Photo: Collected
For several years, Bangladesh’s economy has been grappling with deepening issues, but the situation has worsened dramatically in the past two years.
The country is enduring a severe dollar crisis, widespread bank siphoning of funds under the guise of loans, and rampant money laundering abroad. Coupled with high inflation, these issues have pushed the average citizen to the brink, leading many to reluctantly embrace the interim government.
The outgoing Awami League government, under Sheikh Hasina, was notorious for manipulating economic statistics to project a rosy image of the economy. Despite these efforts, tangible relief never reached the public.
By the time the Awami League left office, they had accumulated a staggering debt of Tk 18.5 lakh crore, leaving the interim government with a daunting economic burden.
Economists and analysts point to the Awami League’s failure to address the crisis in a timely manner as a critical misstep. The government was criticized for its inability to initiate meaningful economic reforms and for lacking the political will necessary for implementation. Instead, their tenure was marked by decisions favoring nepotistic agendas and groups, benefiting a select few while exacerbating the economic downturn.
Industry insiders have highlighted that the economy is now in its worst state in decades. Nearly all macroeconomic indicators are at an all-time low. In July, inflation hit a 13-year high of 11.66 percent, with food inflation surpassing 14 percent. Headline inflation has remained above 9 percent for over a year, straining household budgets and eroding purchasing power.
Dr. Selim Raihan, Executive Director of the South Asian Network on Economic Modeling (SANEM), shared insights with The Daily Messenger, noting that recent appointments of qualified financial and planning advisers are a positive step. Some initial reforms in the banking sector have been implemented, but he cautions that the benefits will take time to materialize. He stresses that controlling inflation requires coordinated efforts from the Bangladesh Bank, the National Board of Revenue (NBR), and the Ministry of Commerce, suggesting the formation of a high-powered committee to address these challenges.
During the Awami League’s 15-year rule, defaulted loans surged to approximately Tk 1.90 lakh crore. This increase was largely due to policies that protected defaulters and ignored widespread financial mismanagement. Banking sector policies were skewed to benefit influential businessmen and those connected to the ruling party, severely damaging the sector’s stability.
To cover budget deficits, the previous government borrowed extensively from both domestic and international sources. As of June, the government’s total debt stood at Tk 18.36 lakh crore. This debt has grown six and a half times over the period, now equating to three times the current budget.
Consequently, a significant portion of the annual budget is dedicated to debt repayment, straining financial resources.
The dollar crisis that began two years ago remains unresolved. The exchange rate for the dollar, which was Tk 86, has risen to Tk 120, significantly increasing import costs. There has been no significant growth in exports or remittances in the past two years, and persistent issues such as inadequate revenue generation and sluggish project implementation continue to plague the economy.
Efforts by the previous government to boost foreign exchange reserves have fallen short. According to Bangladesh Bank sources, despite import controls, the country still requires an average of $500 crore monthly to meet its liabilities, leaving only enough reserves to cover about three months of import costs.
Corruption and irregularities in the banking and financial sectors have reached unprecedented levels over the last decade and a half. The sector's deterioration has prompted calls for a dedicated commission to spearhead banking reforms. Although a decision to form such a commission has been made, it has yet to be established. Additionally, there is a lack of coordinated action among Bangladesh Bank, NBR, and the Ministry of Commerce to manage inflation effectively.
Revenue collection has also fallen short of targets, with Bangladesh’s tax-to-GDP ratio declining to around 8 percent. Despite this, the current government has yet to implement significant reforms in the revenue sector. Efforts to address irregularities and corruption in the power and energy sectors have been insufficient, although the 'Immunity Act' in these sectors has been suspended.
Dr. Zahid Hussain, former chief economist at the World Bank’s Dhaka office, highlighted the institutional vacuum in key government bodies like the Bangladesh Bank and NBR. Recent restructuring efforts aim to address these issues and stabilize the economy. While halting black money laundering is a crucial step, the law-and-order situation remains unstable, contributing to uncertainty in sectors like ready-made garments and further exacerbating extortion in various marketplaces.
As Bangladesh navigates these turbulent economic waters, the path to recovery remains uncertain, with significant challenges still to be overcome.
Messenger/Disha
