Bangladesh under Yunus’ leadership: Challenges, opportunities

Muhammad Yunus, Chief Adviser of the interim Government of the People’s Republic of Bangladesh, speaks during the United Nations General Assembly (UNGA) at the United Nations headquarters on September 27, 2024 in New York City. (Photo : AFP / Yonhap)

By Shafiqul Bashar

DHAKA: As Bangladesh finds itself since 8 August 2024 in the interim leadership of Nobel laureate Dr Muhammad Yunus, the nation stands at a crossroads of potential and peril.

Following the ousting of former prime minister Sheikh Hasina on 5 August, Dr Yunus’ administration has inherited a complex landscape marked by economic turmoil.

While the challenges are immense, Dr Yunus’ unique vision could either stabilize or further complicate the nation’s trajectory.

The economic scenario Dr Yunus faces is daunting. High inflation, currently exceeding 10%, coupled with a liquidity crisis in the banking sector, has created a precarious environment for ordinary Bangladeshis.

For the last couple of months, price hike of essentials has become unbearable for common people. The government is taking decisive steps to address these issues, including halting the printing of money for loans, raising interest rates, rationalizing public spending and measures to control price hike.

One of the most promising developments is Bangladesh’s recent commitment to secure up to $6 billion in loans from the International Monetary Fund (IMF). This support is crucial for stabilizing the economy, but it also comes with the expectation of significant reforms.

The IMF’s involvement signals the need for rigorous accountability in financial management, which Bangladesh desperately needs, especially in its banking sector.

With bad loans accounting for 32% of total loans – largely due to politically motivated lending and corruption – the urgency for reform cannot be overstated.

In addition to economic woes, the interim government faces a significant challenge with youth unemployment, which currently affects about 2.6 million young individuals.

Many are seeking education and job opportunities abroad, contributing to a growing trend of brain drain, with the number of Bangladeshi students studying overseas doubling in the past decade.

The exodus not only deprives the country of its future leaders and innovators but it also exacerbates the existing skills gap in the work force.

Dr Yunus’ administration is attempting to address these issues while also working to restore public trust in the banking system. The erosion of confidence among depositors, driven by past corruption and mismanagement, poses a significant barrier to economic recovery. Initiatives aimed at improving transparency and accountability will be critical in regaining that trust.

One bright spot in the current economic landscape is the substantial growth in remittances, which have surged by 80%. Efforts to channel remittances through formal avenues have bolstered foreign reserves, and provided much-needed protection against economic shock.

However, the geo-political instability in the Middle East, particularly the ongoing conflict between Palestinians and Israelis, raises concern for the approximately 6 million Bangladeshi workers in the region. As job security wanes, these remittances – vital for many families and the economy – are under threat.

Additionally, the recent repayment of $1.5 billion in foreign debts without tapping into foreign currency reserves, reflects stabilization in the dollar supply, thanks to improved conditions in the interbank market. Bangladesh central bank authorities have attributed this to measures aimed at curbing money laundering and corruption. The hope is that the remaining $400 million is outstanding debts will be settled by December, further enhancing liquidity, and stimulating economic activities.

However, while the initial steps taken by the interim government are promising, they are just the beginning. Experts emphasize the need for comprehensive reforms across multiple sectors to ensure long-term economic stability. Dr Yunus must not only focus on banking reform but also address structural issues in trade, agriculture and industry.

The newly-approved export policy for 2024-2027, which targets $110 billion in merchandise exports, marks on ambitious effort to diversify the economy and bolster growth.

By introducing new thrust products like vegetables and handicrafts, and aligning with World Trade Organization (WTO) regulations, Dr Yunus’ government is taking steps to ensure that Bangladesh remains competitive in global markets.

Yet, the clock is ticking. The public and investors will be looking for tangible results from these initiatives. The transition from intention to action is where many governments falter, and Dr Yunus must be vigilant in maintaining momentum.

The road ahead for Bangladesh under Dr Yunus’ interim leadership is fraught with challenges, yet it is also filled with opportunities for reform and growth. The nation stands at a critical juncture where decisive action, transparency and public engagement will be paramount.

While the initiatives currently underway are commendable, the real test will be whether they translate into lasting change that benefits all Bangladeshis.

As the global community watches closely, Dr Yunus has the chance to redefine the economic landscape of Bangladesh – transforming potential into reality in a country yearning for stability and progress.