Political instability is driving Bangladesh's economic collapse

The rising cost of living in Bangladesh is no longer merely a matter of market prices. Its effects have eroded people's real incomes. As a result, they must continually cut back on everyday expenses.Recent research by the International Monetary Fund (IMF) shows that sharp increases in food and energy prices do not merely generate temporary inflation; the effects of such inflationary crises weigh on a country and its state institutions for a long time. These effects will be prolonged in Bangladesh, too. Poverty has already increased. Many people have fallen below the poverty line. At the same time, employment is contracting and production is declining, and the situation is worsening by the day. The gap between the economically privileged and the disadvantaged is set to widen considerably.A recent Reuters report on poverty said a new IMF economic model calculated the disproportionately greater impact of inflation on poor households. According to the model, between 2021 and 2024, about 23 million more people fell into extreme poverty than previous estimates indicated. The IMF will publish the research as a chapter in its forthcoming World Economic Outlook.This warning is particularly important for Bangladesh, because the figures being presented to show that inflation is declining conceal a mathematical sleight of hand. The reported decline in inflation uses 2025 as the comparison year, measuring the current rate against that year's abnormally high inflation. Meanwhile, the IMF model discussed in the Reuters report was developed with politically stable countries in mind. And in those countries, rising energy prices have been treated as the principal cause of inflation. But in countries such as Bangladesh, Afghanistan, and Myanmar, rising energy prices are not the sole underlying cause of inflation. Moreover, inflation had already become acute in Afghanistan, Myanmar, and Bangladesh before the outbreak of the war between America and Iran.In Bangladesh, inflation reached alarming levels immediately after Yunus illegally seized power. After Yunus left power, oil prices rose as a consequence of the US-Iran war. In reality, the main reason for inflation in countries like these is that state structures have been dismantled. In Afghanistan, Taliban militants dismantled those structures. In Myanmar, they were broken down through armed rebellions by various ethnic groups and the military’s overthrow of the elected government. In Bangladesh, too, an NGO figure named Yunus dismantled the structures of the state by bringing together militants and various groups to overthrow a stable government through "meticulous design". Several religious-nationalist political parties helped Yunus dismantle those structures and create anarchy in the country. The starkest example of the dismantling of state structures in Bangladesh is the enactment of a law to protect the killers of police officers instead of bringing them to justice. Judges were even forced to resign through mob violence at the Supreme Court.Meanwhile, as in Myanmar, a so-called elected government has been formed in Bangladesh under the guise of an election in which only one political grouping participated. Since the election did not reflect public opinion, political stability has, naturally, not followed. Consequently, as in Afghanistan and Myanmar, political instability is the principal reason Bangladesh is being drawn ever further into poverty.Beyond the parameters of the IMF model, Bangladesh stands alongside Afghanistan and Myanmar in Asia as a country experiencing a more severe rise in poverty and inflation. Here, poverty and inflation will not merely decline slowly; the situation may instead descend into an even deeper crisis.When energy prices rise and global trade, including the energy trade, shifts onto new paths, every country must confront changing circumstances with considerable caution and competence. Governing at such a time demands a much higher level of capability. Above all, it requires national unity, a stable country, and leadership that commands trust.At present, as in Myanmar, the activities of Bangladesh's principal political party are banned. The leader of Bangladesh's principal party, the Awami League, is currently in India as a state guest. She has announced through the international media that she will return to the country in December. From this, observers at home and abroad understand that the country is about to enter a new political chapter.Naturally, therefore, domestic and foreign businesspeople want to get through this period without taking risks. This reluctance among businesspeople to act is pushing Bangladesh further into economic stagnation with every passing day.The damage Yunus, the NGO leader who seized power, inflicted on the country's military and civilian structures and its economic sector presents the greatest obstacle this government faces in trying to overcome the crisis. In most areas, this government continues to follow Yunus's policies. As a result, it has essentially defined itself as Yunus 2.0. It was not properly elected, with actual participation in the election amounting to only 12% to 15% of voters.For this reason, rising inflation and poverty in Bangladesh cannot be attributed solely to higher energy prices. Far more consequential are political instability, the government's lack of popular representation, the absence of capable state leadership, and the lack of a clear direction for governing the country.FROM YUNUS TO THE PRESENT GOVERNMENT: INFLATION REMAINS HIGHThe World Bank's April 2026 Bangladesh Development Update raised similar concerns. The institution reported inflation at around 8.5 percent in the 2026 fiscal year, with prices remaining high for both food and non-food items. As low-income workers' wages failed to keep pace with prices, their purchasing power declined.In its July 2026 forecast, the Asian Development Bank (ADB) projected inflation in Bangladesh at 9% for 2026 and 8.8% for 2027. It raised its 2027 inflation forecast because it feared the second-round effects of energy and electricity costs would persist.The IMF's revised October forecast paints a more troubling picture, putting GDP growth at 3.2% and inflation above 10%. The modest easing anticipated in July has thus given way to a forecast of renewed inflationary pressure alongside weak economic growth.Since July, however, global politics, oil prices, and oil supply routes have become increasingly complicated. A new chapter in the US-Iran war began in September. In this chapter, the Houthis have put another oil transport route, the Red Sea, at risk; by attacking a Saudi airport in October, they have placed Saudi airspace in the same predicament.As a result, the political and security situation has already become more