Many economic parameters were cooked during the past Awami League regime while over US100 billion learnt to have been siphoned off the country, a Brussels-based agency reports and suggests rapid reforms for a rebound.
Macroeconomic indicators, including export figures and growth data, were believed to be manipulated and were "highly misleading", according to the report styled 'A New Era in Bangladesh? The First Hundred Days of Reform'.
The report, prepared by International Crisis Group and published Friday, says it was an open secret that Hasina's administration was manipulating key economic data for much of its time in office.
It has cited World Bank estimation that from 2015 to 2019 about half of Bangladesh's reported gross domestic product (GDP) growth was "unexplained", in that it could not be attributed to structural improvements or the effects of earlier reforms.
Export statistics were also doctored: in early July, Bangladesh Bank said export figures for the previous fiscal year alone had likely been inflated by $10 billion.
"It was rubber-and-pencil growth," the highly critical report says quoting an international macroeconomist.
"In other words, the numbers were cooked, though to what extent remains unclear," it adds about the alleged cooking of books on data.
The European agency notes that corruption also worsened under the deposed government, particularly in the banking sector, and became a major source of resentment.
More than $100 billion is thought to have been moved offshore illegally over the past fifteen years.
"Industrial-scale looting by ruling-party acolytes" has left some of the country's biggest private banks insolvent, according to regulators, putting depositors' money at risk.
"It's a classic case of crony capitalism," a foreign economist said. "The amount of embezzlement that the country has faced, particularly in the financial sector, is extraordinary."
Foreign governments should also help the interim government recover the proceeds of corruption and state-sanctioned theft that are sitting in banks and property markets outside Bangladesh, the agency suggests.
It notes that despite popular grievances over economic hardship, long-term economic reform is a lesser priority for the interim government than political change.
Its view is that addressing fundamental economic problems, such as low tax revenues, will take years - far longer than the interim government's likely lifespan - whereas political reforms to improve governance can be taken more swiftly and lead to better economic decision-making.
The post-uprising interim government is focused on short-term macroeconomic priorities, such as maintaining stability, building up foreign-currency reserves and bringing down inflation.
The early signs suggest that policymakers can avoid a Sri Lanka-style economic crash that brings down the government.
The interim government, in the recovery process, has secured billions of dollars of additional financial support from multilateral financial institutions, including the International Monetary Fund (IMF), the World Bank and the Asian Development Bank.
Exchange-rate reforms have helped boost foreign reserves. Inflation, while still high, has declined from its July peak, and Dhaka has started to clear its debt in the power sector. It is also seeking to renegotiate terms with some of its external creditors, including Russia and China, says the report.
Led by Nobel laureate Muhammad Yunus, the administration is expected to remain in office for another year, and maybe, longer. If the interim government falters, however, the country could revert to the status quo ante or even enter a period of military rule.
It should avoid staying in power too long and build consensus on new measures among political parties. External actors should offer aid, India should work to repair its image with the Bangladeshi people, suggests the report.
Foreign governments and multilateral institutions should provide the interim government with technical and financial assistance, including on security, judicial, electoral and economic reforms.
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