White Paper on State of the Bangladesh Economy: Report brief

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Time present and time past Are both perhaps present in time future, And time future contained in time past. — T.S. Eliot, Four Quartets: Burnt Norton (1936) 

The Context 

The present government, brought to power through a student-citizens uprising, has been saddled with an economy which is afflicted by severe structural strains and macroeconomic stresses. Rising inequalities and lack of distributive justice have been one of the most disconcerting features of the economy. These challenges are perceptibly visible in areas running from public finance management to the sustainability of external balances to the human development status of disadvantaged communities. The Interim Government of Bangladesh has to deal with these challenges as it seeks to restore macroeconomic stability and undertake reform measures for promoting inclusive development. 

Recognising the seriousness of the situation, the Interim Government, through a gazette notification on 29 August 2024, decided to establish a committee to prepare a White Paper on the state of the economy. The twelve-member committee was given three months to deliver an objective assessment of the economic landscape inherited by the government. The present document is an outcome of the said directive. Design of the White Paper Preparation of the White Paper is, essentially, a transparency exercise that offers a candid view of the economy’s “ground zero”. The White Paper takes on an integrated approach of drawing on real-time empirical evidence and informed stakeholder perspectives to form not just an account of “what happened”, but to take a deep dive into “why it happened”. Arguably, such an exercise cannot be complete without a reflection on the future, which this document does, albeit in a limited way. 

Although commissioned by the government, the authors of the White Paper remain exclusively responsible for its contents. At the same time, the government remains free to pick and choose the policy suggestions offered in the report. 

The authors of the White Paper are fully aware that the present report remains limited in terms of the scope and depth of the analyses offered. This is largely due to the paucity of time and resources available. Yet, the White Paper would serve as a good resource for the Commissions, committees and task forces set up by the government to look into specific economic reform related issues. 

This report is the culmination of an intense and inclusive consultative process. The process was structured under three broad pillars, viz (a) mobilisation of the team and related logistics, (b) data generation, information collection and consultations, and (c) consolidation, drafting and validation of the report.

A total number of 60 consultations were held - the White Paper Committee members met 618 times to plan and discuss their respective tasks; there were 22 specific policy-related consultations; 17 technical consultations and key informant interviews; and three public hearings outside Dhaka (Sylhet, Chattogram and Rajshahi). The full list of the meetings is provided separately in the report. 

In response to the committee’s open call, more than 340 ideas, views, and inputs have been received through emails, posts and White Paper social media platforms. 

The Overarching Findings 

The White Paper explores and establishes the situation in specific areas of the economy. A total of 23 chapters in the document are grouped under five broad heads. These include (i) Macroeconomic issues, (ii) Structural challenges, (iii) Social dimensions,(iv) Institutional aspects, and (v) Policy outlook. 

The review presented in the White Paper validates the contemporary understanding of the difficulties currently confronting the economy and the hardship experienced by the citizens. Indeed, the investigation undertaken by the authors of the White Paper reveals that protracted periods of deceptive data, lax financial management, reckless macroeconomic management, public finance pilferage, and external sector imbalances have created deep wounds in the economy. The depth of these wounds turned out to be much deeper than is generally suspected. 

The sustenance of the economic management by the erstwhile government was provided by a development narrative underwritten by cooked-up GDP growth figures. Even this invented hyped-up development story could not hide the stagnating tax-GDP and private investment GDP ratio and resource paucity for human development sectors, including social protection. The record of poverty alleviation turned out to be a vain glory. Indeed, as our analysis shows, the data eco-system of the country became essentially political preference driven. 

The deceptive economic outcome indicators were coupled with serious institutional flaws in two sectors in particular - the financial sector (e.g. banking and non-banking financial institutions, capital market) and the energy sector (primary and secondary). Such a situation remains closely related to the launch of overpriced mega projects and the huge outflow of illicit finance. 

Thus, one of the world’s most vaunted development stories of the recent period was built on shaky ground and deep-rooted systemic flaws. Curiously, a number of our international partners were enthusiastic subscriber of this false narrative. 

The critical question that begs an answer “Why have things turned out the way they have?” 

The Kleptocratic Legacy 

The short answer lies in unchecked corruption, abuse of public resources and misuse of discretionary power for a decade and a half. The fundamental reason for such misgovernance was predicated by a pervasive lack of democratic accountability originating from the fraudulent national elections of 2014, 2018 and 2024. Such elections, along with disempowering local government elections, gave shape to a very centralised authoritarian government. For its sustainability, the regime promoted collusion between the ruling politicians, a section of the bureaucrats and certain business elites.