complicated not only in the Middle East but also in Pakistan. If Pakistan commits itself more deeply to the Mecca agreement, it will find itself in still greater difficulty. Following the Houthi attacks on Saudi Arabia, analysts in Pakistan are saying that the country's political, security, and energy crises will all intensify. Entering a framework such as the Mecca agreement bears much of the responsibility for this predicament.Bangladesh, meanwhile, has already become more deeply entangled in its relationship with Pakistan. It has expressed a desire to join the Mecca Pact. Bangladesh may therefore have to bear some of the consequences that fall on Pakistan. The more actively Pakistan involves itself in Saudi Arabia, the more it will expose itself as a target for the Houthis and Iran. If Bangladesh continues to support Pakistan openly in this manner at such a time, its energy import routes may face disruption.In both the Strait of Hormuz and the Red Sea, the countries of the Mecca Pact and their supporters will face obstruction as part of Iran's and the Houthis' war effort. With its present instability and weak economy, Bangladesh will find it extremely difficult to withstand the pressures of such a situation. The country's stability and international position will become even more precarious.Above all, with the war entering this new chapter, any assurance that global oil prices will fall has become increasingly implausible. The cost of transporting oil, which stood at $30,000, has now reached $1.2 million. At this moment, the world sees no prospect of that cost falling; it sees only further increases.It is therefore impossible to reduce inflation or prevent poverty from rising merely by controlling oil prices or thinking in terms of oil alone. What Bangladesh needs first and foremost is capable political leadership to govern the country. From the New Deal to the recovery from recession during Obama's presidency, political decisions shaped the way out of economic crisis.Economic conditions and available resources alone were not the determining factor. Again, although widely condemned in history, Adolf Hitler brought about economic development in his country after World War l through political decisions, as did Japan's leadership after World War ll.Even in Bangladesh, when the Awami League-led Grand Alliance formed the government in 2009, the country was facing a severe energy crisis. The world was in recession. The government at the time overcame these difficulties by using political decisions to guide the economy and make energy policy an integral part of it. To overcome the recession, the government set energy production targets, took swift decisions, and began work, despite condemnation from many quarters.It focused on restoring economic momentum by increasing purchasing power in the domestic market. In keeping with that approach, the government pursued economic diplomacy with all neighbouring countries. It did not confine itself within a particular sphere and thereby tie the hands of industry and commerce.These achievements were undone before oil prices rose.POVERTY IS ALREADY RISINGThe World Bank's latest development update, published in October 2026, presented an even more alarming picture. According to its calculations, poverty and inequality increased in the 2026 fiscal year, with about 2.1 million additional people living in poverty than the previous year. At the same time, job creation stagnated, and women were hit harder by job losses.Furthermore, according to the World Bank report, these pressures mean nearly one-third of the country's population, or 62 million people, could at any moment be pushed back into poverty by illness, a natural disaster, or another sudden shock.In Bangladesh, official figures already put the number of children who have died of measles under this government at more than 1,100. An average of four to five children are still dying every day. Official figures also show an average of three to four deaths from dengue each day. Medical services in district towns and remote areas have broken down. Consequently, most of those dying from measles and dengue have to be brought to Dhaka for treatment. To bring them to Dhaka, many families are having to sell their land or other immovable assets. Having to sell such assets demonstrates that a section of the country's families has lost the financial capacity to secure treatment for their sick.The cost of blood tests and other diagnostic tests at general hospitals has risen by 25% to 30% since last month. This is a direct blow to middle-class families as well. Meanwhile, the sudden shock the World Bank refers to has been unfolding in Bangladesh since July–August 2024. The country was abruptly plunged into political instability. The attempt to stabilise it through a so-called election involving only one political grouping has already proved mistaken.Instead, the country has not moved even an inch out of instability. It is therefore now realistic to regard this political and administrative instability itself as the "possible shock" identified by the World Bank. As a result, 60 million people now stand at the edge of the precipice, at risk of falling into poverty.In the World Bank's view, Bangladesh faces a dual challenge: reducing inflation on the one hand, and creating employment or income sources that increase ordinary people's real purchasing power on the other. To this end, the World Bank has advised that the path toward inclusive growth will not be sustainable without rapid reforms in the financial sector, revenue collection, energy, and the business environment.The World Bank is a financial institution. Just as it provides loans, it also considers, from its own perspective, the returns on those loans. All its recommendations therefore remain within the framework of a financial institution's thinking. From the standpoint of governing a state, that perspective is limited.In reality, a state's economy is never governed solely by considerations confined to the financial sector. Political judgment always guides it.In their recommendations concerning Bangladesh, the World Bank, the IMF, and the ADB place particular emphasis on reforms in the energy and financial sectors. But Bangladesh's problems began, and later grew more complex, when the country descended into political instability and fell into the hands of weak leadership inexperienced in state and political matters.For this reason, research by financial institutions will indeed reveal the current realities of Bangladesh's economy. But the way out lies in a stable political environment and capable leadership. In its recommendations, the World Bank has called for the country to move toward inclusive economic growth. The country will move toward such growth only when it establishes an inclusive society and inclusive politics.- Ends