Appointing a committee to prepare a white paper on the state of the economy was one of the first tasks of the Muhammad Yunus-led interim government that came to office via the July-August student-led mass uprising in Bangladesh.

Dr Debapriya Bhattacharya, one of the country's leading economists, was tasked with chairing the committee, and he in turn chose the other members of the committee to prepare the white paper so that strategic steps can be taken to stabilise the economy, reach the Sustainable Development Goals, and mitigate the challenges after Bangladesh graduates from the LDC grouping.

Starting September 1, it was given 90 days to complete the task, and the committee duly submitted its work to the chief adviser on December 1. A press briefing was held marking the release of the White Paper at the NEC Auditorium of the Planning Commission the next day, at which all the members of the committee were present.

Dr Debapriya, a distinguished fellow at the Centre for Policy Dialogue (CPD) and leader of the White Paper preparation committee, alleged that over the past 15 years, the country has transitioned from crony capitalism to kleptocracy. He attributed this shift to three successive national elections that undermined fundamental democratic rights and eroded accountability mechanisms.

Highlighting the key features of the report and the government's potential future actions, the eminent economist urged the government to make a public statement on its various operations and initiatives across different sectors.

Dr Debapriya stressed the importance of the next six months, recommending that the government present a clear plan for economic management ahead of the upcoming national budget. The distinguished economist proposed outlining anticipated inflation levels, foreign currency reserves, and interest rates amidst ongoing reforms in various sectors.

Debapriya also called for a mid-term strategy focusing on investment, employment generation, education, healthcare and social safety nets.

Commending the interim government's decision to withhold the 8th Five-Year Plan, Dr Debapriya described the proposed projects as unrealistic and impractical, necessitating an authentic evaluation. He also urged the government to provide a comprehensive account of its activities over the past four months, a detailed working plan for the next six months, and a two-year operational outline.

Addressing Bangladesh's progress towards LDC graduation, Dr Debapriya noted that the country meets all the necessary criteria and sees no justification for delaying the process, scheduled for 2026. He encouraged stakeholders to abandon the mindset of relying on preferential market access indefinitely.

Bangladesh's capacity, qualifications, and size make it unsuitable for remaining within the LDC category, he said.

When questioned about the sectors most affected by corruption over the past 15 years, Dr Debapriya ranked the banking sector as the most impacted, followed by infrastructure, energy and power, and ICT.

Prof Mustafizur Rahman, another distinguished CPD fellow who was on the committee, warned that future generations would bear the consequences of widespread corruption, particularly in mega projects.

At the press conference Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office who was also on the committee, cautioned that Bangladesh is facing the challenges of a middle-income trap. He suggested macroeconomic stability, policy reforms, and institutional accountability as pathways to overcome these hurdles.

Dr Selim Raihan of Dhaka University's Department of Economics, as well as executive director of SANEM, underlined the need for sustained reforms in critical sectors to support economic recovery and boost private sector investment. He also criticised the last three general elections as flawed, arguing that they undermined democratic institutions.

What it says

The white paper is, essentially, a transparency exercise that offers a candid view of the economy's "ground zero". It 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". As such an exercise cannot be complete without some reflection on the future, it also does that, albeit in a limited way.

The white paper is pointedly titled 'Dissecting a development narrative', a reference to the Awami League's efforts to paint itself as a development-friendly government. But this narrative was underwritten by cooked-up GDP growth figures, the paper finds. "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," it says.

The record of poverty alleviation of the previous government turned out to be a vain glory, as the data ecosystem of the country became essentially political preference-driven. The white paper panel, based on analysis and consultations with stakeholders, found discrepancies in data prepared by state agencies relating to gross domestic product (GDP), inflation, poverty, population, and agricultural production.

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," the white paper says.

The panel cited discussions with relevant data professionals of the Bangladesh Bureau of Statistics (BBS) and other organisations, saying political policymakers took a special interest in GDP figures and "surely had a strong influence" during the post-2013 period.

The paper alleged that a collusive group within the BBS emerged to ensure the economic performance of the country was maintained against all odds, be it only on paper.

During the post-2019 period, this collusive group was largely maintaining the act.

Cooking the books

The white paper found that a central issue behind the discrepancy between the picture presented of the economy by the government, and people's lived experience, was the deliberate falsification of economic data.