The mentioned anti-development alliance not only eroded institutional integrity and democratic accountability but also held back all institutional and policy reforms so as to maximise its gains. A major fallout of these collusive behaviours had been a gradual erosion of the mandated role of the three critical organs of the state, viz. legislature, executive and the judiciary. This process further led to the paralysis of the non-state actors, i.e., media, civil society and private sectors, through intimidation, self-censorship and co-option. 

What started out as crony capitalism evolved into the rise of the oligarchs manifested in their stranglehold on political governance and economic management. Consequently, the government lost its policy sovereignty. These oligarchs influenced and manipulated key facets of the economy to serve their vested interests, concealed by an illusory development narrative sustained by inflated and misleading data. 

This alliance fostered a corruption-enabling culture that pre-empted reforms. It served to effectively suppress pluralistic voices and exclude stakeholders who could have meaningfully contributed to the nation’s progress. Indeed, in the face of the student people's upheaval, the thenhead of the government could not locate a space for social-political negotiation for a peaceful transition. 

Manifestations of Corruption 

As mentioned earlier, the hallmark of the economic legacy left to the current government had been wide-ranging and deep-rooted manifestations of corruption, particularly concerning the management of public resources. The White Paper Committee identified a number of dominant channels of corruption, which are listed below. 

• Banking Loan Scams. Fraudulent practices in illusory bank loans, misappropriation of loans, etc. 

• Bank Takeover. Forced takeover of ownership of banks with the help of state machinery. 

• Illicit financial outflows. Ill-gotten money is laundered out of the country in large volume. 

• Politically Motivated Unviable Projects. Resources are wasted on unviable projects, prolonging timelines and inflation costs. 

• Inflated Project Costs. Systematic cost overestimation to siphon funds. 

• Project Cost Escalation Post-Approval. Costs are artificially escalated after project approval to divert funds. 

• Non-Competitive Tender Processes. Cronyism and favouritism dominate procurement, excluding qualified bidders. 

• Unnecessary or Poorly Designed Projects. Resources are wasted due to weak feasibility studies, prolonging timelines and inflating costs. 

• Nepotism in Appointments. Project management, particularly Project Directors, is often appointed based on political connections rather than merit. 

• Illegal Land and Asset Acquisitions. Land and assets are seized or acquired through illegitimate means.

Misappropriation of Land Acquisition Funds. Politically weak landowners are coerced into unfair deals, and funds allocated for land acquisition are misused. 

• Awarding Overpriced Contracts. Contracts are often granted to politically connected contractors at inflated prices and given without competitive bidding. 

• Abuse of Project Resources. Misuse of vehicles, travel budgets, and other project resources for personal or political gain.

Bribery as a Standard Management Practice. Bribes are routinely exchanged to expedite processes or secure favours. 

• Misallocation of Public Funds. Funds intended for development are diverted to serve political and/or personal objectives by the leaders. 

• Tax Exemptions for Elites. Tax policies disproportionately benefit influential groups. • Distorted Supply Chains. Manipulated supply chains lead to unfair pricing and market inefficiencies. 

• Sharing Insider Information. Policy decisions are leaked to select groups for financial gain. 

• Collusive Corruption. Collaboration between public officials and private actors for mutual benefits. 

• Extortion-Based Corruption. Coercion is used to extract bribes or enforce unfair deals. 

• Monopolistic Corruption. Market conditions are manipulated to favour specific individuals or entities. 

• Pre-emptive Information Sharing Corruption. Early access to critical information is exploited for undue advantage. 

• Information Concealment Corruption. Withholding important information to mislead stakeholders. 

• Corruption by Inaction. Deliberate delays are used to create opportunities for rentseeking. 

• Corruption for Career Advancement. Bribes and connections are leveraged to secure promotions or influential positions. 

• Commission-Sharing Corruption. High-level officials demand a share of commissions for approvals. 

• Corruption for Political Favour. Resources and decisions are manipulated to secure political allegiance or favour. 

• Legislative Manipulation Corruption. Laws and policies are tailored to serve vested interests. 

The review of the White Paper puts the banking sector on top of the most corruption-ravaged sector, followed by physical infrastructure, and energy and power. Information and Communication Technology (ICT) was also identified as one of the most corruption-affected sectors by its operational and technological novelty. 

This non-exhaustive list of pervasive corrupt practices highlights the urgent need for systemic reforms and robust accountability mechanisms to restore governance integrity and economic resilience. 

