More than six months after the new government assumed office, it is logical to review the country’s socio-economic progress. Several trade bodies, think tanks and media have already shed light on the performance of the BNP government, led by Tarique Rahman, in these areas. Besides identifying the areas of success, pointing out the failures and drawbacks is also important. The exercise is not new; rather, every democratic government has to undergo periodic reviews by various stakeholders as part of ensuring the government’s accountability to the people. Quarterly, half-yearly, and annual reviews of the economy are regular practices in most countries. Even governments in many countries conduct exercises to evaluate their performance and present their actions to the public.
For a new government, the first 100 days or the first six months are generally considered a honeymoon period, when it is in a celebratory mood as it adjusts its administration. During this time, citizens also allow the government to set its workforces and take various steps with errors and omissions to some extent. It is also the time when a democratically elected government enjoys its highest level of popularity. Criticism of government actions is also generally mild at this time. Moreover, the period provides the government with an additional advantage to take tough measures in the greater interests of the nation. Once the honeymoon period is over, the government enters into a phase of strong criticism and rigorous review of its performance.
The BNP government assumed power on February 17 this year following its landslide victory in the February 12 general election in Bangladesh. Tarique Rahman, the elder son of the late president Ziaur Rahman and the late prime minister Khaleda Zia, became the country’s 11th prime minister, for a five-year term. So, his government has completed six months in power on August 17 and is now in its seventh month. Six months is not sufficient time to correct the economy’s course, and no rational critic expects it. It, however, does not mean that there would be no critical review of the period despite the fact that the autocratic regime of Sheikh Hasina had brought the economy to its knees.
Some issues have already emerged as serious threats to the country’s economic growth in the last six months. So far, the government has yet to address these challenges properly.
The first issue of concern is high inflation. Though several domestic and external factors have been contributing to the persistence of high inflation, the government appears clueless about how to tame it. As a result, the average rate of inflation is still above 8 per cent, eroding people’s real incomes. Though headline inflation dropped to 8.32 per cent in July 2026, marking its lowest level in the last eight months, it is still high. The Wage Rate Index (WRI), which comprises three broad sectors — agriculture, industry, and services — increased slightly to 8.22 per cent in July from 8.18 per cent in June. It is still below the inflation level.
The second critical thing is the slowdown in investment. Expectations were high that the investment climate would improve once a democratically elected government is in office. Unfortunately, the desired improvement in the investment climate is still not evident, as reflected in the low growth of private credit. By the end of June this year, public sector credit soared by 30.43 per cent while private sector credit posted a 4.47 per cent growth, one of the lowest in recent times. Total excess liquid assets (including securities) in the banking sector increased by 39.40 per cent to Tk 4.08 trillion in June this year, reflecting sluggish credit demand. High interest rates, infrastructure bottlenecks, and deterioration in the rule of law are discouraging investors from expanding operations. Net inflow of foreign direct investment (FDI) declined by 18 per cent in the first nine months of FY26 to $1.13 billion from $1.39 billion in FY25. The full-year data for FY26 is not yet available.
The third issue and the most pressing one is the energy crisis. The crisis is a full-blown one and has started taking a heavy toll on investment, growth and employment. The BNP government has indeed inherited an expensive and chaotic energy sector legacy, distorted by the Hasina regime. During the last decade, 2009-2024, the country was made heavily reliant on fossil fuel imports. The need for investment in gas exploration and production was deliberately ignored. A major crisis in the gas sector started in 2015 due to yawning supply shortfalls against rising domestic demand. Awami League government formulated a master plan for the gas sector in 2017, outlining import-based solutions to address the deficit. From 2018, Bangladesh began importing gas under long-term contracts. Hasina’s power and energy adviser was the key person who made the country dependent on gas import. Allegations are that, along with a few ministers, bureaucrats, and oligarchs, he formed a syndicate that took control of the energy sector, heavily compromising the country’s long-term energy security. At present, half of the country’s total power generation is sourced from natural gas. As gas supply has declined amid volatility in the global energy market, the country is now facing a serious setback in power generation. The decision to import liquefied natural gas (LNG) in 2014 was a turning point in the country’s energy security. The first shock of import dependency was felt in 2022, when the Russia-Ukraine war broke out. The high cost of shipping, along with uncertainty in delivery, forced the country to resort to heavy load shedding. The second shock came early this year when the United States and Israel jointly launched an attack on Iran. As Iran retaliated, oil tanker shipments through the Strait of Hormuz were halted. Since than Bangladesh has been facing a serious energy crisis.
Student-led mass uprising forced the Hasina regime to fall on August 5 2024. The Yunus-led interim government took responsibility for running the country. During its 18 months in office, the interim government sought to repair the damage caused by the Hasina regime in the financial and energy sectors. Though it succeeded to a large extent in fixing the country’s forex reserves, little could be done in the energy sector. The core reason is various long-term contracts, signed and implemented by the Hasina regime, on importing LNG and power. The interim government couldn’t revoke any contract, despite knowing that the deal was heavily biased towards the suppliers at the cost of Bangladesh.
Now, the BNP government is struggling to find a solution, although options are limited in the short run. For instance, electricity imports from Adani Power in India remain the most expensive source, costing an average of Tk 14.86 per kilowatt-hour (kWh) in FY25. Signed in 2017, the 25-year contract is taking a heavy toll on the Bangladesh exchequer. If the county wants to revoke the deal, the cost will be much higher due to some unfavourable conditions in the agreement.
The energy crisis is not going to be resolved soon; the supply of power will continue to remain disrupted for days. It will also reduce fresh domestic and foreign investment in the near future, as investors are already struggling to continue operations. As a result, economic growth will also slow further, and unemployment may surge. Coupled with persistent inflation, an ominous future awaits the economy, the government, and the country indeed.
Source: https://thefinancialexpress.com.bd/columns/where-is-the-economy-heading
