When the interim government took office three months ago on 8 August, after the ouster of the autocratic Awami League government through a mass uprising, the country’s economy was beset by enormous crises.

Soaring inflation, depleting forex reserves, decreasing exports, slowed growth, inadequate revenue collection, dollar crisis, and stagnant private investment intensified over the last few years, and when former prime minister Sheikh Hasina resigned and fled the country, she left a debt of Tk18.5 lakh crore for the next government.

However, more miserable than the overall economic condition was the condition of the financial institutions and the state machineries that constitute it, which necessitated launching immediate reform measures to bring back people’s trust in the financial sector. Consequently, the interim government led by Prof Muhammad Yunus started the daunting recovery process with vigorous practical measures.

After the end of Sheikh Hasina's autocracy, information of corruption and looting during the period are coming to light one after another. During the Awami League’s rule for more than 15 consecutive years banks were looted and money was laundered abroad in the name of a class of loans. Meanwhile, the people got crushed by high inflation.

Soon after the interim government came to power, the process of reform and change was initiated by changing the leadership in various sectors of the economy. The Anti-Corruption Commission (ACC) has started an investigation against the influential people of the Awami League government. Besides, a committee has been formed to draft a white paper on the existing economic situation.

Bank accounts of several former ministers, members of parliament, businesspersons, and police and military officials have been suspended to prevent laundering and recover misappropriated assets.

Additionally, the dollar exchange rate has been further liberalised to make it more market-driven. A committee has also been formed to investigate irregularities and corruption in 12 companies listed on the stock market.

These actions appear to be part of a broader effort to address alleged financial misconducts, increase accountability, and promote transparency in the financial and corporate sectors. In the financial sector in particular, a message has been given that the days of irregularities, corruption and taking over banks under the aegis of people in power are over.

Prof Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), welcomed the initiatives. He said a separate committee can be formed for recovering misappropriated assets.

Prof Rahman also called for legal reforms to ensure good governance in the financial sector.

Efforts to recover laundered money

In the aftermath of widespread allegations of corruption and embezzlement during the previous regime, the interim government faces a formidable challenge: recovering billions of dollars syphoned out of the country over the years.

According to the international anti-corruption organisation Global Financial Integrity (GFI), at least Tk17 lakh crore ($149.20 billion) was laundered out of the country during the 15 years of the Awami League’s autocratic rule.

The Interim government has taken decisive measures to recover the vast sums of money embezzled abroad.

As part of this effort, the chief adviser and economic adviser have issued stern warnings against the money launderers. They have sought assistance for recovering the laundered funds during meetings with international organisations and diplomats from various countries.

Anti-Corruption Commission Reform Committee head and The Transparency International Bangladesh’s (TIB) Executive Director Dr Iftekharuzzaman told the Daily Sun, “Bringing back the money is possible, but it is time-consuming. The work has already started to recover the money laundered to the United States, the United Kingdom and the European Union countries. In the meantime, the government has held meetings with the United States and the United Kingdom.”

He said if even a single penny is returned in the next two years, it will be a big achievement.

Stabilising the dollar market and preventing reserves depletion

After the fall of Sheikh Hasina’s government, Abdur Rauf Talukder resigned as the Bangladesh Bank governor. In this critical time, economist Dr Ahsan H Mansur took charge of Bangladesh Bank on 14 August.

The dollar and the foreign exchange reserves crisis that has been going on for several years are still not over. The new central bank governor has taken a significant measure to stop selling dollars from reserves.

Also, last year, the Bangladesh Bank introduced the “crawling peg” method to determine the dollar price. On 18 August, the authorities decided that banks will quote a maximum rate of Tk120 for remittance dollars and the rate will also apply to interbank and import payment settlements. Previously, the rate was Tk117.

Due to this decision, the banks are now able to pay a little more for the dollar, resulting in an increase in supply of dollars from expatriates.

According to the Bangladesh Bank data, in the first four months of FY25 (July-October), expatriates sent $8.94 billion, which is 30% higher than the same period last year.

On the other hand, Bangladesh’s reserves have kept falling since it surged to a record high of $48 billion in August 2021. The reserves declined rapidly during the last months of Hasina’s fascist rule.

After the regime change, Dr Mansur took immediate steps to halt the depletion of the country’s foreign exchange reserves by suspending the sale of dollars from the central bank. This move aimed to stabilise the reserves and address the ongoing dollar shortage.

He also took proactive measures by instructing the central bank to collect dollars independently to bolster foreign currency reserves. These actions were intended to restore stability to the interbank foreign exchange market and alleviate the ongoing dollar crunch.

As a result of these measures, Bangladesh Bank’s foreign exchange reserves began to increase, signalling a potential shift towards greater currency stability.

According to the Bangladesh Bank, on 6 November, foreign exchange reserves stood at $20 billion, as per the International Monetary Fund (IMF)-guided calculation method, and the gross reserves at $25.72b.

Disclosure of actual inflation figures

After the change in government in August, new inflation data was released, revealing that July saw the highest inflation rate in 13 years. Economists had long questioned the accuracy of the inflation statistics provided by the previous administration, noting that, despite sharp increases in the prices of goods and services, the official inflation rate had not crossed into double digits.

Following the regime shift, inflation rates reported by the Bangladesh Bureau of Statistics (BBS) appeared to increase significantly. Economic and Planning Adviser Dr Salehuddin Ahmed has since assured the public that accurate data will be published in a timely manner to reflect the true state of inflation.

According to BBS, Inflation rose to 10.87% in October, the highest in three months, as surging food prices eroded the gains of August and September. With the interim government assuming office on 8 August, inflation had dropped to 10.49% in August from July’s 11.66%, and dipped further to 9.92% in September.

Meanwhile, initiatives have been taken to control inflation by increasing the policy interest rate and making money more expensive. Currently the policy interest rate is 10%.

In this context, central bank Governor Ahsan H Mansur said the effect of increasing the policy interest rate will not be visible in the market right now. “It will take some more time,” he said, adding that the ease of inflation will gradually become more noticeable.

Freeing the banking sector from S Alam Group’s clutch

The biggest visible move in the financial sector in the last three months was dissolving 11 banks’ boards and freeing the banking sector from S Alam Group’s control.

S Alam Group took control of at least eight banks including the Islami Bank Bangladesh Ltd as a result of political decisions and in some cases under the direct supervision of the Directorate General of Forces Intelligence (DGFI). Other banks were the First Security Islami Bank, Social Islami Bank, Union Bank, Global Islami Bank, Bangladesh Commerce Bank, Al-Arafah Islami Bank and National Bank.

Apart from this, three separate task forces have been proposed for reforming the banking sector.

Bangladesh Bank Executive Director and Spokesperson Husne Ara Shikha said one task force is working on banking reforms.  The second task force is working to increase the efficiency of manpower in the Bangladesh Bank, and the third to recover the money laundered.