POST-HASINA ECONOMY: Current efforts show relief, but past economic wounds persist

Muhammad Muhid Hasan :

After more than a decade and half of major economic disruption plagued by corruption, misuse of discretionary power and mismanagement during the regime of ousted Prime Minister Sheikh Hasina, Bangladesh’s economy has shown considerable signs of recovery under the current government.

The country’s key macroeconomic indicators are gradually shifting from uncertainty to resilience.

More than a year ago, Sheikh Hasina was forced to resign and she fled the country on 5 August 2024 amid a mass uprising, leaving behind significant economic challenges for the current interim government led by Nobel Laureate Professor Muhammad Yunus.

The economy inherited by the interim administration was deeply weakened and malfunctioning. Many of the multifaceted challenges the government has been grappling with are legacies of the past.

Nearly all key economic indicators had been on a downward trajectory – including persistently high inflation, fragile banks, a sharply reduced foreign exchange reserve, statistical manipulation, unpaid liabilities to foreign creditors and energy companies, a steep depreciation of the taka against the US dollar, revenue leakages, fiscal inefficiencies, and widespread wealth concentration.

According to the White Paper report published on 1 December 2024, an average of USD 16 billion was illicitly siphoned out of Bangladesh every year during Sheikh Hasina’s tenure, totalling a staggering USD 234 billion laundered between 2009 and 2023. The report also revealed that over Tk 700,000 crore was spent under the Annual Development Programme (ADP), of which around 40 per cent was misappropriated by bureaucratic and political networks.

Furthermore, ten crisis-hit banks – mostly Shariah-based – were found to be “technically bankrupt and illiquid”.
Recognised non-performing loans (NPLs) rose nearly tenfold since 2010, reaching Tk 2,11,391crore by the end of June 2024.

The taka began weakening against the dollar in 2022 amid instability in the foreign exchange market, driven by both global and domestic disruptions. By mid-2024, the currency had depreciated by roughly 30 per cent. The public debt-to-GDP ratio also increased to nearly 40 per cent in FY2024.

Interim government’s economic stabilisation efforts
The interim government managed to pull the economy back from the brink by curbing rampant corruption, halting the free fall of foreign reserves, boosting exports, and increasing remittance inflows through tighter financial oversight.

# Taming inflation to 9 per cent
Assuming office, one of the biggest challenges for Yunus has been controlling inflation, which had remained above 9 per cent for more than two consecutive years. Inflation dipped below that threshold in June 2025.

According to the Bangladesh Bureau of Statistics (BBS), inflation edged up slightly to 8.36 per cent in September 2025 from 8.29 per cent in August, indicating that while the problem has not been fully resolved, a clear downward trend is evident compared to 9.92 per cent in September 2024 and 9.63 per cent in September 2023.

# Stabilizing foreign currency reserves
One of the government’s major achievements has been halting the decline in foreign currency reserves. According to the IMF’s BPM6 methodology, reserves have remained above USD 20 billion for the past nine to ten months. Gross reserves stood at USD 32.18 billion, while BPM6-adjusted reserves were USD 27.38 billion, last Monday.

Reserves, according to IMF standards, had previously peaked at USD 48.06 billion in 2021 before steadily declining to USD 20.48 billion by 31 July 2024 – during the final week of the previous administration. Central bank data show that between 2022 and mid-2024, reserves declined by an average of USD 1.3 billion per month.

# Rising remittance inflows
Since the fall of past government, remittance inflows through official channels have surged as expatriate confidence in the banking system has been restored. Monthly inflows have exceeded USD 2 billion since August 2024, with a record USD 3.29 billion received in March 2025. The fiscal year FY2024-25 marked a historic milestone, with inflows surpassing USD 30 billion – a 26.8 per cent increase from USD 23.91 billion in FY2023-24.

# Export growth
Export earnings also showed encouraging progress. In the first quarter of FY2025-26 (July-September), export earnings increased by 5.64 per cent, totalling USD 12.31 billion. For the entire FY2024-25, merchandise exports reached USD 48.28 billion, marking an 8.58 per cent year-on-year increase, according to the Export Promotion Bureau (EPB).

Persistent weaknesses and structural challenges
Despite stabilising reserves and inflation, the economy continues to face deep-rooted challenges, particularly in investment, employment, and poverty alleviation.

# Declining private sector credit growth
Private sector credit growth has fallen to a 23-year low, signalling weak investment momentum. Bangladesh Bank data show that credit growth dropped to 6.35 per cent in August 2025, down from 6.52 per cent in July and 7.5 per cent in April, indicating a sustained slowdown.

# Plunge in capital machinery imports
Total imports in FY2024-25 stood at USD 69 billion, rising by just 0.18 per cent from the previous year. Import LCs for capital machinery – a key indicator of investment activity – declined by over 25 per cent year-on-year.

Imports of intermediate goods, petroleum, and industrial raw materials also decreased. Between July and August FY2025-26, imports of capital machinery fell by 11.5 per cent, according to the central bank.

# Wage growth lagging behind inflation
For 44 consecutive months, wage growth has failed to outpace inflation, eroding real incomes for millions of low- and middle-income families. BBS data show that wages grew by 8.02 per cent in September 2025, compared with inflation of 8.36 per cent – continuing a persistent gap.

# Rising poverty levels
According to the World Bank’s Bangladesh Development Update (October 2025), poverty has worsened, rising to 21.2 per cent in FY2024-25 from 20.5 per cent in FY2023-24. Poverty on the USD 3.00 line is projected to reach 8.9 per cent, pushing about 1.2 million additional people below the poverty threshold.

Acknowledging the recovery sign in major macroeconomic indicators under the current government, Economist and academic former Professor Muinul Islam told The New Nation that several deep-seated problems still persist – including low GDP growth, weak investment, inflation surpassing wage increases, and rising poverty.

He further noted that since economic growth depends heavily on the private sector, without renewed investment, new jobs cannot be created, and incomes will stagnate.

The Professor added that the government should take immediate steps to address major challenges, including tackling inflation, boosting revenue and private investment, generating employment, and reversing the rise in poverty, but economic uncertainties is prevailing ahead of the national election.