Soothsayers of yore would mete out predictions with glimmers of hope so as not to create concern. Similarly, present-day economists also speak in ambiguous terms about the new year. They have this propensity to politely term 'problems' as 'challenges,' so as not to step in the government's toes. But if you don't properly call a spade a spade, the problem can turn into a crisis.
If we can believe that the election will indeed be held in the second week of February, then this interim government has only a few weeks left. So I do not want to end up being blamed at the last minute by criticising this government’s handling of the economy. Attention therefore needs to shift to the next elected government, whose primary responsibility will be economic recovery. But the key precondition for ensuring this is to tighten the reins of law and order, which alone can guarantee a secure social life. From that sense of security flows social stability, and from stability comes a surge in private investment.
Without this sense of security and stability, what economist Keynes called the “animal spirits” of investment do not awaken. The new government of 2026 will have to energise this primal drive for investment. Without an increase in revenue, the government itself will be unable to function. Under the heavy pressure of the government’s high dependence on borrowing, the banking system will not survive either. What is needed is a separate ministry for revenue. The claim that breaking up the NBR into two parts would automatically boost revenue has already been disproved. If investment and revenue do not rise, the economy will slide inexorably into stagflation. This combined ailment of high unemployment and high inflation was first observed in the United States in the 1970s, before making its way into economics textbooks.
“Darbesh”-class entrepreneurs, if reckless, can wipe out the entire loan and collapse the banking sector. The elected government must first break free from this vicious cycle. This systematic reform of financing culture must begin from day one, or the financial sector will not survive
The prerequisite for any government’s finance minister to succeed is to have the home minister properly in place, along with a dynamic and functional judiciary. This is institutional economics we are talking about, a field for which multiple Nobel Prizes have already been awarded. I wonder why the interim government, despite being enriched with so many economists, neither understood nor seemed willing to understand this. I had written in Prothom Alo 14 months ago that there is a crisis of governmental attention in the economy. I did not expect that it would remain true for the entire tenure of this administration.
The interim government’s focus was on the exercise of rewriting history. Alongside that, great emphasis was placed on discussions rich in rhetoric about culture, national identity, the constitution, and politics. Under the banner of the 'consensus,' disunity increased. Disrespect, attacks and the fostering of mobocracy towards dissenting voices grew. The media was also under assault. Out of fear of these disturbances, both domestic and foreign investment, components of GDP, declined. As a result, in the 2025 fiscal year, Bangladesh achieved GDP growth of less than 4 per cent, the lowest in three and a half decades, except for the COVID years. This did not happen under the previous interim government, even though there was a global financial crisis at the time, coupled with high oil and commodity prices in the world market.
The first responsibility of the next elected government will be to lift this weak growth to Bangladesh’s capable growth, around 8 per cent.
The government, busy removing portraits and changing gateways, has let the capital-centric stock market fall. In 2025 alone, nearly one hundred thousand crore taka of market capital was lost. It is this market that provides the long-term capital for industrialisation. If it is not revived, big business will inevitably loot the banking sector. Such plundering is not possible in the stock market because there, investors have a direct mechanism to hold owners accountable—something entirely absent when it comes to bank funds. A capitalist, developed world relies on the functioning of its stock markets, and this must be revitalised.
The banking sector will provide large businesses and industrial ventures only with working capital. Permanent capital will be supplied primarily to small and medium enterprises, because they lack the capacity to access the capital market and, proportionally, create far more employment. For example, a national entrepreneur of the “Darbesh” class may take a loan of 100 crore taka and employ just 50 people. If the same amount were divided among 100 small entrepreneurs, they would ensure employment for at least a thousand people. Even if five small loan recipients fail to repay their loans for legitimate reasons, the bank can absorb the loss.
But “Darbesh”-class entrepreneurs, if reckless, can wipe out the entire loan and collapse the banking sector. The elected government must first break free from this vicious cycle. This systematic reform of financing culture must begin from day one, or the financial sector will not survive.
At the end of the Awami League government, the economy bore six major wounds: 1. high inflation, 2. rising unemployment, 3. contagious non-performing loans, 4. weak revenue collection, 5. uncontrolled currency outflow, and 6. declining reserves. The interim government achieved some success only in preventing currency outflow and reserve depletion but failed in the first four areas. In fact, unemployment, revenue collection, and non-performing loans worsened under its watch. This added a seventh wound: rising poverty, which is eroding the gains of the past 20 years. The responsibility of healing these seven wounds will fall squarely on the shoulders of the next elected government.
A mere one-percentage-point decline in high inflation over 15 months cannot be considered progress. In August 2024, average inflation was 9.95 per cent; by November 2025, it had fallen only slightly to 8.96 per cent. In the same period, India, Pakistan and Sri Lanka achieved ten times greater success in reducing inflation. This does not mean that the country’s central bank is failing. On the contrary, it is the only institution actually doing its job. But rescuing a sinking banking sector and providing additional liquidity to a revenue-weak government are preventing high inflation from coming down.
Moreover, the relentless extortion by local strongmen, combined with supply-demand gaps, continues to drive inflation. Meanwhile, BIDA is making smart efforts to attract foreign investment, but foreigners are scared off by the chaos and the fires.
Once public security is ensured, the first task of the elected government will be to form a well-structured economic commission to prepare recommendations on each of these seven wounds and make them known to the public. The ultimate goal of the economy is the people. When people suffer from inflation, unemployment, and poverty, the government should focus immediately on resolving these issues. The interim government has created nearly half a dozen commissions, but only a separate commission dedicated to poverty alleviation was truly needed.
Poverty rising from 18 per cent to 22 per cent is a shameful reversal of Bangladesh’s achievements over the past two decades. Even if the previous government which claimed to achieve poverty alleviation, failed to actually address this, we can hope that the elected government will make it a priority. Political parties should include in their election manifestos how they plan to heal these seven wounds.
* Dr. Birupaksha Pal is Professor of Economics, State University of New York at Cortland
* The opinions expressed here are the author’s own