TDS Desk:

The imperative of reform has dominated the national discourse throughout 2025. The issue of economic reform was also extensively discussed during this period alongside administrative reforms. Yet, as the year draws to a close today, a critical assessment reveals that the most neglected aspect of these reforms has been the push for good governance.

Good governance constitutes a system of state or institutional management guaranteeing rule of law, transparency, accountability, justice, and public participation. Following the 2024 mass uprising, expectations ran high that the government would ensure just and equitable use of public funds. People anticipated transparent policymaking and unfettered access to information alongside ending corruption, waste, and misappropriation. None of these expectations saw meaningful progress during the outgoing year.

Reviewing the interim government’s performance over the past twelve months reveals no reduction in administrative expenditure. On the contrary, the debt burden grew further, continuing a fifteen-year trend, while revenue collection failed to increase. The tax-to-GDP ratio fell below 7 percent. Though posts such as cabinet secretaries, principal secretaries, and secretaries were recommended to be reduced to sixty to curb spending, the government moved in the opposite direction. Contractual appointments and favouritism in promotions further increased administrative costs.

The government issued a July National Charter for state rehabilitation, with a referendum now planned for its implementation. Yet no initiatives emerged over the past year to reform 232 state-owned and autonomous institutions. State banks showed no movement towards establishing good governance. Though steps were taken to amend the Bangladesh Bank Order as part of central bank reform, implementation stalled. Similarly, efforts to amend the Bank Company Act for better governance remain frozen. No effective measures restored good governance in capital markets, insurance or other financial sector entities.

The central bank maintained its policy of raising interest rates to tame three-year-high inflation. This depressed private sector credit growth to around 6 percent, stalling business expansion and job creation. Mounting bad loans now strain the banking sector under pressure from high interest rates. Yet inflation remains unchecked, recently accelerating while ordinary citizens’ purchasing power dwindles — widening the wealth gap between rich and poor.

Observers note that establishing effective governance and reducing irregularities ranked among the core aspirations of the student-led uprising. However, the interim government’s actions this year remained confined to select policy reforms. There is little evidence that these measures have significantly altered public service delivery, where reports of bribery persist. Furthermore, procurement processes continue to be marked by irregularities, including the awarding of projects without competitive tendering. Similar concerns have been raised regarding the financial sector; board restructurings and bank mergers appear to reflect preferential selection, notably in the decision to exclude two established private banks from consolidation despite NPL ratios exceeding 70 percent.

Dr Mustafa K Mujeri, former Bangladesh Bank chief economist and now executive director at the Institute for Inclusive Finance and Development, told journalists, “All national institutions decayed over the past fifteen years. Economic institutions fared the worst. The interim government could have conducted forensic audits to determine real damage upon taking charge. Beyond a few private banks, I have seen no such scrutiny. Data quality from official providers like the Bangladesh Bureau of Statistics remains poor. Citizens still pay bribes for public services. So where exactly has governance improved?”

Dr Mujeri voices further frustration over opaque public spending: “Our bureaucracy is top-heavy and rife with corruption. No transparency or accountability exists in government expenditure. We have seen salaries, allowances, and perks for officials consuming disproportionate funds.” He notes that crucial sectors benefiting the poor — agriculture, social safety nets, local government, and rural development — saw budget cuts during the past year, not increases.

Under Sheikh Hasina’s fifteen-year rule, the banking sector sustained the deepest damage to Bangladesh’s economy. Hundreds of billions of taka vanished from this vital financial artery. The scale of decay only surfaced after the mass uprising. Bad loans in the banking sector alone surged by BDT 2.98 trillion during the first nine months of 2025 (January–September). By the end of September, non-performing loans across all banks reached BDT 6.44 trillion — 35.73 percent of disbursed credit. When the Awami League government assumed power in January 2009, after winning the ninth parliamentary elections, bad debts stood at merely BDT 224.82 billion.

Seventeen of the country’s 61 scheduled banks now report bad loan ratios exceeding 50 percent; some institutions see 80 to 98 percent of their lending turn default. Another eight banks suffer between 20 and 50 percent non-performing loans. Insiders, however, insist these figures mask reality. Forensic audits of state-owned and private banks alike would reveal substantially higher losses, they argue.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, observes that momentum for economic reform has stalled. Speaking to journalists, he noted, “The uprising demanded corporate and economic good governance. Initially efforts existed in this regard. But that urgency has evaporated. Though amendments to the Bank Company Act were proposed, implementation remains frozen. Bangladesh Bank’s reform order also stalled. Five troubled banks merged without accountability for those responsible. We must remember that without reining in corruption, all initiatives will fail.”

This veteran banker characterises 2025’s economic performance as mixed. He added, “External accounts were strong. The balance of payments returned to surplus, reserves grew, forex shortages eased, and the central bank now buys surplus dollars from the market. But little changed within the country. Inflation continues rising; investment and credit growth remain dismal; employment generation has stalled completely. One-third of all banking loans are now in default. Fuel security shows no progress. Years of high inflation have