Despite the deep crisis left behind by the fallen Awami League government, the country’s financial sector has been gradually steered toward stability, according to financial adviser Salehuddin Ahmed. Speaking at an event held at Bangladesh Bank to mark the "July Uprising Day," the adviser said that financial reforms take time.
“Corruption and mismanagement were deeply entrenched at institutional, procedural, and individual levels in the financial sector. However, there are some honest and skilled individuals, and we are trying to implement reforms through them. We have already moved from the ICU to a cabin, and it wouldn’t be wrong to say we’re now on our way home.”
Although the economy has indeed left the "hospital cabin," economists and business leaders say that potholes along the way are causing delays in reaching "home."
Under the previous government, the financial sector had completely collapsed. There was a total absence of discipline. Powerful individuals borrowed money with no intention of returning it, and there was no one to hold them accountable. The situation had deteriorated to such an extent that the corporate office of one industrial group had effectively become the control center for eight banks, along with an equal number of non-bank financial institutions and insurance companies. Most banks were weighed down by mismanagement and an overwhelming burden of defaulted loans, both under official and proxy names.
Most reforms focused on banking sector
The first action taken by the interim government was to put a stop to looting. New boards were formed at banks where the chairpersons and managing directors had either fled or had left the institutions in disarray after nearly a decade and a half of control. Several measures were taken to rein in inflation, prevent the devaluation of the dollar, curb the fall of foreign reserves, and stop capital flight. These initiatives gradually began to bring stability.
Dr. Zahid Hussain, former lead economist at the World Bank, told Banglanews, “The financial sector has been identified as the most distressed. There was initial fear—how could public confidence be retained amid so many struggling institutions? From that point, the most visible reforms have occurred in the banking sector. Many banks had their boards dissolved and restructured. Liquidity support was provided to stop the 'bleeding.'”
He added, “Legal reforms were necessary to resolve the crisis in these institutions, and that has been done. One key reform is the ‘Bank Resolution Ordinance.’ The financial health of banks needed assessment. The asset quality of six banks has already been reviewed, and assessments for another 11 are planned. Although no final model of resolution has yet been confirmed, it is known that a model for merging five banks is being developed.”
Fazlul Hoque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), considers the financial sector one of the areas where the interim government has made visible improvements.
He told Banglanews, “We’ve seen tangible progress here. One way or another, inflation has been brought under control—which is undeniably a positive development.”
“The massive looting in the banking sector has been halted for now. Whether this is temporary, or how things will play out under future political pressure, is a separate discussion.”
Fazlul Hoque further said that banking reforms are ongoing. “The governor deserves particular credit for this. His role during this government's tenure has been visible. He is doing good work—or at least trying to.”
Boards of 12 banks dissolved
Immediately after assuming office, the interim government dissolved the boards of 12 banks and restructured them. Most of these banks had been either abandoned by their chairpersons and managing directors or devastated by years of control. This move clearly signaled the government’s intentions and commitment. As a result, the condition of several banks began to normalize, and discipline started returning. However, some banks remain in crisis, and the government is addressing these through planned mergers.
Simultaneously, the government initiated strict monitoring and messaging to curb capital flight. Consequently, the volume of money laundering has reportedly dropped to nearly zero. According to economists, “The launderers themselves have fled, which effectively ended the laundering.”
Curbing inflation
Upon assuming office, the interim government inherited a high inflation rate, which quickly escalated to double digits. To curb inflation, the government raised interest rates. This reduced the money supply in the market while several initiatives were launched to boost the supply of goods. Though this had a cooling effect on private investment and led to some investor frustration, the measures helped keep inflation under control, if not reduce it as expected.
Dr. Ahsan H. Mansur, Governor of Bangladesh Bank, said, “The central bank has two main functions—first, to keep inflation in check, and second, to maintain financial sector stability. Compared to the situation we inherited, we are now in a much better position.”
