Opinion | Economic Debacle In Bangladesh During Yunus's Regime

The interim government has damaged what was once a thriving economy

Bangladesh’s economy grew significantly during the Awami League’s 15-year regime and has achieved significant progress in promoting economic growth. Through a mix of government-supported infrastructure projects, SME financing, and focused industrial policies, the country proved that self-reliance was achievable.

Over that 15-year period, Bangladesh maintained an average GDP growth rate of 6.3%. Bangladesh was also set to graduate from LDC list in 2026, meeting all three conditions. Extreme poverty reduced to single digit; social sector indicators were the best among the South Asian countries. Bangladesh has ranked highest among Muslim-majority countries in terms of women’s empowerment.

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However, that progress has now been systematically undermined. In August 2024, under a unique political circumstance, an interim government was formed in Bangladesh led by Dr. Muhammad Yunus. Upon its formation, the government promised to reduce political tensions through a neutral administrative process and pave the way for a credible election. However, the interim government failed to reflect even a minimal sense of this intent in political, social, or economic domains. Instead, the economic situation quickly worsened to an unprecedented level.

This discussion will present evidence demonstrating how the interim government has damaged what was once a thriving economy, led to the collapse of hundreds of industries, caused millions to lose their jobs, and brought hardship to ordinary people.

The average GDP growth rate from FY2009-10 to FY2023-24 was 6.24%. Per capita income increased almost fourfold to $2,728 in FY24 from $759 in FY09. However, GDP growth has reduced to only 3.49% in FY25, which is lowest since FY1991-92. The real wages of general people also decreased compared to last year due to higher inflation.

From FY2009-10 to FY2023-24, the poverty rate consistently declined at an average annual rate of 0.75%. But we have seen a reverse phenomenon in the following year. The Asian Development Bank (ADB) has estimated that poverty increased to 27.93% in 2025 from 18.7% in 2022, with 3 million more people at risk of falling into poverty.

Due to labour unrest, political turmoil and closure of industrial units owned by entrepreneurs close to the previous government, exports dropped for four consecutive months by late 2025. Over 100 factories closed between August 2024 and May 2025, causing roughly 60,000 job losses.

Banking Sector Crisis

The Interim Government commenced measures targeting business individuals associated with the previous administration. Consequently, most leading business figures either left the country or chose to go into hiding. As a result, most of them were unable to pay either the principal or the interest on their loans. Non-performing loans (NPLs) have increased to more than 35% of total credit, significantly limiting lending activity and resulting in private investment declining to its lowest point in ten years. It should be noted that non-performing loans accounted for just 12.6% at the end of June 2024.

Bangladesh’s unemployment rate is projected to be around 4.6% to 5.0% in 2025, driven by a rising number of jobless individuals and a challenging labour market, especially for youth and graduates. The Bangladesh Bureau of Statistics (BBS) noted that 2.62 million people were unemployed by December 2024, with figures rising, indicating sustained pressure on the job market in 2025.

Poverty increased in 2025 due to high inflation and economic shocks, with estimates indicating the national poverty rate has increased to over 27% from 18.7% in 2022, according to the Power and Participation Research Centre (PPRC). The World Bank projects a more conservative increase in the national poverty rate to 22.9% in 2025, with extreme poverty rising to 9.35% (which was 6.7% in 2023). High inflation (especially food prices), stagnation in manufacturing jobs, and economic inequalities are primary drivers, with households spending up to 55% of income on food. A 2025 UNICEF report indicates that nearly 28.9% of children in Bangladesh are living in multidimensional poverty.

High inflation during 2025 is primarily driven by a depreciation of the Taka against the USD, severe supply chain disruptions from political instability, and high global commodity prices. According to the Bangladesh Bureau of Statistics (BBS), the annual average inflation rate for FY25 was 10.03%, down from a peak of over 10% in mid-2025 to 8.49% by December 2025. Bangladesh Bank implemented contractionary monetary policy by raising the policy rate, but this action had minimal effect on inflation; instead, it pushed the average lending rate above 16%.

Private investment faces significant challenges, with rates dropping to a five-year low of 22.48% of GDP in FY25. High inflation, tight monetary policy, energy shortages, and political uncertainty have hampered growth. Private investment slumped to 22.48% of GDP in FY25 from 23.96% in the previous year. Private sector credit growth saw a decline in late 2025 following the interim government’s takeover, with growth at 6.23% in October 2025. High interest rates, a shortage of US dollars, inconsistent utility supplies (gas/electricity), and weak banking sector governance have limited new investments.

