Political unrest in Bangladesh is threatening the country’s already fragile economy. That’s because the opposition has been staging repeated blockades demanding Prime Minister Sheikh Hasina’s resignation ahead of general elections expected in January. Yesterday was the second day of a two-day nationwide strike led by Bangladesh Nationalist Party workers on Monday after a three-day strike last week. The protests disrupted traffic and prompted many citizens to limit their travel to avoid potential violence. Numerous incidents of arson took place and several deaths were reported and hundreds of BNP members and leaders were arrested.
Previous elections were marred by allegations of rigging. The opposition has made it clear that the agitation will continue until Hasina’s Awami League government hands over power to an impartial caretaker administration to oversee a free and fair election. But Hasina, who insists she is defending democracy, refuses to give up. Amidst this unrest, workers in Bangladesh’s garment industry have also been protesting for wage hikes in recent days.
The deepening political deadlock is raising fears for the economy, which is already under severe pressure from the global impact of the Covid-19 pandemic and the Ukraine war. Dwindling foreign exchange reserves and high inflationary pressures forced the Bangladesh government to seek a 4.7 billion loan from the International Monetary Fund earlier this year. But while some reforms are underway, macroeconomic stability remains elusive and the road crisis could further damage the country’s prospects.
Dhaka-based think tank ‘Bangladesh Enterprise Institute’ president and former ambassador to the United States M. Humayun Kabir said – ‘Overall it is a tough situation, but the stakes are high. Because if the stalemate continues, our multi-layered global connectivity – trade, exports, remittances or other economic activities may be further affected.’
Bangladesh’s ‘balance of payments deficit’ – already widened to Rs 2.8 billion in the July-September quarter, while its current account deficit widened to Rs 3.93 billion. According to the latest central bank data, foreign exchange stocks fell to 20.66 billion based on India’s Balance of Payments and International Investment Position Manual (IIG6) criteria. According to the Export Promotion Bureau, earnings from merchandise exports fell 13.64% to Rs 3.76 billion in October, the lowest in 26 months. Remittance flows also fell by 4.4% in the July-October period. Debapriya Bhattacharya, distinguished fellow at the Center for Policy Dialogue in Dhaka, told Nikkei Asia, ‘Bangladesh’s macroeconomic fundamentals are weak. Fiscal balance, external sector balance and inflation rate – all these issues have been under pressure for quite some time.’ Inflation has hovered around 9% in recent months.
Debapriya says that several factors are making the situation more difficult. Referring to the lack of focus and coordination on the economy, he said- ‘It seems that the government does not want to seriously address any reform issues in the next three months before the elections. It’s a problem that’s getting deeper.’ According to him, political violence affects both investment and employment prospects and can also affect the supply of export goods. Regardless of what happens politically, experts say the government needs to address its economic woes sooner rather than later. Zahid Hossain, former chief economist at the World Bank’s Dhaka office, feels, ‘The ongoing political uncertainty is clearly not good news for trade and investment, as it is disrupting them.’ He added that the economy is already in a ‘serious crisis’. To overcome this, it is necessary to reduce inflation and check external imbalances. Governments must address macroeconomic imbalances in any case, regardless of the political climate. ‘He advised that there is still time for an overdue course correction, but if not corrected on its own, it could take a turn for the worse.’
But a prolonged political crisis could divert attention from the sinking economy. Neither the ruling Awami League nor the BNP are showing signs of backing down or going on the road to negotiations. Former Ambassador Kabir said, ‘It is very difficult to predict what is going to happen. A third party may be needed to mediate and resolve impasses, but the question is who that third party will be.’ Internally, he found no effective person. Internationally, the United States is already applying pressure to ensure a fair election, imposing visa restrictions on anyone who might undermine Bangladesh’s democratic process. According to Kabir, ‘Intervention from abroad does not bring any significant solution. He himself could not give any solution. But warned of one thing – ‘the risks are multiplying and it will affect us as a nation’.