When the Interim Government of Bangladesh, led by Dr. Muhammad Yunus, took office, the country’s economy was standing on uncertain ground. Foreign exchange reserves had fallen sharply – from nearly $48 billion to below $26 billion. Inflation had been above 9 percent for almost two years. The balance of payments showed a worrying deficit. Growth was slowing.
Behind the official numbers, deeper cracks had already formed. The banking sector was fragile, though just how fragile it was not yet fully understood. Some financial institutions were struggling to return depositors’ money. The insurance sector was weak. The stock market lacked momentum. Confidence, perhaps the most vital economic resource, was fading.
From the beginning, the interim government’s primary task was not expansion, but survival. Economists later described its greatest achievement as simply preventing collapse. In a post-uprising environment, where instability often deepens economic crisis, maintaining stability became the central mission.
One of the most visible improvements came in the external sector. A trade deficit of over $4 billion gradually turned into a surplus of around $1 billion. Remittances increased. Exports improved. Imports remained subdued, partly due to weak investment, but this also allowed foreign exchange reserves to recover to around $34 billion. The exchange rate, after losing more than 40 percent of its value in three years, finally stabilised. This stability alone reduced panic in markets and restored some predictability to economic planning.
Perhaps the most revealing development during this period was the exposure of the banking sector’s true condition. Through forensic audits, the interim administration uncovered problems that had long remained concealed. Outstanding foreign liabilities and irregularities came to light.
Support had to be extended to distressed banks that had suffered from earlier mismanagement and alleged looting. Yet reform was uneven. While some institutions were brought under scrutiny and restructuring, others remained outside the reform net. The effort to clean up the system had begun – but it was far from complete.
Despite external improvements, domestic challenges persisted. Private investment did not rise. In fact, it declined relative to GDP. Investors hesitated, uncertain whether policies adopted by an interim government would remain unchanged under elected administration.
Inflation, though slowly declining, remained painful. For ordinary citizens, especially fixed-income earners, prices had risen faster than wages. The relief people expected did not arrive quickly enough. Economic stability did not translate into immediate improvement in living standards. Meanwhile, public debt continued to grow. Government borrowing increased from around BDT19 lakh crore to BDT21.5 lakh crore. Part of this rise reflected inherited liabilities and high-interest obligations. Low tax collection left few alternatives to borrowing. Stabilising the system required resources the government did not fully possess.
Reform efforts were launched in banking, regulation, and the capital market. But reforms take time – and interim governments rarely have the luxury of time. Some initiatives stalled; others progressed slowly.
The issue of implementing a new pay-scale for government employees added another layer of complexity. Though not implemented, expectations were raised. Managing those expectations now falls on the newly elected government.
The interim government successfully conducted a conflict-free election. In a nation emerging from upheaval, this was no small achievement. Political legitimacy is often the first step toward economic recovery.
The Yunus-led interim administration did not transform the economy. It did not spark investment or dramatically reduce inflation. It did not complete the deep structural reforms the system requires.
But it did something perhaps equally important: it prevented further deterioration. It steadied foreign reserves. It stabilised the exchange rate. It exposed hidden weaknesses. It created political conditions for a newly elected government to take charge.
In the end, its tenure can be described as a period of containment rather than expansion – of managing crisis rather than driving growth.
The new government now inherits both the burdens and the groundwork left behind. Whether Bangladesh moves from stabilisation to sustained recovery will depend on how effectively those unfinished reforms are completed and whether investor confidence can finally be restored.
The writer is a journalist and columnist
