The Centre for Policy Dialogue (CPD) said that while the interim government was able to ease inflation following its takeover last year, underlying institutional weaknesses, such as low revenue collection, continue to pose challenges for the economy.
“Inflation may have eased, but many persistent challenges remain,” said Centre for Policy Dialogue (CPD) Executive Director Fahmida Khatun, at a dialogue on “365 Days of the Interim Government” in Dhaka today (August 9).
The recent decline in inflation is a positive sign, but it does not fully reflect improvements in the broader economic structure, she said, presenting CPD’s scorecard on the government’s first year.
The scorecard used green, yellow and red indicators to assess 38 issues based on benchmarks set last year.
CPD’s assessment showed that while inflation control fell into the green zone, several other areas, including governance, foreign exchange reserves, and banking sector reforms, remained in yellow or red.
Fahmida Khatun, in presenting the CPD’s findings, underlined that limited revenue collection, constrained private credit flow, and weak institutional capacity continue to hinder economic progress.
“GDP growth has been low due to political instability and unrest. Revenue collection and the tax-to-GDP ratio have decreased,” she said, adding, “The concerning issue is the low private sector investment along with a low credit flow to the private sector.”
She further added, “Exports, imports, reserves, and remittances are good. The trade balance has come down. Foreign investment is low. There is a gas and electricity crisis.”
The CPD also highlighted concerns over unemployment and insufficient reforms in public sector management, noting that these factors limit the benefits of short-term improvements in economic indicators.
The dialogue, organised by the CPD at the Lakeshore Hotel, was presided over by Professor Mustafizur and attended by Labour Adviser Brig Gen (retd) M Sakhawat Hossain as chief guest.
CPD Distinguished Fellow Professor Mustafizur Rahman said the CPD had set out expectations for the interim government last year and now it was time to take stock.
“On 14 August 2024, the CPD discussed what the expectations of the interim government were and presented them,” he said.
“At that time, there was high inflation, rising unemployment, devaluation of the currency, a decrease in ADP implementation, falling remittance and export earnings, a decline in reserves, and low investment. There was a challenge in macroeconomics,” Professor Mustafizur added.
“Now we are looking back after one year. There is a need for an evaluation. How do the scorecards look on various key indicators?” he asked, noting that some targets had been met, others had not, and some initiatives were only just beginning.
“There has been progress in several areas. Some have not met expectations. Some have just started. The future political government will have to do them,” he said.
He warned that while stability is emerging, the major test will be translating that stability into investment and job creation.
“The challenge is to convert these changes into investments and bring comfort or relief to people’s lives by creating employment,” he said.
The CPD’s scorecard was presented as a tool to guide that process and inform the next phase of economic policymaking.
According to the organisation, addressing these structural weaknesses will be critical to sustaining economic stability and ensuring long-term growth.
Banking sector reforms, energy moves among other CPD findings
Beyond inflation and revenue concerns, the CPD’s review flagged deep-rooted issues across multiple sectors.
It described the banking sector as fragile, with rising non-performing loans and heavy influence from political and business elites.
While the boards of 14 banks were dissolved and reorganised, and three task forces formed, CPD noted that the true scale of bad loans and asset quality still needs thorough review.
Bangladesh Bank’s adoption of international loan classification standards was praised, along with Tk23,000 crore in special credit line support to restore lending.
The capital market showed little progress, with continued instances of companies raising funds and exiting.
In contrast, SME lending policies requiring banks to allocate at least 25% of loans to the sector were viewed positively, as was the creation of a youth fund and enhanced financial support for migrant workers.
CPD found export diversification and tariff reforms for post-LDC graduation lacking, alongside delays in updating labour policy.
Agricultural subsidies for key food items have been raised, but broader energy security challenges remain, CPD noted.
While arrears to Adani have been cleared and capacity payments abolished, the think tank stressed the need for uninterrupted and affordable energy.
CPD marked the recently introduced renewable energy policy as a positive move.
On governance and social spending, CPD noted investment in physical infrastructure but little in social sectors.
In mobile financial services, it credited efforts to curb waste and fraud. However, recommendations from the White Paper have seen little follow-through, and preparations for LDC graduation remain inadequate.
With the national election set for February 2026, CPD cautioned that major reforms are unlikely in the coming months, but urged the government to sustain macroeconomic stability measures, continue inflation control, expand open market sales, and maintain support for the ultra-poor.
While reserves have stabilised and remittance and export earnings have improved, the think tank said high inflation and stagnant revenue collection mean there has been no qualitative change in ordinary people’s lives.
