By Dr. Chietigi Bajpaee and Dr. Patrick Shcroder
Chatham House — The resignation of Bangladesh Prime Minister Sheikh Hasina after anti-government protests has been celebrated by many in Bangladesh as a ‘second liberation’. Yet the ousting of the world’s longest-serving female leader also marks the most critical political situation in the country since the revolution in 1971. The turmoil reflects underlying fissures in Bangladesh’s politics, economy and security situation.
To address these issues, the military-led interim government will need to focus on building political consensus, stabilising the economy and rebuilding the legislative, judicial and executive state institutions to ensure accountability.
The need to build political consensus
Under the 15-year leadership of Sheikh Hasina, Bangladesh’s political system had become highly skewed – the country has essentially become a one-party state that favours groups affiliated with the ruling Awami League. This comes after the party was re-elected to a fourth consecutive term in January 2024 while opposition parties were marginalised.
In the formation of the interim government, all major opposition parties – including the Bangladesh Nationalist Party which boycotted the January 2024 elections – provided inputs to the new government structure and nominated politicians to work on the reform agenda.
BNP leader Khaleda Zia, who was convicted on corruption charges in 2018, has been released. The Jamaat-e-Islami party, which was banned by Sheikh Hasina’s government on 1 August 2023 after several of its politicians faced charges of war crimes dating back to the country’s independence struggle, has also been rehabilitated.
The appointment of Nobel laureate Mohammed Yunus as head of the caretaker administration signals an attempt to lend credibility to the transitional government, although his role is likely to be more of a figurehead. However, attacks on the offices of the Awami League, coupled with reports that several of its party leaders have been killed, do not bode well for creating an inclusive political climate.
Economic challenges
The anti-government demonstrations that toppled Hasina began as protests against the reimposition of public sector job quotas, reflecting the challenges facing the Bangladeshi economy. Bangladesh has been touted for its strong economic credentials in recent years, with its per capita GDP, life expectancy and female workforce participation rate all surpassing that of neighbouring India, and its fast-growing economy, with growth averaging 6.6 per cent in the decade preceding the COVID-19 pandemic.
However, these statistics belie structural challenges facing the Bangladeshi economy. These include high inflation – 9.73 per cent in 2023-24, the highest since 2011-12 – and slowing growth amid the country’s export-dependent economy. The country’s readymade garment industry accounts for 83 per cent of the country’s total export earnings, which makes it highly vulnerable to external shocks – from the COVID-19 pandemic to the war in Ukraine.
The protests in July saw many factories shut and exporters fear mounting losses if domestic political disruptions and lootings of factories continue. However, the IMF affirmed its commitment to the interim government following the protests, and will proceed with its planned $4.7 billion loan to promote economic stability.
Most significantly, the country faces high levels of youth unemployment with 18 million people – almost a fifth of the population of 170 million people – not working or in education. This is what made the issue of public sector job quotas a lightning rod for anti-government unrest, with 400,000 new graduates competing for 3,000 civil service jobs. The protests also raise questions about Bangladesh’s stability as an investment destination, particularly for the country’s lucrative textile and garment industries.
Bangladesh is on course to graduate from Least Developed Country status (as defined by the UN) in 2026, a transition which will require a revised set of trade agreements with major trading partners. Yet the European Union postponed the negotiations on a new cooperation agreement because of the government’s response to the July protests.
This pause includes discussions on the EU’s Generalised Scheme of Preferences Plus (GSP+) trade scheme, which gives developing countries a special incentive to pursue sustainable development and good governance. The interim government will need to resume these talks to ensure continued preferential access to the EU market – the main destination for ready-made garment sector.
Political and security risks
The high number of fatalities during the protests – over 300 people killed since mid-July along with the arrest of 11,000 – highlights the proclivity for aggressive and heavy-handed tactics by Bangladesh’s security forces.
The protests in July saw many factories shut and exporters fear mounting losses if domestic political disruptions and lootings of factories continue. However, the IMF affirmed its commitment to the interim government following the protests, and will proceed with its planned $4.7 billion loan to promote economic stability.
Most significantly, the country faces high levels of youth unemployment with 18 million people – almost a fifth of the population of 170 million people – not working or in education. This is what made the issue of public sector job quotas a lightning rod for anti-government unrest, with 400,000 new graduates competing for 3,000 civil service jobs. The protests also raise questions about Bangladesh’s stability as an investment destination, particularly for the country’s lucrative textile and garment industries.
Bangladesh is on course to graduate from Least Developed Country status (as defined by the UN ) in 2026, a transition which will require a revised set of trade agreements with major trading partners. Yet the European Union postponed the negotiations on a new cooperation agreement because of the government’s response to the July protests.
This pause includes discussions on the EU’s Generalised Scheme of Preferences Plus (GSP+) trade scheme, which gives developing countries a special incentive to pursue sustainable development and good governance. The interim government will need to resume these talks to ensure continued preferential access to the EU market – the main destination for ready-made garment sector.
Political and security risks
The high number of fatalities during the protests – over 300 people killed since mid-July along with the arrest of 11,000 – highlights the proclivity for aggressive and heavy-handed tactics by Bangladesh’s security forces.
A ‘Boycott India’ campaign emerged in Bangladesh after the January elections in opposition to Hasina’s perceived pro-India stance. The duration of Hasina’s stay in India will also pose challenges for New Delhi as it seeks to cultivate relations with the new government in Dhaka.
Five Indian states share the 4,000 kilometre border with Bangladesh, so New Delhi fears that any security crisis in the country could spill over. There are also concerns over the plight of several thousand Indian nationals in Bangladesh, with over 4,500 Indians returning in July alone. There are already reports of attacks on Bangladesh’s 13-million minority Hindu population.
Events in Bangladesh also highlight the disconnect between the foreign policy priorities of the West and India, which along with China has shielded the Hasina regime from international criticism.
While the West has focussed on democratic backsliding, India and China had welcomed the emergence of a more stable and predictable political environment in the country under the Hasina government. Relations between China and Bangladesh’s interim government, and then any democratically-elected administration, will be closely watched.
New Delhi justified its support for Hasina’s government on the grounds of an ideological struggle in Bangladesh between secularists and religious extremists, with the Awami League representing the former and opposition parties painted as the latter (often with the backing of India’s longstanding rival Pakistan).
Leaders in the region and beyond will be alert to the potential revival of religious extremism as a result of instability in Bangladesh, as well as its impact on migration flows.
Developments in Bangladesh also hold lessons for other countries in South Asia with large and young populations facing growing inequality and lack of employment opportunities. With almost 40 per cent of the region’s population below the age of 18 there is a latent risk of their demographic dividend becoming a demographic burden in the absence of sufficient economic opportunities and employment generation.
The departure of Sheikh Hasina marks a new chapter in the country’s political development, with the interim-government facing major challenges. In the short-term, it needs to stabilise the political situation and then to prepare for a new election. It also needs to start engaging internationally to gain legitimacy and rebuild partnerships with its neighbours and trading partners.
But any new government must also look further ahead and address the country’s myriad structural challenges. It must prioritise security for its citizens and protect the country’s economic development, but both require a period of stability within its splintered politics,
•Dr. Chietigi Bajpaee
Senior Research Fellow for South Asia, Asia-Pacific Programme
• Dr. Patrick Shcroder
Senior Research Fellow, Environment and Society Centre
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