Key Findings
- Indian media frames Bangladesh’s economic challenges as evidence of “collapse” under the interim government, ignoring that most problems predate August 2024
- Foreign exchange reserves fell from $46B (2021) to $26.7B (2024)—a decline that began years before the July Revolution
- The banking sector crisis, with $17+ billion in non-performing loans, developed under the Hasina government’s watch
- GDP growth has slowed, but World Bank projections attribute this to structural issues, not regime change
- The interim government inherited a deeply troubled economy and is pursuing IMF-backed reforms that the previous government resisted
The “Collapse” Narrative
Indian media has discovered a new angle for attacking Bangladesh’s interim government: economic catastrophe. Headlines warn of “economic spiral,” “collapse,” and “failed state” status.
Bangladesh’s economy is in a downward spiral.
Bangladesh is in BIG trouble.
The narrative serves a clear purpose: attribute all economic difficulties to the July Revolution and interim government, thereby delegitimizing the democratic transition and implicitly arguing that Hasina’s ouster was a mistake.
There is one problem with this narrative: the facts.
A careful examination of economic data reveals that virtually every challenge Bangladesh faces today has roots in decisions and mismanagement under the Hasina government. The interim administration inherited a troubled economy; it did not create one.
The Inheritance
When Dr. Muhammad Yunus assumed leadership of the interim government in August 2024, he inherited:
- Foreign exchange reserves at multi-year lows
- A banking sector riddled with non-performing loans
- Inflation running above 11%
- A currency under pressure from years of overvaluation
- Public debt that had tripled over the previous decade
- An IMF program already underway due to pre-revolution economic stress
None of these conditions emerged after August 5, 2024. All were created under the previous government.
The Foreign Exchange Crisis: A Pre-Revolution Problem
Indian media points to Bangladesh’s depleted foreign exchange reserves as evidence of post-revolution failure. The timeline tells a different story.
The Peak and Decline
Bangladesh’s forex reserves peaked at $46 billion in 2020-21. By the time Hasina fled in August 2024, they had fallen to approximately $26.7 billion—a decline of $19 billion over three years.
This decline occurred entirely under Hasina’s watch. The causes were structural:
- Import bills that outpaced export earnings
- Overvalued currency that the Bangladesh Bank defended at unsustainable levels
- Capital flight by well-connected individuals moving wealth abroad
- Debt servicing on loans taken during Hasina’s infrastructure spending spree
The current reserve level of approximately $20-21 billion reflects continued pressure, but the trajectory was established years before the July Revolution.
The Banking Sector: Cronyism’s Legacy
Perhaps no sector illustrates the inherited nature of Bangladesh’s economic problems better than banking. The industry is burdened with an estimated $17+ billion in non-performing loans—debts that will likely never be repaid.
How Did This Happen?
Under the Hasina government, politically connected individuals received loans that bypassed normal due diligence. When businesses failed or borrowers simply refused to repay, banks could not pursue recovery against figures with regime protection.
The most notorious case involves the Bangladesh Commerce Bank-Islami Bank scandal, where billions disappeared into enterprises controlled by regime-connected individuals. Similar patterns occurred across multiple banks.
The interim government did not create these bad loans. It inherited a banking sector hollowed out by cronyism. The current challenge is cleaning up the mess—writing off unrecoverable loans, recapitalizing weak banks, and prosecuting those who looted the system.
What the Interim Government Is Actually Doing
Rather than presiding over collapse, the interim government has pursued difficult but necessary reforms:
Exchange Rate Flexibility
The previous government artificially supported the taka at rates that depleted reserves and created black market premiums. The interim government has allowed more flexibility, accepting short-term pain for long-term sustainability.
Banking Sector Cleanup
The interim government has moved to address the NPL crisis, including investigations into major loan defaults and efforts to recover assets from connected individuals.