By Motaher Hossain

When a train or bus comes to a halt, it takes time to restart and regain momentum. Similarly, it takes time to put a derailed train back on track and restore its operation. In the same way, reviving and stabilizing the currently fragile and devastated economy of the country requires a long period. February 8 marked six months since the interim government, led by Nobel Peace Prize winner Dr. Muhammad Yunus, took charge. In terms of governance, six months is a very short period.

Within this short span, the government has presented many visible achievements to the nation. However, the economic crisis, wounds, and destruction caused during the ousted Awami League government’s tenure have only partially been addressed. Some progress has been made, but the economy has yet to fully recover from its deep crisis. Inflation and commodity prices have not yet reached a comfortable level. As a result, domestic and foreign investments, as well as employment opportunities, have not reached the expected level. General citizens remain frustrated with inflation and rising commodity prices. However, government officials remain optimistic that the "fragile economy" will soon regain momentum, and inflation and commodity prices will become more affordable.

Over the past six months, the interim government has taken several measures to control the prices of essential commodities and curb inflation. One such step was providing approximately BDT 225 billion in assistance to struggling banks to alleviate liquidity crises. The previous government’s "digital" disruptions led to massive financial misappropriation from banks, pushing at least a dozen banks into crisis. Former central bank governor Abdur Rouf Talukder attempted to cover up this banking disaster by printing money and providing various illegal benefits. However, following the student-led mass movement and uprising that toppled Sheikh Hasina’s government in July-August, the interim government adopted a different approach. The new central bank governor, Dr. Ahsan H. Mansur, vowed not to print money to support struggling banks. Despite this, to restore public confidence, Bangladesh Bank has provided liquidity support by printing money for some financially distressed banks.

To curb the surge in commodity prices, the government has reduced import duties on several essential goods and permitted increased imports. Although importers have taken advantage of these tax benefits and lower LC margins, consumers have seen little relief, with prices of some staples, such as soybean oil and rice, continuing to rise. Additionally, under the influence of the International Monetary Fund (IMF), the National Board of Revenue (NBR) has increased taxes on over a hundred products and services, causing market instability and higher costs for consumers.

The government faces challenges in both revenue collection and expenditure management. Revenue collection targets are not being met, leading to increased budget deficits. The NBR’s revenue shortfall has grown significantly, affecting the financing of development projects. Rising costs for government employee salaries, domestic and foreign debt repayments, and other expenses have forced the government to make substantial budget cuts. The economic decline started in 2019, exacerbated by the COVID-19 pandemic and the Russia-Ukraine war in 2022, which disrupted global economies, including Bangladesh. However, the crisis deepened due to the previous government’s reckless policies, widespread looting in banks and financial institutions, and large-scale money laundering, leading to a downward spiral in almost all economic indicators.

Upon taking office on August 8, the interim government initiated economic reforms. However, the full benefits of these reforms have yet to be realized. Meanwhile, law enforcement advisor Major General (Retd.) Jahangir Alam Chowdhury is actively working to maintain law and order. Despite government efforts, reports of extortion under the banner of political parties continue to surface in newspapers. In a recent law and order advisory committee meeting, the government reaffirmed its "zero-tolerance" stance on such activities and instructed law enforcement agencies to take necessary actions. Overall, to regain public trust, the interim government must accelerate its ongoing efforts.

Economist Zahid Hossain comments on the economic situation of the past six months: "Expecting a complete economic turnaround in just six months is unrealistic. However, it is crucial to assess whether the economy is on the path to recovery. Some progress has been seen in balancing international trade, with current account surpluses recorded in recent months. Export earnings and remittance inflows have increased, and foreign reserves have stabilized. Preparations are underway for a turnaround in the banking sector. However, three key areas remain stagnant: inflation, employment, and investment. The economic crisis worsened due to the previous government’s consecutive policy failures, leading to a downturn in almost all economic indicators. While the interim government has initiated reforms, the full benefits are yet to be realized."

Following the mass uprising in July, the authoritarian Awami League government fell on August 5. One of the interim government’s notable successes has been preventing the further decline of foreign exchange reserves. According to IMF calculations (BPM), reserves have remained around $20 billion for the past six months. The exchange rate of the dollar has also stabilized. Increased exports and remittance inflows have positively impacted both the current and financial accounts, leading to a degree of stability in the financial sector.

The previous government had attempted to control reserve depletion by reducing imports. However, import costs are no longer being suppressed artificially. From July to December of the past six months, the settlement of letters of credit (LCs) increased by 2.5% compared to the same period last year. Economist Zahid Hossain reiterates that expecting a full economic turnaround within six months is impractical, but signs of progress are evident.

Since April 2024, food inflation has remained in double digits for ten consecutive months. In July 2024, food inflation peaked at 14.10%, the highest in 13 years. Apart from September and January, overall inflation has remained in double digits in most months over the past seven months, averaging 10.34% in 2024. To control inflation, the interim government raised interest rates. The NBR reduced taxes on potatoes, onions, and several other essential goods, but prices continued to rise. Both the economic advisor and the central bank governor have indicated that it will take more time for inflation to decrease, requiring patience from the public.

Despite IMF conditions, the NBR has struggled to increase revenue collection. In the first six months of the current fiscal year (July-December), revenue shortfalls amounted to BDT 578.91 billion, even lower than the same period in the previous year by BDT 35 billion. Implementation of the Annual Development Program (ADP) is also at its lowest level in recent years. According to the Planning Ministry, only BDT 500.2 billion of the ADP has been spent in the first six months, about BDT 120 billion less than the previous year. Meanwhile, inadequate oversight and profiteering by businesses have kept market prices high despite reduced taxes on essential goods.

Statistics indicate that capital machinery imports fell by about 28%, intermediate goods imports decreased by 14%, and raw material imports for industries saw little growth. These trends signal an investment slowdown. While there is widespread support for taking action against corrupt and influential businessmen from the previous government, shutting down their factories has led to job losses. The government has formed multiple committees to reform the economy.

A white paper on the economy has been prepared, and task force reports have provided recommendations for revising economic strategies. If these recommendations are implemented, economic stability can be restored. Since August 5, law and order have improved significantly, but further efforts are needed to create a business-friendly environment. The government must focus on making essential goods affordable and enhancing security to foster business growth and employment opportunities, particularly for the youth.

The writer is a, Journalist, General Secretary – Bangladesh Climate Change Journalists Forum.