Economist Debapriya Bhattacharya Warns Bangladesh Faces 'Political and Social Earthquake' Amid Financial Crisis

Economist Sounds Alarm on Bangladesh's Economic Stability

Dr. Debapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue (CPD) and a renowned macro-economist, has cautioned that Bangladesh is rapidly approaching a potential 'political and social earthquake.' The warning, delivered on Thursday, November 29, 2025, at a book-launch event for 'Economic Journalism' held at the Economic Reporters' Forum (ERF) auditorium in Paltan, Dhaka, highlighted critical issues stemming from financial mismanagement and significant vulnerabilities within the country's banking sector.

Deep-Rooted Financial Mismanagement Exposed

Dr. Bhattacharya asserted that the bureaucracy played a substantial role in enabling the previous government's financial mismanagement, leading to the full exposure of long-suppressed banking sector weaknesses. Recent forensic audits, he noted, have unveiled the true extent of problems, including a 'mountain of defaulted loans,' significant provisioning shortfalls, and reserve deficits. He specifically criticized the head of the central bank, stating that this individual would be among the 'key accused' for failing to ensure accountability and transparency.

The economist's concerns are echoed by other international bodies. The International Monetary Fund (IMF), in its October 2025 Country Report, identified persistently weak tax revenues, fundamental fragility in the financial sector, and high inflation as deep-seated vulnerabilities. Similarly, S&P Global Ratings revised its economic-risk score for Bangladesh's banking system to '9' (on a scale of 1-10, with 10 being the weakest), citing elevated asset-quality stress and weak capital buffers.

Banking Sector Under Severe Strain

The banking sector in Bangladesh is facing immense pressure, with non-performing loans (NPLs) surging dramatically. By December 2024, NPLs had risen to over 20 percent of total loans, significantly surpassing the global distress benchmark of 10 percent. Some state-owned banks, such as Janata Bank, reported alarming NPL ratios as high as 66.8 percent. This situation has led to severe capital shortages, with the banking sector's average capital adequacy ratio (CAR) standing at approximately 3.1 percent by the end of December 2024, well below the regulatory minimum of 10 percent. This erosion of asset quality and capital has severely curtailed banks' ability to provide new credit, impacting business investment and overall economic growth.

Critique of Government's Crisis Response and Transparency

Dr. Bhattacharya also voiced strong criticism regarding the interim government's approach to addressing the crisis. He questioned the effectiveness of measures such as merging five banks, appointing administrators, and revising parts of the Banking Companies Act. Furthermore, he raised concerns about the hurried announcement of foreign investment proposals, including the leasing of a terminal at Chattogram port, arguing that decisions made under non-disclosure agreements (NDAs) 'lack transparency' and that 'large decisions do not last without stakeholder participation.' He emphasized that the current investment environment is 'very weak,' with private sector credit growth at its lowest in many years.

These observations align with findings from the 'White Paper on the State of Bangladesh's Economy,' a report he led, which was unveiled on December 1, 2024. This paper exposed deep-rooted financial mismanagement, extensive money laundering (estimated at $16 billion annually during the Awami League's tenure from 2009 to 2023), and pervasive corruption across critical sectors. Dr. Bhattacharya stressed the need for accountability and comprehensive reforms to navigate the country through its current economic challenges.