Economic Struggles: A Decline in Income Across Sectors

In the Amatali Botatla area of Dhaka’s Mohakhali, Mosharraf sells peanuts. When asked about his business, he replied, “Not good.”

He explained that his daily sales have dropped to around 2,000 taka, and this amount is continuously decreasing. By the end of the day, he is left with only about 500 taka. Before the recent political unrest, his daily sales were around 3,000 taka, with a profit of approximately 800 taka.

When asked how he is managing with reduced income, Mosharraf responded with a heavy heart, saying, “It’s getting tough.”

The reason for the drop in sales and income, according to Mosharraf, is that people simply don’t have money.

This drop in income is a concern that has been voiced by the country’s working-class population. Even vegetable and poultry vendors report a decrease in sales.

Rickshaw pullers, street vendors, and transport workers all share a similar story: lower earnings. Meanwhile, food inflation has risen by over 14% in November, the second-highest in the past 13 years.

Before income fell, a product costing 500 taka was already a struggle for people. Now, with the same product costing 550 taka, life has become unbearable for many.

It’s not just individuals suffering; the state’s income has also declined. Business activities, imports, and exports are all slowing down, and this is impacting the country’s development expenditure.

After the departure of the Awami League government, even businesses that supported the party are now under scrutiny.

Former Minister and freedom fighter Ghulam Dostgir Gazi’s large factory was looted, set on fire, and destroyed, leaving thousands of workers unemployed. Similarly, workers at the Beximco Group, owned by Prime Minister Sheikh Hasina’s advisor Salman F Rahman, have been protesting, demanding unpaid wages.

In an effort to pressure business groups like S Alam Group and Bashundhara Group in Chattogram and Dhaka, the government’s actions have led to disruptions in their business activities, leaving thousands of workers uncertain about their future employment.

Meanwhile, law and order in the country is deteriorating, with incidents of theft, robbery, and looting becoming increasingly common. Protests and blockades are also affecting traffic, making it difficult for people to move around.

From 2009 to 2021, Bangladesh’s economy experienced rapid growth. However, the onset of the Ukraine war in 2022 created significant challenges. In the past two years, the country has witnessed inflation, depleting reserves, and a depreciation of the currency.

Since the interim government assumed power on August 5, they have vowed to reverse the previous government’s policies. However, the reality is that these changes have made life harder for the people.

The World Bank’s forecast paints a grim picture. According to the South Asia Development Outlook report published in October, Bangladesh’s GDP growth this fiscal year could drop to 3.2%, much lower than the 6.75% growth target set in the current year’s budget by the previous government.

No Investments, Fears of Recession
Bankers report that despite some problems in specific banks, the overall liquidity situation in the banking sector remains excess, as businesses are not investing. They are not expanding their operations, and therefore, there is no need for large sums of money.

The central bank’s reports reflect this trend, with private sector loan growth having declined for four consecutive months since July. In October, loan growth fell to 8.3%, the lowest in 41 months.

After the interim government’s various policy changes since August, coupled with frequent worker protests, deteriorating law and order, and rising interest rates, entrepreneurs are increasingly reluctant to make new investments. Economic advisor Wahiduddin Mahmud recently commented on the country’s economic vulnerability, highlighting concerns over potential recession.

On November 25, during a briefing following a meeting of the National Economic Council (NEC), Mahmud directly expressed fears of a recession. He noted that political instability and chaos have led to stagnation in private sector production, especially in the garment sector. Without private sector investment and increased public development spending, the economy is headed for a downturn.

Stagnation in Development
The interim government, caught up with reforms, is struggling to maintain its development expenditure. Recently, a decision was made to cut the budget by 53,000 crore taka, with 30,000 crore taka slashed from development allocations.

The government had initially set a development budget of 2.56 trillion taka at the start of the fiscal year, but this has now been reduced to 2.26 trillion taka. However, implementation has been slow, with only 7% of the development budget being utilized in the first four months, the lowest in 14 years.

There are 1,326 projects under the Annual Development Program (ADP) this fiscal year, many of which, though included in 2023, have not seen any expenditure yet.

The stagnation in business and trade is also impacting the government’s revenue. From July to October of this fiscal year, revenue collection amounted to 101,281 crore taka, which is 30,831 crore taka less than the target. As a result, the government has revised the revenue target down by 23,000 crore taka.

Loss of Foreign Confidence
After the change in government, various foreign agencies promised loans, but the situation has not improved. Despite foreign loans, the country has not seen a recovery in its economic pace. In fact, the promise of foreign loans has dropped by 93% in the first four months of the 2024-25 fiscal year compared to the previous year.

The number of foreign loans pledged in the first four months of the current fiscal year stands at just 25 million dollars, a significant decline from 362 million dollars in the same period last year.

Even in the oil and gas exploration sector, where seven companies purchased tender documents, none of them submitted their bids on time, indicating a lack of foreign interest due to the uncertainty surrounding the government.

Instability in the Banking Sector
The banking sector has been rocked by instability following a comment by Bangladesh Bank’s Governor Ahsan H Mansur, which caused panic among depositors, prompting many to withdraw their money. As a result, some banks were unable to pay out even 10,000 taka to depositors.

Afterward, the central bank intervened, providing liquidity assistance to struggling banks. However, even with this support, inflation continues to rise, and interest rates in the industrial sector have surpassed 15%.

Businessmen Struggling
Anwar-ul-Alam Chowdhury Parvez, President of the Bangladesh Chamber of Industries (BCI), said, “No one is at ease right now. We are moving backward. Inflation is one factor, production costs are rising, gas shortages are disrupting production, and on top of that, interest rates are constantly increasing. With such uncertainty, no one will want to invest in business.”

Meanwhile, Babul Mia, who has been selling chickens at Dhaka’s Jigatala old market for nearly 10 years, has never seen such poor sales. He said, “I used to sell 170 chickens on Fridays, but now I only bring 70, and even they aren’t selling well.”

With sales dropping, his income has also decreased, and Rashid Mia, a vegetable vendor in the same area, is struggling to manage his household expenses, even cutting down on personal spending.

But it’s not just Babul. Meat vendors in Karwan Bazar have reported that their sales have halved. While they used to sell 15 to 20 goats a day, now they are only selling 8 to 10. Similarly, vendors who used to sell 3 to 4 tons of meat per day now sell only 2.5 to 3 tons.

National Impact on Meat Production
According to the Department of Livestock, meat production has decreased by nearly 50% in the last three months. In July, meat production in the country was 1.225 million tons, but it dropped to 641,000 tons in August and further decreased to 639,000 tons in September. In October, meat production was 600,000 tons, and data for November is yet to be released.