Yunus fails to restore momentum to economy

When the interim government led by Dr Muhammad Yunus assumed office following the July mass uprising, Bangladesh’s economy was widely described as being in a “fragile” state. High inflation, a dollar crisis, instability in the banking sector and stagnant investment combined to create a daunting reality.

However, one and a half years on, business leaders and economists say that although the economy has not collapsed entirely, the government has failed to restore the desired momentum.

Former president of the Dhaka Chamber of Commerce and Industry, Rizwan Rahman, said that managing the economic distress following the fall of the previous government had been the immediate challenge. “The government has managed that much, but it has failed to bring dynamism back to the economy,” he remarked.

When the Yunus administration took over, inflation stood at 11.66 per cent. To curb price rises, the government adopted a contractionary monetary policy, halted the printing of new money and raised interest rates on bank loans. Yet even after 18 months, inflation has not fallen to a satisfactory level. According to the Bangladesh Bureau of Statistics, overall inflation stood at 8.49 per cent last December — still considered high by economists.

Professor Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue (CPD), said, “Inflation has eased somewhat, but even after a prolonged period of contractionary monetary policy, the government has failed to bring it under effective control.”

Mahfuz Kabir, Research Director at the Bangladesh Institute of International and Strategic Studies (BIISS), noted that while many countries managed to tackle inflation within a short time, Bangladesh had failed to do so. He added that inflation had directly affected essential commodities, with prices of potatoes, onions, oil and other necessities rising repeatedly. Like its predecessor, the current government has been unable to take effective action against market syndicates and extortion, he said.

According to the World Bank, the poverty rate stood at 18.7 per cent in 2022 but has since risen beyond 21 per cent. The private research organisation PPRC estimates it even higher at 27.93 per cent. Analysts attribute this primarily to the erosion of real incomes due to high inflation.

The contractionary monetary stance and high interest rates on bank loans have effectively stalled investment over the past year and a half. Domestic entrepreneurs have refrained from launching new projects, while foreign investment has failed to materialise due to political instability and weak law and order.

Rizwan Rahman criticised the Bangladesh Investment Development Authority (BIDA), saying that the time spent courting foreign investors could have been better utilised supporting local investors. “The interim government has prioritised its own agenda rather than that of the public. When a foreign investor or official visits, they receive meetings with the Chief Adviser and press briefings. Yet even the president of BGMEA cannot secure a meeting,” he said.

Business leaders argue that high interest rates invariably discourage investment. The government has failed to create an investment-friendly environment, resulting in a lack of new employment opportunities in the private sector and rising unemployment — concerns frequently raised at business forums and seminars.

Although some reform initiatives have been undertaken in the financial sector, Rizwan Rahman said the government has failed to address the most pressing issue: controlling non-performing loans. By the end of 2025, defaulted loans had exceeded Tk6 trillion, accounting for more than 33 per cent of total outstanding loans. “Most regrettably, despite facing no political pressure, the government failed to pass the Bangladesh Bank Act, yet it enacted many unnecessary laws,” he added.

Professor Mustafizur Rahman observed that the failure to recover bad loans has constrained banks from issuing new credit, adversely affecting investment, employment and overall living standards. On a more positive note, he pointed out that foreign exchange reserves have risen from $15 billion to over $32 billion, largely due to increased remittance inflows.