During the Awami League tenure, the country's economy ran rife with phrases like "the tide of development", "Smart Bangladesh" and so on. Ministers and the media would sprout these terms at random. And now in recent times there are new buzzwords making the rounds in economic circles --"Yunus Magic," "new settlements," "reforms" and so on.
I used to love magic as a child. I would even perform magic tricks, occasionally paying the price when my classmates caught me out. But that fascination for magic persists. In fact, I am thrilled when I hear that magic can be performed in economics too.
A publication brought out in 1993 by the World Bank, 'The East Asian Miracle,' created quite a stir. It described the rapid development of the four Asian Tigers—Singapore, Taiwan, Hong Kong and South Korea—as a "miracle." These countries achieved astonishing growth between 1965 and 1990. However, there was no mention of any magic involved.
In 1995, when UN policymaker Dr. Selim Jahan visited Dhaka, I asked him to explain the use of the word “miracle.” He said, “Where do you see a miracle here? It’s a result of their hard work.” Just as he would teach me in his classroom at Dhaka University in the eighties, he explained again how these four Tigers had several common strategies. They became Tigers by ensuring quality education, healthcare, infrastructure and good governance.
I’ve recently saw a television report which claimed that the current head of government has brought about “magic” in the economy, turning around all economic indicators. Another report claimed that Bangladesh will become a “beacon of hope” for the world. Someone even said this magic was like a tornado, stemming the propensities to migrate, and wiping out inflation and unemployment.
No matter how much the government’s information department boasts of a “brilliant performance,” private investors are steadily losing interest. They do not feel confident about investing their money before the election.
A former Dhaka University Central Students' Union (DUCSU) leader reportedly commented that the head of government is performing magic. An acquaintance forwarded me a video clip where the central bank governor claimed that Bangladesh no longer needs IMF loans. I couldn’t tell whether this was a case of sour grapes or if our reserves were actually overflowing. I asked myself, “Has a gold mine been discovered somewhere in Bangladesh that I wasn’t aware of?”
But there is no gold mine, I realised this was just the old habit of certain media outlets that aim at appeasing the government—old wine in new bottles. This was common during the Awami League era. Why is it resurfacing now? Vague or inflated statements in economics are dangerous.
Mathematics, statistics and accurate observations safeguard the economy. These do not speak of any miracles or wonders. Even news of moderate success is hard to come by. The government’s information department calls everything “brilliant,”, but IMF or the World Bank is not impressed. They are sending signals of concern on many fronts.
If we compare the financial sector to a car, the four wheels would be the four financial institutions. These are banks, the capital market, investment institutions and revenue institutions—in other words, the central bank, the Bangladesh Securities and Exchange Commission (BSEC), the Bangladesh Investment Development Authority (BIDA), and the National Board of Revenue (NBR) under the finance ministry.
The Planning Commission is like the wise grandfather in a joint family—someone who upholds the philosophy and dreams of the household. The main problem in the banking sector is defaulted loans and these have not improved whatsoever. In June 2024, non-performing loans were 13% of total loans. By December 2024, this rose to over 20%. The governor deserves credit for attempting to present the real picture of loan defaults. Unlike the accountant finance minister of the Awami era—who catered to looters by portraying a default of Tk 100 as just Tk 5 —he is not trying to downplay the issue.
In March, the international credit rating agency Moody’s downgraded the outlook for Bangladesh’s banking sector from “stable” to “negative.” It cited increased asset risk and a deteriorating economic situation as the reasons. Nearly 10 banks are on the verge of collapse. While money had been printed to support them temporarily by boosting liquidity, it’s uncertain whether they will ultimately survive.
The state of the share market is equally bleak. Since the interim government took over, the Dhaka Stock Exchange index has been on a decline. In April 2024, the index stood at 5764. After a nearly 12pc annual drop, it has now fallen to 5097. Even before this, it wasn’t good. Recently, investors have demanded the resignation of top officials in the stock market. Foreign investors are unlikely to inject funds in a country where the capital market is constantly deteriorating.
From June 2024 to February 2025, private sector credit growth was just 3 per cent, which is almost half of the same period the previous year. This means that no matter how much the government’s information department boasts of a “brilliant performance,” private investors are steadily losing interest. They do not feel confident about investing their money before the election.
In the meantime, foreign investment has hit a five-year low. In the first eight months of the fiscal year, foreign direct investment totaled USD 824 million, whereas it was over USD 1 billion in the corresponding period last year. Even the small increase in private sector credit flow raises questions as to whether it is actually being used for proper investment or productive purposes. Unemployment is rising and wage growth is failing to keep up with inflation. People are dipping into their savings to survive.
Between July and January of the 2024–25 fiscal year, net sales of national savings certificates were a negative Tk 70 billion. In fact, the trend of negative net sales in savings certificates began during the previous government due to high inflation. This government has been unable to reverse the trend. From July to February of 2024–25, capital goods imports dropped by 25pc. This is reducing productivity and efficiency in the economy. As a result, Bangladesh is heading toward its lowest GDP growth in 36 years. There’s no “magic” at work here.
Most newspapers don't publish false reports. But there has been a surge of substandard and often misleading reports in the electronic media, where there is no editorial supervision or professionalism. This is causing confusion about the real state of the economy. Economic indicators are like a patient’s temperature or blood pressure. The numbers require careful interpretation, not emotional overreaction or hype.
The Nobel Committee awarded Dr. Muhammad Yunus the Peace Prize based on the logic that Grameen Bank’s microcredit helped reduce poverty, which contributed to peace. So if such a globally respected figure were to be given administrative leadership of the country, it would be expected that poverty would decline, the economy would strengthen, and social harmony would increase.
However, according to the World Bank, around 3 million people will fall into extreme poverty this year. The national poverty rate is projected to rise to nearly 23pc, reversing a long-term trend of steady decline. Our active home advisor might be the best person to speak on the matter of social peace.
It is difficult to accept that an increase in foreign reserves alone can be considered the beginning of “magic,” without these critical national issues being addressed. Reserves are merely one indicator, not the ultimate achievement of a nation. Ultimately, what matters for the nation is the GDP, human capital, security and a decline in poverty that leads to an improved quality of life. There is no magic visible in these areas.
* Dr. Birupaksha Paul is a professor of economics at the State University of New York at Cortland, USA.
* This column appeared in the print an online edition of Prothom Alo and has been rewritten for the English edition by Ayesha Kabir