The panel said Bangladesh's GDP estimates have been under scrutiny for the past several years due to their apparent disjuncture with several other key macroeconomic and development indicators, including private sector credit growth, revenue mobilisation, import payments for capital machinery, energy consumption, export receipts and employment generation.

The white paper panel cited a World Bank (WB) study and said structural growth drivers such as trade, foreign direct investment (FDI), finance, macroeconomic stability and political stability could predict GDP growth reasonably well during the 1990s and 2000s. However, the share of unexplained GDP growth started to increase in the 2010s.

This peaked in the 2015-2019 period, when 3.7 percentage points of growth could not be explained by the structural drivers, it added. The report said the WB report terms this period as "rather unusual."

"Often, think-tanks in the country raised similar questions. Curiously, between FY14 and FY19, the GDP growth rate (calculated based on 2005-06 prices) never declined compared to the preceding year's estimates."

The panel used FY17 as an example, saying that the BBS reported 54.8 percent growth in leather and related industries although exports of the sector declined 16.3 percent that year.

In FY18, the same sector posted a 50.5 percent growth despite exports declining by more than a fifth.

The panel also questioned the calculation of inflation estimates by government agencies.

Citing a 2022 study by the South Asian Network on Economic Modeling (SANEM), the white paper mentions that while BBS recorded food inflation at 4.85 percent for urban areas and 5.94 percent for rural areas in January 2022, SANEM's estimates suggested that marginalised households faced inflation rates over twice those figures.

The white paper mentioned another research by the Bangladesh Institute of Development Studies, saying it found that food inflation in rural areas had hit 15 percent in December 2023 whereas national food inflation was reported at 9.58 percent by the BBS.

The white paper committee said the BBS estimated that poverty rates have been reducing since 2010, hitting 18.7 percent in 2022 from 26.5 percent in 2016. Similarly, extreme poverty rates have declined from 9.2 percent in 2016 to 5.6 percent in 2022, according to the statistical agency.

"However, these reductions do not align with improvements in other well-being indicators, such as food security," the paper added, citing the 2023 Food Security Statistics by the BBS that showed more than one-fifth of households perceived themselves as moderately to severely food insecure.

The panel also said that the BBS estimated a low unemployment rate by following an outdated methodology. Citing the International Labour Organization (ILO), it said the UN agency prepares Bangladesh's key labour market indicators based on the 19th International Conference of Labour Statisticians (ICLS), published in 2013. However, the BBS report used standards and definitions from the 13th ICLS, published in 1982.

"Furthermore, the BBS uses a different age range for youth and the working-age population than what is recognised by international standards. These discrepancies in standards and definitions have enabled the BBS to report an inflated employment rate for years, thereby downplaying the extent of the unemployment issue in the country," the paper said.

It all leads the white paper to conclude that the narrative spun by the previous rulers was rather a delusion, that even they fell victim to in the end, unable to perceive the long-term possibilities that such a delusion could brew.

A damning indictment

The white paper poses a critical question that it says begs an answer: "Why have things turned out the way they have?"

The short answer, it says, "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."

What started out as crony capitalism, it says, evolved into "the rise of the oligarchs"- which was 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.

The paper goes on to list 28 different forms of corruption that it said afflicted the economy most during the previous regime, from banking loan scams and takeovers to non-competitive tender processes to 'bribery as a standard management practice'.

Coming to the magnitude of such corruption, it says the following:

Between 2009 and 2023, illicit financial outflows averaged $16 billion annually-more than double the combined value of net foreign aid and FDI inflows.

Corruption in large-scale public projects has caused an average cost escalation of 70 percent 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.

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 high profile scams have eroded financial stability and diverted capital away from productive sectors.

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.

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.

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.

A baseline for policymaking

Upon receiving the paper from the committee members at his office on December 1, Chief Adviser Prof Yunus thanked the committee for what he described as a 'landmark effort', saying it should be published once it is finalised and be taught in textbooks in national college and university curricula.

"This is a historic document. It will show us the economy we inherited after the July-August mass uprising. The nation will benefit from this document," said the chief adviser in his short speech.

"Our blood curdles to know how they plundered the economy. The sad part is they looted the economy openly. And most of us could not summon courage to confront it," he said, adding that even the multilateral agencies that monitor Bangladesh's economy were also largely silent when this plunder took place.

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. It says even 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.