During the rule of the ousted Awami League (AL) government, the country’s economic growth was inflated through exaggerated statistics. Over the years, figures such as GDP, per capita income, and exports were inflated. After the fall of the AL government in August through the mass uprising, there was an expectation that the exaggerated economic data would be corrected.
Eight months have passed since the interim government took office, but Bangladesh has not been able to escape from the grip of these inflated statistics. The reason for this is twofold: the previous framework for data collection remains in place, and there is a lack of overall initiative to correct past data. Analysts believe these two factors prevent the government from moving away from exaggerated economic statistics.
Donor agencies have long raised concerns about the quality of Bangladesh’s statistics. In 2022, the World Bank published a report titled Country Economic Memorandum: Change of Fabric. The report analyzed 30 years of statistics from 130 countries.
It showed that while Bangladesh’s average growth rate from 2009 to 2019 was claimed to be 7 percent, the actual growth rate was only 4.2 percent. In other words, the government had inflated the average growth rate by 2.8 percentage points over ten years. Additionally, the World Bank’s statistical capacity index showed a steadily declining score for Bangladesh.
GDP plays a key role in various important economic indicators. Globally, GDP ratios are often compared with indicators like debt, exports, and revenue. Over the past fifteen years, there have been many questions about government statistics. Both domestic and international economists have disagreed with the government’s claims regarding GDP growth.
For the fiscal year 2023-24, the government reported Bangladesh’s GDP size as 459 billion dollars. Many economists have raised questions about the accuracy of this figure. They argue that the actual size of the economy is likely between 300 to 350 billion dollars.
Despite these concerns, the interim government has taken no visible steps to determine the actual GDP in the past eight months. GDP measures important indicators like a country’s safe debt limit, export earnings, and necessary tax revenue. If GDP data is inflated, these indicators will also be inaccurate. The previous government has been accused of inflating GDP figures to show lower debt levels.
Due to inflated export earnings, the balance of payments (BOP) would often show large deficits in trade credit each year. The previous government explained that these deficits were due to the failure to repatriate export earnings. However, the government corrected this after pressure from the International Monetary Fund (IMF) and the World Bank.
The correction revealed that export earnings had been overstated for years due to flaws in the accounting method. After this correction, it was reported that in the last completed fiscal year 2023-24, goods and services worth BDT 5.23337 trillion were exported. Previously, this figure had been reported as BDT 6.63312 trillion, meaning exports had been overstated by BDT 1.39675 trillion.
The calculation of exports is closely related to the size of the country’s GDP. Inflating export earnings has also overstated GDP size, growth, and per capita income. According to the Bangladesh Bureau of Statistics (BBS), the final fiscal year 2023-24 GDP is BDT 500.02654 trillion, or 450 billion dollars. In previous provisional figures, the GDP was reported as BDT 500.48027 trillion, or 459 billion dollars.
This means the final GDP figure is BDT 453.73 billion lower than initially reported. The provisional GDP growth rate for 2023-24 was 5.82 percent, but the final figure has dropped to 4.22 percent. BBS stated that the decrease in growth was due to the revised export earnings and the slow pace of industrial production.
However, while the GDP data for the 2023-24 fiscal year has been corrected, the GDP figures for previous years have not been revised. BBS explained that the lack of corrected export earnings data for earlier years prevents the revision of past GDP figures.
Recently, the IMF has been pressuring the government to increase tax revenue on GDP. The IMF argues that the tax-to-GDP ratio should also increase if the economy grows. However, the tax-to-GDP ratio has been decreasing instead. Bangladesh has one of the lowest tax-to-GDP ratios in the world.
Experts believe that if the inflated GDP statistics are corrected, the GDP size will decrease, increasing the tax-to-GDP ratio. However, if the GDP shrinks, the debt-to-GDP ratio will likely rise.
Professor Mustafizur Rahman, a distinguished fellow at the Center for Policy Dialogue (CPD), told Bonik Barta, “Accurate data at the right time is crucial for evidence-based policy formulation. In this context, reviewing statistics, institutional reforms, and strengthening the Bangladesh Bureau of Statistics (BBS) are very important. We need to focus on improving the quality of the statistics being released and increasing the sample size. We have highlighted these issues in the white paper presented to the government. With the budget approaching, we must ensure adequate allocations for these areas.”
BBS calculates the country’s GDP based on production and expenditure. After including the revised export earnings in the expenditure-based GDP calculation, it was found that the statistical imbalance for the fiscal year 2023-24 stood at negative BDT 444.04 billion. In comparison, the figure for the previous year, 2022-23, was negative BDT 234.89 billion. In the two years before that, the imbalance was positive.
A negative statistical imbalance in GDP calculations means that the expenditure-based GDP is lower than the production-based GDP. After correcting the GDP figures, the statistical imbalance has increased further.
There is some ambiguity regarding the actual amount of the country’s reserves. During the Awami League government, Bangladesh published its gross reserve data based on its calculations. However, after joining the IMF’s loan program, the IMF pressured the country to change the method of calculating reserves.
As a result, Bangladesh Bank now publishes reserve data using the IMF’s BPM6 method. However, these are not the country’s actual usable reserves. Net reserves are considered the true reserves. According to the IMF’s method, liabilities related to reserves must be deducted from the Gross International Reserves (GIR) in BPM6 calculations to determine net reserves.
