Towards the end of the Hasina era, Bangladesh’s economy was caught between soaring inflation, a banking sector crisis, depleted reserves, and mounting foreign debt. Years of populist spending and the systematic weakening of regulatory institutions had left the fiscal position strained, the banking system vulnerable, and investor confidence at historic lows. Public funds were squandered on partisan activities disguised as digitalization and IT training programs. Many celebrated mega-projects, such as the Rooppur Nuclear Plant, were beset by inflated costs, weak governance, and questionable returns.

In January 2024, writing in the Press Trust of India, I predicted that it would take something of a miracle for Bangladesh’s economy to continue thriving under a democratic autocracy without experiencing a major social and economic collapse by 2025. But Hasina’s regime fell far earlier than I anticipated, leaving the interim government of Professor Yunus with a fragile, distorted economy in urgent need of structural reform.

When the interim government assumed power, it had little choice but to embark on a program of far-reaching reforms. These were not pursued out of luxury, but necessity—meant to restore macroeconomic stability, regain public trust, and reset the development agenda for a post-Hasina Bangladesh. Now, one year into this experiment, it is worth asking: where have reforms delivered, where have they fallen short, and what should come next?

Interim government’s economic reforms: Successes and Gaps

One visible success of the past year has been on the inflation front. The government’s targeted measures to stabilize food prices—through tighter monitoring of import channels, release of buffer stocks, and improved inter-ministerial coordination—have begun to ease inflationary pressures. While households still struggle with living costs, the pace of price increases has slowed compared to a year ago, offering some relief to wage earners.

Progress has also been made in stabilizing the banking sector. For years, Bangladesh’s banks were plagued by non-performing loans, politically connected defaulters, and liquidity crises. Through stricter loan classification rules and mergers of weaker institutions, the interim government has restored some confidence. Depositor trust has improved, though deep-rooted flaws remain.

Even so, recapitalization of state-owned banks has been inadequate. Sonali, Agrani, Rupali, BASIC, and BDBL remain saddled with high levels of NPLs and have yet to recover funds siphoned off by political cronies. Beyond finance, reform momentum has been uneven. The labor market stands out as a missed opportunity.

Domestically, job creation has lagged behind the surge of young entrants into the labor force. Investment in labor-intensive sectors—such as agriculture-linked value chains or small-scale manufacturing—has been weak. Combined with inadequate social safety nets, this has contributed to rising poverty. According to the World Bank, the extreme poverty rate is projected to increase from 7.7 percent to 9.3 percent.

Externally, the overseas labor market has received insufficient support. New bilateral agreements, better training, and stronger protections for migrants are still lacking. Uncertainty over the reopening of Malaysia’s labor market for Bangladeshi workers persists, though one bright spot is improved cooperation for skilled manpower exports to Japan.

Revenue mobilization has also disappointed. The government fell short of its FY25 target. Attempts to reform the National Board of Revenue without buy-in from tax, customs, and VAT officials created political economy challenges. Whether splitting policymaking and implementation functions into separate units—Revenue Policy and Revenue Management—will help raise the tax-to-GDP ratio from its current 8 percent to 9 percent by 2028 and 10 percent by 2035 remains uncertain.

Central bank reform remains a pressing but unfinished agenda. Bangladesh Bank has long been vulnerable to political capture and weak enforcement. The interim government has spoken of professionalizing governance, but concrete steps—enhancing operational independence, modernizing supervisory frameworks, and insulating policy from political interference—are still pending. Without such reforms, gains in banking stability may prove temporary.

Finally, another area of frustration is the recovery of stolen funds. For decades, billions have been siphoned abroad through trade misinvoicing, illicit transfers, and procurement abuse. Despite public pledges, actual recovery has been negligible. Without credible international partnerships and stronger domestic investigative capacity, this problem will persist.

Constraining the oligarch class

Bangladesh’s recent history shows that authoritarian rule was sustained not only by political repression but also by the rise of a powerful oligarchic class. These oligarchs—business magnates with political loyalties—entrenched authoritarian structures by financing ruling parties, capturing key industries, and extending influence into media and parliament. The fusion of money and politics produced what scholars call a “plutocracy”, where economic power translated seamlessly into political control.

This is not unique to Bangladesh. Across Southeast Asia, from the Philippines to Malaysia, oligarchs have been central actors in sustaining authoritarian bargains. The policy challenge is twofold: to prevent oligarchs from monopolizing markets and to curb their stranglehold on politics.

What is to be done?

First, stronger regulation of campaign finance and party funding is essential. Money politics allowed oligarchs to buy parliamentary seats and shape legislation to their advantage. A transparent disclosure regime and caps on political donations can help level the playing field.

Second, regulatory authorities must be freed from oligarchic capture. In sectors like telecoms, energy, and banking, oligarchs have long used their influence to secure licenses, tax exemptions, or bailouts. Malaysia offers an instructive example: in the post-Mahathir years, competition policies were strengthened to curb market dominance, while independent commissions were given statutory autonomy to act without ministerial interference. Bangladesh needs similar safeguards.

Third, media pluralism must be preserved. Oligarchs in Bangladesh accumulated vast media empires to shape narratives and silence dissent. Breaking up such monopolies, supporting independent journalism, and introducing antitrust oversight in media ownership are crucial steps.

In short, containing the oligarchic class requires a mix of legal, regulatory, and political reforms. Without such measures, democratic gains will remain fragile.

M Niaz Asadullah, Head of the Southeast Asia cluster of the Global Labor Organization, is a visiting professor of economics at the University of Reading, an Adjunct Professor at Chulalongkorn University, Thailand, and a professorial fellow at North South University in Bangladesh. He is currently heading a white paper task force to investigate corruption in Bangladesh’s ICT sector.