Magnitude of Corruption 

One wonders to what extent corruption occurred because of these fraudulent practices. Below, we present several such estimates provided by the White Paper committee. 

• Revenue Leakages and Fiscal Drainage. Systemic tax evasion, misuse of exemptions, and poorly managed public finances have deprived the state of critical resources, stalling development. Between 2009 and 2023, illicit financial outflows averaged USD 16 billion annually—more than double the combined value of net foreign aid and FDI inflows. Moreover, halving tax exemptions could double education funding and triple health allocations, underscoring the significant fiscal opportunities lost to corruption. 

• Public Investments. Corruption in large-scale public projects has caused an average cost escalation of 70 per cent and delays of over five years. Of the $60 billion invested in ADP and development projects over the past 15 years, $14–24 billion (1.61–2.80 lakh crore BDT) has been lost to political extortion, bribery, and inflated budgets. Misappropriation of funds during land acquisitions and the appointment of patronised project directors have further strained resources, undermining potential benefits from infrastructure and social investments. 

• Distorted Supply Chains. Manipulated domestic production figures and understated demand for key commodities, such as rice, edible oil, and wheat, have destabilised markets. Erratic and politically influenced procurement policies have benefited powerful business groups while exacerbating consumer hardships. The absence of robust regular stock monitoring has only compounded these distortions. 

• Banking and Financial Systems. Politically influenced lending practices have deepened the banking sector crisis, with distressed assets (as of June 2024) equivalent to the cost of constructing 14 Dhaka Metro systems or 24 Padma Bridges. Persistent loan defaults and highprofile scams have eroded financial stability and diverted capital away from productive sectors. 

• Labour Migration. Over the last decade, BDT 13.4 lakh crore (BDT 1.34 trillion) has been funnelled through hundi transactions by recruiting agencies for visa purchases—an amount four times the cost of constructing Dhaka MRT 06 (Uttara-Motijheel). Syndicates and exploitative recruitment practices have deprived migrant workers of equitable access to employment and diminished remittance contributions to the economy. 

• Social Safety Nets. Misallocations within social protection programs have left millions of people vulnerable. As of 2022, 73 per cent of social safety net beneficiaries were classified as non-poor, a significant increase from 66 per cent in 2016. Over 20 million individuals remain just two days of lost work away from falling into poverty, highlighting the systemic inequities exacerbated by corruption. 

• Environmental Mismanagement. Corruption within climate adaptation funding has exacerbated environmental degradation. Politically patronised mismanagement of climate resources has derailed sustainability initiatives, threatening long-term resilience against climate-induced risks. 

Closure 

This White Paper is the collective work of the Committee. I am extremely grateful to the esteemed members of the White Paper Committee as well as to all other colleagues who have provided invaluable inputs and exceptional support. All of them have volunteered their time and talent imbued by an aspiration for a new Bangladesh. 

I am also grateful for the overwhelming support that the various interviewees and stakeholder groups from Bangladesh and beyond have extended during the preparation of this report. All of them have been mentioned in the following note of acknowledgement.

Finally, I would like to express my deepest gratitude to the Chief Advisor, Professor Muhammad Yunus, for giving us the opportunity to remain professionally and substantially engaged in this historic moment of Bangladesh’s transition.

Acknowledgement 

The White Paper Committee most sincerely appreciates the excellent support provided by the various organisations, institutions and individuals in various capacities and ways. 

• General Economic Division, Bangladesh Planning Commission for hosting the office of the White Paper Committee and extending secretarial support. 

• United Nations Development Programme (UNDP), Bangladesh, for generously providing operational and logistics support. 

• Centre for Policy Dialogue (CPD) for continued support throughout the process. 

• Citizen’s Platform for SDGs, Bangladesh, its Secretariat and the Partner Organisations of the network who have been engaged in mobilising diverse groups of participants for the public hearings organised outside Dhaka. 

• Government ministries, divisions and agencies who designated Focal Points from their respective organisations and provided data, documents and information support requested by the White Paper Committee. 

• Participants of the public hearings held in Sylhet, Chattogram and Rajshahi whose valuable insights and perspectives have significantly shaped the development of the White Paper. 

• Experts and participants who have contributed by taking part in various policy consultations, technical meetings, focus group discussions and key informant interviews. • Those stakeholders who have shared their ideas, views and inputs through emails, posts and White Paper social media platforms. 

• Members of the print and electronic media who covered the process and progress of the work of the White Paper Committee. 

Debapriya Bhattacharya, PhD Head of the Committee for White Paper on the State of Bangladesh’s Economy