Foreign Direct Investment

Foreign direct investment (FDI) has fallen to less than half of its 2021 peak, with investors cautious due to ongoing political uncertainty. Foreign Direct Investment showed a slight recovery in the third quarter (July–September 2025) driven largely by reinvested earnings, though overall inflows remain below target. The country requires at least $8 billion in FDI annually to boost GDP growth by one percentage point. The Eighth Five-Year Plan had aimed to raise FDI inflows to 3.0% of GDP, but they have remained below 1.0%.

The National Board of Revenue (NBR) is experiencing a substantial revenue deficit for the fiscal year 2025–26. As of January 2026, the shortfall reached Tk 60,110 crore for the first seven months, with projected total FY26 deficits likely to exceed Tk 1.0 lakh crore due to sluggish economic conditions, persistent high inflation and slower-than-expected economic activity. NBR collected Tk 2.24 lakh crore, missing the target by 27%, a shortfall of Tk 60,110 crore. In the last fiscal year, the total recurring expenditure of the government exceeds the total revenue collection by Tk. 23,000 crore taka. This incident represents a significant fiscal deviation and is unprecedented in the past forty years.

Lower ADP implementation

Annual Development Programme (ADP) implementation in the first half of the FY2025–26 (July–December 2025) hit a five-year low of 17.5%, with only Tk 41,876 crore spent out of a Tk 2,38,695 crore allocation. Performance further deteriorated to 21.2% by February 2026, marking a 16-year low due to political instability, bureaucratic delays, and budget constraints. The 17.5% implementation rate in first half of FY26 is one of the weakest in five years, reflecting persistent issues in project execution. A Revised ADP (RADP) for FY26 is expected to cut the total allocation by approximately Tk 300 billion, reducing it to around Tk 2.0 trillion due to poor performance.

The power sector is facing a severe financial crisis driven by massive unpaid bills to private power producers, government owned power companies and IPPs, which have accumulated to over Tk 74,000 crore (740 billion) by January 2026. These outstanding dues, largely for Independent Power Producers (IPPs) and furnace oil-based plants, have remained unpaid for 8 to 10 months, leading to warnings of potential electricity shortages during the summer months. While the previous government managed to reduce arrears to three months in early 2024, payments slowed significantly after August 2024, causing debts to balloon again to over 8–10 months of unpaid bills. Due to the inability to pay for fuel imports (furnace oil and coal), several private power plants are struggling to operate at full capacity.

At the end of July 2024, the gross forex reserve was over $26 billion. Due to poor performance of the economy and increase remittance inflows through official channel, foreign exchange reserves experienced a steady recovery to over $33 billion by the end of December 2025. Higher remittance inflows, lower imports, lesser investment, poor ADP implementation, pending power bills has helped for such reserve build up.

Financial benefits taken by Dr Yunus

Bangladesh experienced significant economic challenges during the eighteen-month tenure of Dr. Younus’s administration. However, it did not stop him to get personal benefits from the country. Some of the benefits are listed below:

1. The verdict regarding the deposit of Tk. 666 crore as unpaid income tax was recalled.

2. Managed to withdraw 26 cases from the Labour court which were related to non-payment of workers’ benefits.

3. Took PSP (Payment Service Provider) licence from Bangladesh Bank.

4. Obtained permission from Education Ministry to establish Grameen University.

5. Got licence from Health Ministry to establish Grameen Nursing Institute.

6. Obtained a manpower export licence from the Expatriate Ministry under the name Grameen Employment Service.

7. Government share reduced to 10% from 25% at the Grameen Bank.

8. Obtained corporate tax waiver from NBR for Grameen Bank for further five more years.

9. Provided licence to Starlink to do business in Bangladesh in collaboration with Grameen Phone.

10. Given tax exemption benefit for Nobel prize money.

11. Grameenphone (GP) declared (26.02.2025) a total of 330% cash dividend for 2024, the highest in its history. This money, amounting to taka 2,500 crore, was provided from the reserve fund of Grameen Phone. Please note that Dr. Yunus has a stake of 34.2% at Grameen Phone through his own company called Grameen Telecom.

Syed Mozammel Ali is the Chair of the Study Circle, a London-based think tank focused on Bangladesh. In 2021 he was decorated as a ‘Freedom Fighter’ by the Bangladesh Government for his role in the Bangladesh War of Independence. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views.

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