These liabilities include SDR allocations from the IMF, Bangladesh’s short-term unpaid liabilities to the IMF, foreign currency liabilities, non-resident liabilities in convertible currencies, ADB, Japan Debt Relief Grant (JDRG), foreign currency clearing liabilities, forward contracts, foreign currency swaps, and other future market-related liabilities.
Net reserve data are only sent to the IMF and never published publicly. The previous government followed this policy, which the current interim government maintains.
While the previous government inflated GDP size and growth figures, it also underreported inflation. This was done by changing the base year and increasing the number of items in the calculation. Many unnecessary products were also considered. However, BBS does not publish the list of items used for inflation calculation. Even under the current interim government, the previous method of calculating inflation is still in use.
Economists say that there are allegations that GDP growth has been inflated and shown higher than actual. Based on this inflated data, any policies or steps do not truly reflect the economic situation. Data and statistics are the foundation for policy formulation or any decision-making. The outcomes will not be beneficial if actions are based on unrealistic or false data. This is why the accuracy of statistics and data is crucial. Correct results cannot be achieved without accurate data on growth, inflation, and other important indicators.
Private-sector businesses also rely on economic statistics and data to analyze market trends and determine business strategies. In the past, business owners have repeatedly questioned the accuracy of export earnings data provided by the government. Inflated data has also harmed businesses.
Anwar-ul Alam Chowdhury Parvez, president of the Bangladesh Chamber of Industries, told Bonik Barta, “Everything depends on statistics. We don’t have accurate data on per capita income, employment figures, the number of SMEs, or employment in different sectors. How can a country progress without such data? Work cannot be done based on assumptions. Accurate statistics are needed for domestic investment. For example, we need to know the population, the number of consumers, the required spending, and the market size. There is no way to make progress if these statistics are unclear or questionable. In Bangladesh, all projections are based on growth. Without accurate statistics, they cannot be made. The government needs to rely on accurate data to make the right decisions. The public and private sectors suffer from the lack of correct statistics. We must move forward based on accurate statistics.”
After taking office, the interim government formed several reform commissions and a white paper committee to assess the country’s financial sector. After three months of work, renowned economists published a report. The report accused previous administrations of manipulating statistics to create an illusion of development. It stated that while growth was overstated from 2010 to 2019, there was no explanation for achieving this growth. In one model, the country’s growth began to decline after 2013, but the government’s declared growth rate continued to rise. Over time, the gap between the presented growth data and reality only widened.
Dr. Zahid Hussain, former lead economist of the World Bank, told Bonik Barta, “There’s no need to emphasize again the importance of accurate statistics. Some work may be happening in this regard. I’ve heard that a step has been taken. The planning adviser mentioned that work on a new statistics law has started. The current government will do this through an ordinance. Although the details of the ordinance aren’t fully clear, one key aspect is the need for approval. The new ordinance will not require approval from the planning minister, only from a technical committee. The ordinance will also require that the basis, data, and calculation methods for statistics be published on a website. Failing to do so will be a violation of the law. The most important thing for accurate statistics is the independence of the Bangladesh Bureau of Statistics (BBS). The ordinance will include provisions to make BBS independent. Whether BBS will fall under any ministry is still unclear. However, I have heard that the new ordinance will block political interference. I hope we will have a statistics ordinance by December.”
Economists have often called for the BBS to be made an autonomous body. This would ensure that the agency could present the true picture of the country’s economy without being influenced by the government. This did not happen during the previous government, which used the BBS to manipulate data. Misleading statistics were published to show the government’s success. Trust and credibility in BBS data are crucial. No other agency can be relied upon for important statistics like growth and inflation.
Dr. Mustafa K. Mujeri, former director-general of the Bangladesh Institute of Development Studies (BIDS) and executive director of the Institute for Inclusive Finance and Development (INMF), told Bonik Barta, “Unfortunately, during the previous government, various committees on statistics were formed. These committees included recognized statisticians and economists. They justified the misleading statistics. So, they cannot escape the responsibility for the inflated, misleading data. By justifying false statistics, they harmed the nation.”
Mustafa K. Mujeri, former chief economist of Bangladesh Bank, shared his opinion, saying, “Now, there’s an opportunity to work on statistics again because there are no political compulsions. Only the positive aspects were shown in the past due to these compulsions. This kind of pressure should no longer exist. Politicians used to manipulate statistics for their benefit. Now is the time to break away from that practice. If we can establish statistics on a solid, accurate, and reliable foundation, no one will be able to use it for their own gain in the future. However, no such steps have been visible so far. I believe there is a conflict of interest here, so there is still silence on statistics. It seems the conflict of interest has grown stronger. If this were not the case, why wouldn’t we seize the current opportunity to determine accurate statistics?”
Projections about where the country’s economic indicators might stand in the future are based on statistics. Therefore, policy strategies based on accurate statistics are crucial for effectiveness. The country’s economy is currently going through a challenging period. In such times, officials from the Ministry of Finance believe that making decisions based on accurate statistics is extremely important. They argue that if the transparency and accuracy of official statistics are not ensured, no policy will be effective.