,000 crore taka for the North Bengal Agricultural Hub initiative.

Background

The background to these initiatives is the growth of the labour force to 7.17 crore, of whom 26.2 lakh remain unemployed, as the Finance Minister mentioned in Parliament on 10 September, referring to the Bangladesh Bureau of Statistics (BBS)’s Labour Force Survey 2024. The minister also said another 5.04 crore people were outside the labour force altogether, among whom around 3.801 crore were women who were neither employed nor counted as unemployed in 2024. Undoubtedly, this is quite a bleak picture.

Data from international agencies reveal an even starker picture. For example, the World Bank estimates Bangladesh’s total labour force at 7.474 crore in 2025, roughly 30 lakh more than the BBS estimates. 

A 2025 World Bank review finds that, from 2013 to 2022, Bangladesh’s working-age population grew at an average rate of 1.5%, while employment growth during the same period was only 0.2%. Thus, according to International Labour Organization (ILO) data, the employment rate – the indicator of the extent to which available labour resources (people available to work) are being used – remains low at around 56.8%, while the informal employment rate is as high as 84%.

The situation is more challenging for young people, who face additional hurdles in transitioning from education to employment, often with inadequate market-relevant skills. According to the ILO, approximately 20-22 lakh young people enter the labour force every year in Bangladesh. However, the insufficient growth of formal jobs traps 92.7% of working youth and 98.5% of young women in informal employment without social protection and fundamental rights at work. Thus, they face significant decent work deficits, including low wages and poor working conditions. Regrettably, the highest unemployment rates are among those who have completed tertiary education, at 27.8% overall (32.6% for women). Furthermore, an alarming 22% of young people (aged 15–29) – 27.1% of young women and 16.2% of young men – are not in education, employment, or training (NEET).

The situation is likely to become more challenging as the World Bank projects a grimmer outlook. It predicts nearly 6 lakh job losses and higher inflation due to the war in the Middle East, while at least 5,000 Bangladeshi workers have already lost their jobs in Lebanon alone, according to media reports.

An assessment

This assessment is based on media reports, as the government did not release any policy document showing how the various figures were derived. We also do not know how each policy action will work to achieve the ultimate goal; nor do we know whether the various actions will work in tandem, maximising synergies and minimising trade-offs or conflicts. Implementation plans and sequencing, as well as financing mechanisms (especially their sources), are also not adequately explained.

Therefore, in the absence of information about the coordination mechanism among the various implementation agencies, the consistency or coherence between different aspects of the policy package, and their integration, we cannot assess the likely overall effectiveness of the announced policy package.

However, we can still make observations based on past experience and analytical perspectives. To begin with, some of the initiatives mentioned, such as Saudi scholarships for 509 meritorious students a year, may be questionable, given that Saudi Arabia faces a severe economic downturn, with a 4.8% GDP contraction in Q2 2026, according to an Oxford Economics analysis. The same can be said about the expected overseas jobs, especially in the Middle East, where jobs for Bangladeshis have already hit a five-year low. Although Malaysia agreed to reopen its labour market to Bangladeshi workers following the Prime Minister’s visit, the Malaysian government has not yet clarified several crucial elements of the recruitment mechanism to Dhaka.

One serious limitation is its lack of linkage with the country’s demographic dynamics. Bangladesh is currently at the peak of its youth population bulge – nearly 28% of its population is in the age bracket of 15–29. By 2035, it is projected to decline to 24%. The announced policy package does not provide strategies for reaping the “demographic dividend” before it is too late and it turns into a “demographic curse”. The pace of job creation must be fast enough to absorb not only the pool of existing unemployed people but also new entrants into the labour force. Recruitments to fill vacant public sector positions are not new jobs, and cannot satisfy this requirement.

We know that sustainable, productive and decent job creation can only happen through sustained rapid economic growth accompanied by dynamic structural transformation, which entails creative destruction. That is, an economy must progressively move up the productivity ladder – from lower value-added to higher value-added; from lower-skilled to higher-skill-intensive activities; and from less complex to more complex activities. 

