Bangladesh’s election dynamics, economic challenges, and global trade prospects

Bangladesh’s election dynamics, economic challenges, and global trade prospects

In the recent national election, Prime Minister Sheikh Hasina secured her fifth term despite the Bangladesh Nationalist Party’s (BNP) boycott, leading to a subdued 40 percent voter turnout. Amid accusations of a one-party state, Hasina’s victory poses economic challenges for the nation.

The country faces economic strains with a trade deficit of US$17.15 billion and a current account deficit of US$3.3 billion in the last quarter of FY23. Bangladesh’s forex reserves have declined from US$48 billion in 2021 to US$26.9 billion in September 2023, highlighting the need for effective economic management.

The recent decision by the WTO to grant duty-free market access beyond 2026 is crucial for Bangladesh. With 73 percent of exports under trade benefits, this extension aids in navigating economic challenges exacerbated by the pandemic and the Ukraine war.

As Bangladesh pursues higher middle-income status by 2031 and envisions development by 2041, the government faces the complex task of addressing economic woes while navigating the complexities of international trade agreements and LDC graduation.

About the Election

In the 12th parliamentary election, Hasina’s Awami League secured a fourth consecutive term, marking the second lowest voter turnout since the reinstatement of democracy in 1991. Despite a total of approximately 120 million eligible voters, only 40 percent participated, raising concerns about the democratic process.

Former PM Khaleda Zia’s Bangladesh Nationalist Party (BNP) boycotted the election, accusing Hasina of turning Bangladesh into a one-party state and suppressing dissent. Zia, currently under house arrest on corruption charges, labelled the poll as a sham, refusing to accept the outcome.

The political landscape is deeply contentious, with the bitter rivalry between Awami League and BNP defining elections. The challenge for the new government lies in addressing the concerns raised by the opposition, fostering inclusivity, and restoring faith in the democratic process.

Strategically Located & Economic Challenges

Turning to economic challenges, Bangladesh grapples with a trade deficit of US$17.15 billion and a current account deficit of US$3.3 billion in the last quarter of FY23. The decline in forex reserves from US$48 billion in 2021 to US$26.9 billion in September 2023 signals the urgency for effective economic management.

Strategically located in the Indo-Pacific region and boasting the eighth-largest global population, Bangladesh has made remarkable progress in the 50 years since its independence. Agriculture remains a primary source of employment, while the country has become the world’s second-largest producer of garments, constituting 80 percent of exports primarily directed to the EU and the US.

The recent decision by the World Trade Organisation (WTO) to extend duty-free market access beyond 2026 is a significant development. Initially facing the prospect of losing such benefits post-graduation, Bangladesh will now continue to enjoy duty-free privileges, supporting its economic stability.

Bangladesh, along with other LDCs, negotiated with developing and developed countries for an extension of trade benefits after facing economic challenges due to the pandemic and the Ukraine war. Being a top user of duty benefits among LDCs, Bangladesh utilizes up to 67 percent of trade privileges, with over 73 percent of exports under such benefits.

Discussions are ongoing in the LDC sub-committee for the extension of WTO’s LDC-specific special provisions post-graduation, with active involvement from Bangladesh.