M Saifur Rahman is widely regarded as a pivotal figure in Bangladesh’s economic transformation during the 1990s and early 2000s. Serving as finance minister from 1991 to 2006, he spearheaded a series of reforms that shifted the country’s economy away from state control and towards greater market orientation.
When Rahman took office in 1991, Bangladesh’s economy was characterized by heavy state intervention, low tax revenue relative to GDP, a managed currency, dominance of state-owned banks in lending, and a substantial reliance on subsidies to loss-making enterprises. Industrial policy was restrictive, creating barriers for private investment and foreign participation.
One of Rahman’s landmark steps was the introduction of the Industrial Policy of 1991, which allowed for 100 percent foreign ownership and unrestricted joint ventures. This policy move was instrumental in fostering a private sector-led growth model. Closely linked to these efforts was the establishment of the value-added tax (VAT) system, introduced in 1991 and implemented in 1992, which became a major source of government revenue and enhanced fiscal capacity.
Reforms extended to the financial sector through legislation such as the Bank Company Act of 1991 and the Financial Institutions Act of 1993, which promoted a more disciplined banking environment. These reforms helped the banking sector better finance the country’s growing export economy. Rahman also pursued trade liberalisation by abolishing import quotas, rationalizing tariffs, and reducing export incentives, encouraging Bangladesh to compete on a global scale. The decision in 2003 to allow the taka to float more freely marked a significant shift toward market-determined exchange rates.
Rahman faced considerable resistance in pushing these reforms, notably VAT implementation and exchange rate liberalization, but persisted with political resolve. His tenure also saw two noteworthy decisions reflecting his commitment to financial discipline: halting the issuance of new commercial bank licenses between 2001 and 2006, and mandating public disclosure of defaulting borrowers’ names, despite opposition within government ranks.
Today, Bangladesh confronts economic challenges reminiscent of the early 1990s, including depleted foreign reserves, high inflation, and a banking sector weakened by governance issues and nonperforming loans. Recent scrutiny by authorities has revealed deficiencies in loan accountability and instances of fund misuse by large borrowers.
Experts argue that addressing these challenges requires renewed adherence to principles Rahman championed: discipline, transparency, sound governance, adequate capitalisation, and political courage. Policy recommendations include broadening the tax base by integrating taxpayer identification with national IDs, protecting Bangladesh Bank’s independence, restoring credible exchange rate management, and accelerating banking reforms through insolvency frameworks, asset management companies, and professionalised bank boards free from political influence. There remains caution against issuing new commercial bank licenses unless driven by genuine economic need.
Restoring investor confidence through predictable and consistent economic policy is seen as critical. The private sector, it is noted, benefits not from mere encouragement but from a regulatory environment that enforces rules impartially.
As Bangladesh moves forward, the legacy of Khaleda Zia and M Saifur Rahman remains a reference point. Completing the economic reforms they initiated—strengthening tax systems, cleaning up the banking sector, and empowering the private sector—may hold the key to the country’s next chapter of sustained growth.