For several years, the country’s economy has been facing a multitude of crises, which deepened significantly in the past two years. A severe shortage of dollars, bank looting disguised as loans, and the outflow of capital have intensified the hemorrhaging of the economy. Common people have been severely crushed by high inflation, and despite attempts to present a positive picture through questionable statistics, this has not brought relief to the public. In the end, Sheikh Hasina’s government left behind a debt of 18.5 trillion BDT for the interim government to manage.
Economists and analysts believe the Awami League government’s biggest failure in economic management was not taking timely measures to address the crises. Additionally, the government failed to show the strong political commitment needed to initiate and implement economic reforms. Instead, it was preoccupied with nepotistic decisions that primarily benefited a handful of businessmen and relatives of those in power, leading to the virtual breakdown of the economy.
The law-and-order situation could not be fully controlled, which created uncertainty in industries, particularly in the garment sector. Extortion in markets continued, with only a change in the players involved.
Dr. Muhammad Yunus Takes Charge
After over 15 years in power, the Awami League government could not stem the economic bleeding. However, Dr. Muhammad Yunus’s interim government, within just 30 days of taking office, has begun initiatives that the previous government failed to address. Reforms and changes are being initiated through leadership changes in various economic sectors. Especially in the financial sector, a strong message has been sent that the era of irregularities, corruption, and disguised loans under the protection of those in power is over.
In the past month, new leadership has been introduced in various sectors of the economy. A decision has been made to form a committee to draft a white paper to reveal the true state of the economy. Economists observe that the new government has prioritized restructuring the economy and the financial sector. However, beyond slightly raising interest rates, no significant measures have yet been taken to control high inflation. Meanwhile, instability continues in industries due to the incomplete control over law and order.
Economic Conditions
The economy is currently in its worst condition in decades. Almost all macroeconomic indicators are at their lowest. In July, inflation reached a 13-year high of 11.66%, with food inflation surpassing 14%. Overall inflation has remained above 9% for over a year. Some businesspeople within the power circle have continued the practice of taking loans under different names and not repaying them. This has been described by some as outright looting under the guise of loans. In the past 15 years of Awami League rule, bad loans increased by nearly BDT 1.9 trillion due to policies that favored defaulters and ignored corruption.
The previous government borrowed heavily from domestic and foreign sources to cover the budget deficit. As of June, government debt stood at BDT 18.36 trillion, an increase of six and a half times over the past years. This unsustainable borrowing has disrupted the budget’s balance, and a significant portion of annual resources is now allocated to debt repayment.
The dollar shortage persists, with the exchange rate rising from BDT 86 to 120 per dollar. Import costs have surged, while there has been no notable growth in exports or remittances in the past two years. The failure to collect sufficient revenue and the slow implementation of projects remain persistent issues.
Leadership Changes
After the new government took office, significant leadership changes occurred in key economic sectors. Former Bangladesh Bank Governor Salehuddin Ahmed took charge as Economic Advisor, while renowned economist Wahiduddin Mahmud became the Planning Advisor. Both have previously criticized the economic mismanagement under the previous government.
Notably, economist Ahsan H. Mansur, who has worked in senior positions at the International Monetary Fund (IMF), was appointed as the new Governor of Bangladesh Bank. Former Governor Abdur Rouf Talukder, known for granting various benefits to pro-government businessmen, has not been seen in public since Sheikh Hasina’s government fell.
The leadership of the Bangladesh Securities and Exchange Commission (BSEC) also saw changes, with former banker Khondker Rashid Maksud taking over as Chairman. The previous Chairman, Shibli Rubayat-Ul-Islam, was known to be close to the former prime minister.
Dollar Crisis and the Banking Sector
The dollar crisis that began two years ago remains unresolved. Despite efforts under the previous government to increase reserves, Bangladesh Bank reports that around USD 5 billion is required each month to meet obligations. As a result, the country’s reserves can only cover about three months of imports.
In August, Bangladesh Bank expanded the flexibility of the “crawling peg” system for determining the dollar price, allowing banks to offer higher rates for remittances, which has slightly boosted remittance inflows.
A White Paper on the Economy
The new government has announced the preparation of a white paper to reveal the true state of the economy. A committee was formed on August 29, headed by renowned economist Debapriya Bhattacharya, to analyze the economic situation and propose solutions. The committee is expected to submit its report within 90 days.
Future Challenges
Although the government has taken some initial steps to clean up the economy, many challenges remain. High inflation continues to be a major concern, and coordination between Bangladesh Bank, the NBR, and the Ministry of Commerce will be crucial to controlling inflation. Additionally, the government has yet to take significant steps to address corruption and irregularities in the power and energy sectors.
Economic analysts emphasize that while the interim government has made some strong appointments and taken bold steps in the banking sector, the full benefits of these actions will take time to materialize.