Improved Foreign Currency Reserves
On August 5 of last year, when the Awami League government fell, the country's foreign currency reserves were rapidly depleting. The most recent figures at that time showed reserves had fallen to $20 billion, with even less in usable reserves. After the interim government assumed power and initiated various measures, the reserves surpassed $30 billion within 11 months. According to the International Monetary Fund’s (IMF) BPM6 accounting method, the current reserve stands at approximately $25 billion.
With the current reserves, the country can cover nearly six months’ worth of import expenses. Notably, the previous government had left behind substantial unpaid bills for fuel imported from Adani and the Middle East, which the current administration has since settled.
Growth in Export Earnings
A surge in export earnings has significantly narrowed the balance of payments deficit. In the 2024–25 fiscal year, export revenue reached $48.24 billion, compared to $44.46 billion during the same period the previous year—an 8.56 percent growth rate. In July alone, export earnings stood at $4.77 billion, marking a 25 percent increase compared to July last year.
Money laundering typically occurs through remittance and import-export transactions—over-invoicing during imports and under-invoicing during exports. The current government has frozen assets held abroad by several politicians and businesspersons, curbing their previous freedom to move funds illicitly. Export proceeds are now being repatriated swiftly, and surveillance has been strengthened to prevent over-invoicing during imports. As a result, export revenues are rising, while import costs are declining.
Increase in Remittance Inflows
Remittance remains the largest source of foreign currency for Bangladesh, requiring no additional government investment while still boosting reserves. In the 2024–25 fiscal year, remittances reached $30.32 billion, nearly 25 percent higher than the previous year. In July alone, $2.48 billion was sent home.
Previously, remittances were also used for money laundering. Due to high demand for dollars among money launderers, remittances were collected through hundi networks. While families received the funds, the government did not benefit in terms of foreign exchange reserves, as only legally sent remittances count toward official reserves.
Currently, due to the seizure of launderers' assets abroad—and the fact that many launderers themselves have fled—the hundi business has declined. Consequently, legal remittance flows have increased, positively impacting the reserve. Banks are now meeting their own dollar needs and selling the surplus to the Bangladesh Bank, which adds directly to the reserves.
Where the Crisis Still Looms
While several initiatives have yielded results, and some are showing progress, multiple sectors remain in crisis. Economists describe the economy as being on its way "from the hospital cabin to home," but potholes on the road are causing delays in arrival.
Political instability, a lack of confidence, and rising interest rates are the three main reasons new investments are not coming in. Acknowledging this reality, Bangladesh Bank has revised and lowered its private investment targets. Government spending has also been curtailed. In addition, new foreign investment remains minimal—mostly reinvested profits or inter-company loans. As a result, job creation has almost ground to a halt.
Fazlul Hoque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said, “If we look at the bigger picture, it's clear that the private sector has been largely neglected during this time, which is disheartening. Not all private sector actors are looters. The government may have preferences, but the private sector is the engine of the economy. There should be more productive dialogue with the private sector when it comes to reform, development, and policy-making in the industrial sector.”
With declining investment, imports of capital machinery have also dropped. This has reduced import expenses and eased pressure on reserves. However, this does not reflect real economic improvement.
In addition to reserve growth, equal emphasis must be placed on industrial development, increased investment, and job creation, according to the former BKMEA president. He stated that one of the most negative aspects of the economy over the past year is that no new jobs were created. On the contrary, a large number of people lost their jobs for various reasons. Many factories have shut down—some inevitably—but it is important to acknowledge the reality.
Due to political reasons, many individuals have been imprisoned or forced into exile. Among them are major industrialists whose factories have either closed or been destroyed through arson and other causes. As a result, many people have lost their livelihoods. Recovery has not happened, nor has it been possible to keep pace with new demands.
As the government enters its second year, investment and employment creation should be given the highest priority. The private sector must be engaged, not ignored. According to Fazlul Hoque, the government must move forward by recognising the private sector as a partner in the economy.
