Bangladesh lost an average of $16 billion annually to money laundering during the Awami League’s tenure from 2009 to 2023, according to the Economic White Paper Committee.
Submitted on Sunday by Dr Debapriya Bhattacharya, a renowned economist and the committee’s chair, the report highlights extensive misappropriation of funds and systemic corruption.
The 24-chapter report, officially titled “Bangladesh’s Current Economic Status White Paper”, was handed over to the chief adviser’s office and is set to be formally published on Monday.
Finance Adviser Salehuddin Ahmed, Bangladesh Bank Governor Ahsan H Mansur, Principal Secretary Sirajuddin Sathi, and Senior Secretary Lamiya Morshed were also present at the handover ceremony.
A report titled “Dissection of a Development Narrative” is expected to be made available to the public soon.
In the report, they found ten weak banks, mostly Shariah-based, are "technically bankrupt and illiquid".
"We chose 10 distressed banks to dig into their solvency and liquidity. Of the 10 banks, 2 are state-owned banks that were mostly hit by scams in the last decade. The other 8 are extremely weak shariah-based banks and conventional private commercial banks," the white paper read, but did not reveal the names of the banks.
The committee, comprising 12 members and led by Dr Bhattacharya, was formed on August 28 after the fall of Sheikh Hasina's government to evaluate the country's economic landscape.
Yunus thanked the committee for its groundbreaking work, saying it should be included in school, college and university curricula to educate students.
Debapriya emphasized that the committee had operated independently, without government interference.
“The problem is far deeper than we anticipated. The 400-page white paper, spanning 30 chapters, details how crony capitalism has created oligarchs who manipulate policymaking.”
Committee member Mustafizur Rahman said they had examined seven major projects out of 29, each exceeding Tk10,000 crore in costs.
“The total expenditure on these 29 large projects was $87 billion, or Tk780,000 crore.”
For the seven projects investigated, the initial estimated cost was Tk114,000 crore.
By inflating component costs, overestimating land prices and manipulating procurement processes, the project expenses were revised to Tk195,000 crore, according to the committee.
Another member, Dr AK Enamul Haque, highlighted that over Tk700,000 crore had been spent on the Annual Development Program over the past 15 years, with 40% of the funds embezzled by bureaucrats.
Committee member Dr Mohammad Abu Yusuf pointed out that tax exemptions during the past regime had amounted to 6% of the country's GDP, noting that reducing this by half could have doubled the education budget and tripled the health budget.
Dr M Tamim, another committee member, added that $30 billion had been invested in power generation. “And if 10% is considered illicit transactions, the amount would be at least $3 billion,” he said.
The interim government tasked the committee with completing its findings within 90 days.
The report examines six critical areas outlined by the chief adviser’s office: public financial management, inflation and food management, external balance, energy and power, private investment, and employment.
It also examines key areas like education, healthcare, banking, taxation, mega projects, poverty, and inequality, highlighting how governance lapses have deepened economic challenges.
However, the most significant revelations concern systematic money laundering, underscoring the urgent need for accountability and reforms in public financial governance.
Already in middle-income trap
The middle-income growth trap is not lurking any more, it is here in Bangladesh, the draft started.
Saying there was growth in the previous regime, the committee found that it was not as much as made out to be.
“A policy of the development of capital-intensive Fast Moving Consumer Goods (FMCG) and heavy industries (steel, cement) and prioritizing the erection of “temples of development” such as the mega projects in power and transport sidelined investing in small and medium entrepreneurs and farmers or the development of existing cities to make them livable and, more generally, the SDGs.”
It said the AL government's determination to "cling to political power through rigged elections overlooked the full costs of these developmental strategies where the government, connected businesses and elite bureaucracy put democratic accountability on the back burner."
1,340,000C laundered via hundi, data distortion
Recruiting agencies have channelled Tk1,340,000 crore through hundi transactions for visa purchases over the last decade, the paper stated.
It said syndicates and exploitative recruitment practices deprived migrant workers of equitable access to employment and diminished remittance contributions to the economy.
The White Paper on Bangladesh's economy also showed how data was distorted during the Awami League era to present a rosy picture of the economy instead of the real scenario.
Bhattacharya criticized foreign donors for lauding the AL government's economic projections, which he said questioned the international community's diligence.
"Democratic accountability was ignored during the AL rule. We have viewed the last three elections held under the AL government as the starting point of this decline. A centralised autocratic system was created, and our development journey faced problems due to a confluence of politicians, businessmen and bureaucrats," Debapriya further said.
"We have talked about institutional reforms in the White paper. We have said the problems that the interim government found after taking office were deeper than the problems that we thought were prevalent," Debapriya said.
Banking sector most corrupt
The banking sector was the most corruption-ravaged sector, followed by physical infrastructure, and energy and power, according to the paper.
Information and Communication Technology (ICT) was also identified as one of the most corruption-affected sectors by its operational and technological novelty.
The committee further pointed out the forms of corruption, such as banking loan scams, forced takeovers, illicit financial outflows, politically motivated unviable projects, inflated project costs, nepotism in appointments, bribery as a standard management practice, tax exemptions for the elite, distorted supply chains, sharing insider information, collusive corruption, and more.
Politically-influenced lending practices 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, the White Paper Committee on Bangladesh's economy found.
The draft said the depth of the banking blackhole exceeded Tk675,000 crore at the end of FY24, which was equivalent to 13.5 Dhaka Metro systems and 22.5 Padma bridges.
It said the fastest growing manufacturing sector accounted for 49% of the loans extended and 55% of NPLs.
"The window-dressed part of the NPLs are the loans rescheduled or restructured, because they turned bad in the past, and the amounts written off because they have been on the balance sheet as Bad Loans for too long," it said.
Capture by dominant business interests disabled the safeguards in the system leading to the dire state it is currently in. Operational and allocational inefficiencies have hurt growth and inclusion by excluding innovations and startups by entrepreneurs without tradable collaterals.
Proposals
"Our first proposal to the government is to give importance to economic stability and ensure accountability for this aspect. Our second proposal is to create a comfortable work plan before the budget is presented and approved. Another proposal by us is to utilise the time that we have for swift graduation from LDC status," he said.
Stating that the white paper tries to answer what happened and how it all happened instead of what to do now, Debapriya said: "We found huge expectations from the public when we consulted them, tackling which have become a big challenge. We want constructive discussion based on data and information, and we will try so that the White Paper does not focus on political issues."