Bangladesh grapples with weakening economy as election season looms

Bangladesh’s prime minister disembarked from her motorcade last month to unveil an 11km elevated expressway, one of a flurry of infrastructure projects launched as she steps up her campaign for a record fifth term in power.

Sheikh Hasina hailed the expressway, which cost $1bn and breezes over Dhaka’s traffic-clogged streets, as part of the “journey of progress” that has turned one of the world’s poorest countries into a success story under her watch. “I am giving it to you as a gift,” Sheikh Hasina told a rally.

The infrastructure drive — which also includes a new airport terminal and an underwater tunnel road — is a core part of the message Sheikh Hasina, 76 and the world’s longest-serving female leader, is making to voters ahead of national elections in January.

To supporters of her Awami League, it symbolises Bangladesh’s economic transformation under her leadership. But to critics, the overreliance on mega-projects represents not dynamism but a government misprioritising resources as inflation rises and the shine comes off Bangladesh’s economic miracle.

“Infrastructure and megaprojects, we need those,” said Zillur Rahman, executive director of the Dhaka-based think-tank the Centre for Governance Studies.

“But you have to address our basic things. We need to address our education, our health issues, our freedom of expression and human rights.”

The elevated expressway in Dhaka connects the airport to the centre of Bangladesh’s capital, and was built for an estimated $1bn © Ahmed Salahuddin/NurPhoto/Getty Images

Bangladesh has in recent years boasted one of Asia’s fastest-growing economies, largely thanks to its garment exports industry, with annual gross domestic product growth regularly exceeding 6 per cent.

But inflation surged during the coronavirus pandemic, exposing economic weakness underwritten by rising foreign borrowing and fuelling anger over the inequality and alleged corruption that have flourished under Sheikh Hasina’s rule, triggering raucous anti-government protests.

The government has also embarked on a crackdown that analysts warn could sway the outcome of the January polls. At stake, they say, is Bangladesh’s young democracy as well as its hard-won economic progress.

“It’s an existential question for the ruling party,” said Kamal Ahmed, a political analyst. “They think that if they are booted out from power then there will be severe consequences . . . for their mismanagement of the economy or weakening of democracy and destroying institutions.”

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Bangladesh’s garments sector, the world’s second-largest after China, drew millions from rural destitution to higher-paying urban jobs. The poverty rate has roughly halved to about 20 per cent over the past 15 years.

But the economy remains dependent on imports, and foreign debt has doubled since 2016. The government was forced to take a $3.3bn loan from the IMF this year as prices of food and fuel imports rose, and 20 per cent of loans from state banks are overdue, according to Fitch, which economists attribute to politically connected tycoons tapping easy money with little oversight.

Economists have warned that the troubles run deeper. Bangladesh took few steps to diversify its economy as it expanded, with garments accounting for about 85 per cent of exports. 

“The story of growth in Bangladesh . . . has always been the underemployed labour moving from rural areas to urban cities, and to west Asia in low-skilled work,” said Rashed al-Mahmud Titumir, an economist at the University of Dhaka. “There’s no miracle about it.”

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Poverty has actually increased by some metrics in parts of the country including Dhaka, according to government data compiled by Titumir, while food inflation hit a decade-high of 13 per cent in August even as price growth has cooled globally.

Authorities “can’t contain inflation”, Titumir said, pointing to the risk of “the downward slippery slope of accumulated debt”. Fitch and S&P have revised their outlook on Bangladesh’s debt to negative as its foreign reserves decline.

Mohammad Arafat, an Awami League MP, dismissed inflation as a product of global factors. He said the government had responded with more welfare for the poor and that infrastructure projects had transformed the country.

When Sheikh Hasina took power, “we lacked power, energy and also the communications system”, he said. “Without the basic foundations of infrastructure, you cannot promote business.”

Many would seem to agree: a survey by the Asia Foundation in August found that the majority of respondents called the $3.6bn Padma Bridge, which opened last year, “the most important success in Bangladesh”.

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But public discontent is also brewing: the same survey found that only 25 per cent of respondents “thought the country is heading in the right economic direction”.

“This government is destroying the country,” said Mohammad, a fruit seller on the outskirts of Dhaka. “People with honest income have no way to live with prices soaring like this . . . What do I do with these [mega-projects] if I’m dying of starvation?”

Sheikh Hasina’s government has responded by ramping up repression, hounding journalists and human rights activists and arresting leaders of the main opposition Bangladesh Nationalist party, which has been hit by a barrage of legal cases.

The prime minister’s previous re-elections in 2014 and 2018 were marred by violence, low participation and allegations of vote manipulation. The BNP has refused to contest the upcoming polls unless Sheikh Hasina first hands over power to a caretaker government, something she has ruled out.

Bangladesh Nationalist party activists set a bus, blocking a highway in Dhaka in July, to demand Sheikh Hasina’s resignation
Bangladesh Nationalist party activists set fire to a bus, blocking a highway in Dhaka in July, to demand Sheikh Hasina’s resignation © STR/AFP/Getty Images

Tabith Awal, a senior BNP leader, argued that a “wake-up call” was coming for the government. “Can the Awami League destroy the BNP, form a government and continue? Well, no if you don’t fix the economy,” he said. “Why do you think people are supporting us? Because they simply can’t afford anything anymore.”

To critics, projects such as the expressway embody the country’s widening inequality. The toll roadway is closed to motorbikes and three-wheeled auto rickshaws which are far more common modes of transport in the capital than private cars.

Bokul, who lives in a slum near the start of the expressway, does not expect to ever ride on it. “We see that it’s beautiful,” she said of the road soaring overhead. “It’s good that the country is developing. But it’s not for us.”

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