Maintaining political stability, keeping order, containing inflation, reviving businesses聽 major challenges
Maintaining political stability, keeping law and order and containing inflation will remain major challenges for the interim government in 2025, economists said.
Breaking oligarchs鈥� dominance on market, creating employment opportunities, generating more revenue and bringing back stolen assets from abroad are not less challenging for the interim government formed on August 8 after the ouster of the Awami League regime by a student-people uprising.
The outgoing year had begun with deepening political uncertainty following yet another controversial election on January 7 before the mass uprising forced Sheikh Hasina to flee to India on August 5 and complicated Dhaka鈥檚 foreign policy for New Delhi.
The interim government鈥檚 initiatives to reform the constitution, judiciary, administration, Election Commission, banking sector, health sector and media are still at the primary stage.
In the such backdrop,聽 the massive fire at secretariat in the last week of the outgoing year increased headache for the government on the law and order situation due to alleged non-cooperation from the police and bureaucrats and weakness of the state institutions which were almost destroyed during the regime labelled as kleptocracy in the White Paper on State of the Bangladesh Economy.
While the reforms are mainly aimed at restoring democracy through a free and fair election, debates continue on the election road map with many parties demanding election without delay arguing that the reforms should be made by an elected government and many others seeking election after the reforms.聽
Economic challenges like containing inflation, building up reserves, disciplining the crisis-hit banking sector, generating more revenue, creating employment, enhancing private investment, attracting foreign investment and ensuring availability of primary energy, inherited mostly from the previous regime, have yet to see any major improvement over the past five months.
鈥楥ontaining inflation should be the top priority,鈥� former World Bank Dhaka office chief economist Zahid Hussain said, describing the hardship of the majority of people over the past two years due to the price spiral of essentials.聽聽聽
The country has been facing almost double-digit inflation over the past two years with the food inflation soaring to 14.63 per cent in the urban area in November.
The International Monetary Fund, which has been providing a $4.7 billion loan to Bangladesh since 2023 to tackle the economic slowdown, said that the general inflation would prevail in double digits in the remaining six months of FY25 expiring in June 2025.
The high inflation might be used as a tool to cause political instability, said Zahid Hussain, suggesting that the interim government should ensure a proper market monitoring system.聽
Echoing the same sentiment, former caretaker government adviser Hossain Zillur Rahman said that actions against oligarch dominating markets were imperative to discipline the supply chain.
Emphasising the improvement of the supply chain, the economist said that easing import restrictions along with building up the forex reserves could strengthen the economic recovery for the import dependent country like Bangladesh.
The import of consumer goods, capital machinery and intermediate goods recorded 13 per cent, 18 per cent and 13.99 per cent negative respectively in the July鈥揙ctober period, compared to the same period of FY24, according to the Bangladesh Bank鈥檚 weekly selected indicators released on December 19.
Decay in forex reserves has been reduced significantly over the past few months as the central bank under the interim government stopped selling dollars and encouraged the inter-bank exchange, economists said.
Forex reserves stood at $19.95 billion on December 18, compared with $20.6 billion in December 2023 as per the Balance of Payments and International Investment Position Manual known as BPM 6.
The inflow of remittance increased by 26.97 per cent to $10.17 billion between July 1 and November 14 of FY25, compared to 1.29 per cent decrease during the same period of FY24, giving advantage to the central bank to maintain forex reserves.
The country鈥檚 export earnings in the July鈥揘ovember period in FY25 increased by 11.88 per cent to $19.93 billion compared with $17.81billion in the same period of FY24.
Calling on the interim government not to be complacent with the positive growth on export and remittance, economists said that steps should be taken to bolster the inflow of remittance further and diversify the narrow export basket dominated by readymade garment exports.
Economists also said that the interim government needed to earn extra loans from the multilateral lenders to assist the balance of payment and improved the country鈥檚 credit rating cut by Moody鈥檚 in a report in November citing heightened political risks and lower growth.
Credit ratings by leading rating agencies affect a country鈥檚 prospects for borrowing from the international capital market as well as its attractiveness for foreign investment.聽
Policy Exchange Bangladesh chairman M Masrur Reaz said that the foreign investors were happy with the current status of transparency of the government activities which was absent during the past regime.
They are, however, concerned with the current political uncertainty and protests in the industrial belts even after five months of the interim government, he said.
To him, it is imperative for the interim government to bring about a positive trend in imports and make the businesses confident.
The economists, however, said that the economic recovery will not be sustainable unless the falling revenue generation, an Achilles鈥� heel of the previous regime, was reversed.
The years-long revenue shortfall forced the government to rely on bank borrowing to meet the growing budget deficit and limit fiscal spaces which eventually turned to be fatal for the previous regime amid price hike of primary energy items and other essential commodity items.
