Bangladesh economy has begun to regain its vitality

Amidst rampant corruption, bank looting, and authoritarianism that nearly crippled the economy, Sheikh Hasina was forced to resign and flee the country following a massive student and public uprising.

In the aftermath, an interim government was formed under the leadership of Nobel laureate in economics, Dr. Muhammad Yunus. Within just a month of taking office, the new government has begun to revive the economy. Remittances are increasing at a rapid pace, banks are being freed from crony control, and measures have been taken to reduce inflation.

Under Sheikh Hasina’s rule, the economy started deteriorating during the post-COVID period, exacerbated by the Russia-Ukraine war. Rising fuel prices led to instability in the essential commodities market. The exchange rate of the dollar surged from 86 to over 120 takas. Despite the crisis, the Hasina government failed to take visible steps to address it. Instead, a massive outflow of laundered money continued abroad, and banks were plundered under the watch of Bangladesh Bank. Thousands of crores of taka were embezzled by government affiliates like S. Alam through paper companies. Real inflation skyrocketed to over 30%, and foreign debt surpassed 18 trillion taka.

Following the collapse of the Hasina government due to student-led protests, Dr. Yunus took charge as the interim government leader on August 8. He immediately focused on economic restructuring, appointing renowned economist and former central bank governor Dr. Salehuddin Ahmed as the finance advisor. The planning ministry was entrusted to noted economist Wahiduddin Mahmud, while Dr. Ahsan H. Mansur was appointed as the governor of Bangladesh Bank.

Expatriate workers, who had lost faith in the Hasina government, were among the first to rally behind the new leadership. Legal remittance inflows skyrocketed, boosting central bank reserves. According to reports, a record $3.3 billion in remittances was received in a single month.

To prevent further bank looting, the government has initiated banking reforms. With the dissolution of boards, almost all banks, including Islamic Bank, have been freed from the control of S. Alam. The central bank has also announced plans to establish a Banking Commission soon.

The new government has eliminated opportunities for legalizing black money earned through corruption and looting. This is expected to significantly reduce illegal financial practices. The Anti-Corruption Commission (ACC) has become much more active, apprehending figures like Salman F. Rahman, who was involved in past stock market scams and bank looting. Others involved in such activities are under intelligence surveillance.

The Hasina government had painted a rosy picture of the economy while leaving the people to suffer. To uncover the true state of the economy, a White Paper committee has been formed, headed by CPD fellow Debapriya Bhattacharya. The committee is expected to submit its report with recommendations to the interim government within 80 days, based on which the foundation for a new, more sustainable economy will be built.