It has been a turbulent year globally, but especially for Bangladesh, which has faced down growing social, religious and ethnic tensions internally as well as increasingly fractured relations with India. Despite an aspirational revolution last July, the country has since struggled to regain the footing – especially the economic footing – it had under former Prime Minister Sheikh Hasina.
In an attempt to assuage an increasingly worried public, Bangladesh Bank Governor Ahsan Mansur recently claimed that ongoing economic instability is due to investors waiting to “see what the next government will do.” Claiming it’s “natural” for them to want to “wait and talk” to the next administration.
These days, global capital rarely waits around to “see” what happens; it is the driving current of what makes things happen. It’s far from “natural” that investment in Bangladesh has stalled and Mansur’s claim papers over the reality that today, business in Bangladesh is far from booming.
Since coming to power, the Interim Government has at times acted against businesses and business leaders in ways that are highly questionable, if not downright constitutionally illegal.
Over the past year, observers have noted how Muhammad Yunus and Ahsan Mansur have acted in ways that seem to starkly violate businesses rights. Under their leadership, Bangladesh has seen the dissolution of the boards of 14 private banks in their first eight months in power and the seizing of shares and property – both in Bangladesh and abroad – despite thin evidence.
Looking at these conditions, global capital has been highly skeptical that Bangladesh is on the right track under the Interim Government.
In addition to these issues, the country’s economy has also faced ongoing hardships, and is now facing an uncertain future amid difficult US tariff negotiations – a process which has been far from smooth. Initially, the country faced a steep 37% tariff on all exports to the US, which sparked panic amongst many in the country’s keystone ready-made garment (RMG) industry. RMG makes up 11% of Bangladesh’s GDP and 80% of its export earnings; any tariff, let alone one as high as 37%, would have left millions of the largely female workforce jobless.
Bangladesh and the US have now negotiated the tariff rate down to 20%; giving the country an edge over India who will face a 50% tariff following Trump’s frustration with the country’s Russian oil purchases. But to get this deal over the line Bangladesh committed to buying 220,000 metric tons of wheat from the US at a significantly higher price than it pays for wheat from the Black Sea region. Additionally, the country agreed to order aircraft from Boeing.
Bangladesh is also set to graduate from its status as a Least Developed Country (LDC). Whilst this may seem like progress, it also means that the country will lose out on benefits and preferential tariff rates which are only afforded to LDCs. Bangladesh has relied heavily on these preferential rates alongside support from international institutions such as the IMF, World Bank and ADB. However, the country has now received the final instalments of its IMF loan and has had all USAID withdrawn. This is creating a perfect storm of economic hardships for Bangladesh in the middle of an increasingly unstable global economy.
It’s not helpful then that the banking sector in Bangladesh is facing an ongoing crisis. The Interim Government has announced that in order to address the widespread presence of non-performing loans in the country, it intends to merge five Islamic banks into one, which has prompted concern from depositors, experts and taxpayers alike. Depositors have raised concerns about the safety of their money and have not been assuaged by the government’s assurances it will be safe. Experts have warned that this merger does not appear to have learned from the mistakes of previous ones, and the new bank may also end up with unstable loan portfolios and without clear aims. Taxpayers have raised their concerns following reports that these mergers are set to come at huge costs.
This combination of political and economic uncertainty is being felt across the country. Private credit appetite has fallen significantly, and a growing number of Bangladeshis are moving their money abroad.
Although Muhammad Yunus has finally announced that elections will take place in February 2026, there is still a great deal of unpredictability in the country’s future, as it will be a new type of government, under a new constitution and electoral system, that will take power next year.
Photo by Sultan Mahmud Sagor on Unsplash