This means that education and skill-development measures that are not consistent with the country’s structural transformation strategies are likely to create more educated unemployment. The success of the announced policy package will depend on complementary reforms in banking governance, energy supply, and industrial policy.

Using the above analytical framework, one can question whether the initiative to fill vacant positions at government institutions is appropriate. 

Public institutions in Bangladesh have historically been overstaffed, as successive governments have regarded them as repositories of jobs. There is no indication that the government has conducted any rigorous analysis to assess whether these jobs are genuinely required. 

In the absence of such rigorous criteria, the mass public-sector recruitment drive is likely to cause serious challenges for long-term fiscal and structural sustainability.

The instruction to the state-owned commercial banks (SoCBs) to fill vacant positions is likely to cause serious long-term damage to the economy, ultimately undermining the job-creation objective. Severe balance-sheet distress across Bangladesh’s five major SoCBs continues to deepen, as non-performing loans (NPLs) surged by 6,304 crore taka in the first six months of 2026 to a staggering 151,000 crore taka. Asking these financially struggling SoCBs to fill vacant posts will only increase their financial distress. They may survive through the Bangladesh Bank’s injection of capital. But such actions also undermine trust in the banking sector. A banking crisis may turn into a full-blown economic crisis.

Job creation is not an automatic outcome of credit expansion. It depends on whether the financed activities are genuinely productive and whether they operate in an enabling environment. Therefore, one can raise serious concerns about the 60 thousand crore taka stimulus package in an economy suffering from serious structural bottlenecks, especially related to energy, logistics and infrastructure. 

It is highly likely that a large-scale injection of funds into a structurally constrained economy will raise inflation and thus threaten macroeconomic stability, adversely affecting the investment climate.

More importantly, the effectiveness of this strategy hinges critically on the viability of the targeted enterprises. It presupposes that closed factories are victims of temporary shocks; but most of them are structurally uncompetitive or burdened by chronic mismanagement. Injecting fresh credit into such entities runs counter to the principle of creative destruction as an integral part of a dynamic structural adjustment process. Thus, this initiative risks creating ‘zombie firms’ that survive on subsidised finance but fail to generate sustainable returns. This not only locks capital into unproductive uses but also increases the future burden of NPLs on the banking system.

The interest-rate structure of the package also warrants close scrutiny. Loans priced between 4% and 7% are a significant departure from prevailing market rates, with borrowing costs exceeding 15%, particularly for SMEs. While such low interest rates may encourage investment, they may also lead to the misallocation of resources, with borrowers prioritising access to cheap funds over productive efficiency.

The absence of a credit-guarantee mechanism raises concerns about risk distribution. Banks are expected to bear the credit risk associated with lending under the scheme, even when financing distressed enterprises. This could lead to cautious lending behaviour, limiting the reach of the programme. On the other hand, if banks are compelled to lend under pressure, this could worsen future asset-quality problems.

One may also raise concerns about the programme’s long-term fiscal implications, as it relies on the government’s annual subsidy of around 3,000 crore taka. This highlights the importance of ensuring that the stimulus generates tangible economic returns. 

However, liquidity alone cannot drive investment if confidence remains low due to political instability, a lack of regulatory clarity, and a deteriorating law-and-order situation.

Finally, the governance framework will play a critical role in determining the stimulus package’s success. It will require a disciplined approach to implementation, with clear beneficiary-selection criteria and robust monitoring and evaluation mechanisms. The proposal to use escrow accounts and strict monitoring mechanisms is a step towards stronger oversight. 

However, effective monitoring requires institutional capacity and transparency. Past experience with refinance schemes in Bangladesh suggests that weak oversight can lead to misuse of funds and limited impact.

Emeritus Professor Anisuzzaman Chowdhury is former Special Assistant (for the Ministry of Finance) to the Chief Advisor of the Interim Government, led by Professor Yunus. He held senior United Nations positions in Economic and Social Affairs in New York and Bangkok. E-mail: a.chowdhury@westernsydney.edu.au; anis.z.chowdhury@gmail.com

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