Bangladesh at the crossroads

Thoughts from a brief visit to Dhaka

I have a massive soft corner for Bangladesh. Having grown up as a probashi Bangali (raised in Kerala by Bengali parents), it was only when I moved to Dhaka in 2017 that I finally got to live among Bengalis. I felt an almost irrational affinity to my surroundings.

Professionally too, there was so much to learn. The broad narrative about Bangladesh as a development miracle held true – it was an inspirational story of a country that had overcome a violent political history and resource limitations to afford for its citizens, a decent standard of living. The country is a behemoth when it comes to ready-made garment exports and has successfully implemented a productive state – NGO partnership to bring about human development. In terms of per capita income, Bangladesh stands shoulder to shoulder with my country, India which is far larger on every relevant parameter. There was rampant inequality as well, somewhat the consequence of an extremely capitalist economy that accorded much importance to fast-growing enterprises that relied on an abundant supply of cheap labour. As an emerging market and an influential regional and global voice, Bangladesh also demonstrated its compassion on the international stage in its handling of the Rohingya crisis.

Having left Dhaka in 2019, it was the first time in over four years that I was back for a short visit last week. Much had changed – in particular, there was visible infrastructure growth, and I was told that this is the case not just in Dhaka but also in remote rural areas too. Road connectivity is better than before. What had not changed is the complete grip that the Awami League had on governance in the country – if anything, they were more dominant than ever before.

A hegemonic Awami League

This was a frequent topic of conversation since Bangladesh, a country of about 173 million people, is on the verge of conducting its next general election on 7^th January 2024. The outcome of this election is no mystery – Bangladesh will re-elect PM Sheikh Hasina for another term. The principal opposition party, Bangladesh Nationalist Party (BNP) whose leader Khaleda Zia is ailing and has had to stay away from the public eye, is boycotting the election. As a result, Awami League has encouraged hundreds of “independent” candidates to stand for elections – these are all aspirants for official Awami League party tickets who were denied. Even if BNP had contested, there is little reason to believe the outcome would be any different. My friends asked, who is the alternative?

All signs of political hegemony are easily visible in Bangladesh. The Awami League has been in power for 15 years, since 2009 and have captured the state machinery at every possible level of government. Corruption is institutionalised. Decentralisation has hardly taken off. There are also allegations against the government of silencing dissent, curbing all political opposition, voter suppression, etc. Nobody denies any of this. It is almost as if dissent is futile. Previous elections, especially the one in 2019, was similarly acrimonious. What is different this time is a flailing economy, where mounting inflation, in particular, is giving rise to widespread angst – but with seemingly no outlet for citizens to express their discontent. The implicit social contract over the last decade between the government and Bangladeshi citizens is under threat.

I had the good fortune that the conversations I had while in Dhaka were with the best of Bangladeshi intellect that is possibly out there. These were people who lived in Dhaka and cared deeply about the future of the country. It was evident that the plain facts were well-known. It is also clear that Bangladesh’s economic woes have been long in the making.

An economic crisis laid bare

Last Saturday, there was a press briefing by a leading Bangladeshi think tank, the Centre for Policy Dialogue (CPD) in Dhaka, that captured all the different aspects of the economic crisis the country finds itself in at this time. Among the prominent symptoms of this crisis are the following:

• the slowdown in domestic revenue mobilisation (down from 9% in 2020 to 8.2% in 2023)

• inflation of over 10%, particularly affecting the cost of essential items

• alarming levels of non-performing loans (NPLs have gone up by over 50% in the last three years)

• worryingly low levels of foreign exchange reserves (currently at about $20 billion).

To some degree, external events such as the rise in price of commodities due to the Russia – Ukraine war, are relevant here, but overall, poor economic management by the government must be held responsible for the current crisis. From the aforementioned press briefing, what made the most news was the enormous sums that had been lost through repeated banking sector scams over the last fifteen years. Moreover, the case of NPLs perfectly illustrates the maladies of mis-governance – a tale of cronyism being the determining factor in economic policymaking in Bangladesh. The government had recognised the on-coming winter early and had availed of an IMF loan of $3.3 billion in January 2023. One hoped then that the IMF programme would serve as an incentive to adopt the required short and medium-term structural economic and public financial management reforms.

Part of my despair stemmed from the fact that poor governance from an increasingly authoritarian regime has been the headline narrative in India over the past few years. Bangladesh is a much smaller country which doesn’t have the checks and balances that India has (for now!) in the form of a federal system of governance with active political competition at the state level. And it seems that bad political habits are contagious. The development of personality cults, brooking no dissent from ordinary citizens, economic policies that benefit a handful of businesses, the all-pervasiveness of political appointments, the disregard for institutions and conflicts of interest, and the lack of consultation with experts – all of these are bad habits that seem to have spread across national borders in South Asia. How I wish Bangladesh would be an exception! As a country that overcame damning odds over the last three decades, it certainly has the potential to do so.

What can one hope for?

Bangladesh is at the crossroads. In 2026, Bangladesh is set to graduate out of the ‘Least Developed Countries’ category. While this is a matter of great pride for Bangladesh, the government itself recognises that there are major challenges ahead. Graduating out of LDC category will mark the end of concessional loans. Infrastructure projects will get more expensive. Preferential market access for Bangladesh’s key export sectors will cease. These could combine with the structural weaknesses domestically into a crisis of greater proportions.

All hopes seem to hinge on PM Hasina to bring about strong reforms, once re-elected. This is not the time to upset the powers that support her party. But without political competition, does a government have enough incentive to reform? Does it even have access to the right avenues for feedback? With a bureaucracy that is thoroughly politicised, with hardly any independent institutions, and with assured political dominance for some time to come, it is very easy for a government to turn complacent or worse, apathetic.

PM Hasina is an exceptionally shrewd political operator. In her fourth consecutive term in power, she is bound to be thinking about a generational change in her party. She must also recognise that two of her greatest successes have been securing a decent standard of living for Bangladeshis and keeping religious fundamentalists at bay. But people I spoke to were divided on the likelihood of this happening though.

What would prompt a course correction – would it be the high inflation that is causing immense public distress, further compounded by the prevailing low minimum wages in large employment generating sectors such as garments? Or would it be traders demanding better management of the country’s foreign exchange reserves, so they are able to get Letters of Credit? Or will it be the voices of Bangladeshi elites who are starting to face challenges when traveling abroad due to a shortage of USD?

Wheresoever it emerges from, one hopes that the constituency for reform is broad enough, and influential enough that the government is compelled to act. It would be tragedy if Bangladesh doesn’t turn things around.