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This letter was originally sent to LightCastle Bimonthly Newsletter subscribers.
As you may already be aware, Bangladesh underwent a government change during the first week of August. What started out as a student-led anti-discrimination movement for Quota reform in public services in July escalated into widespread unrest, including a 5-day countrywide internet blackout and clashes with the previous government. The previous prime minister Sheikh Hasina, who had presided over the country for the last 15 years, resigned and left Bangladesh on August 5 with a safe exit to India. The Military, largely welcomed by the public, assumed temporary control with an interim government being formed on August 8, led by Dr. Yunus, the pioneer of microfinance and the country’s first Nobel Laureate.
However, during this short period, close to 600 people, including minors and children, have lost their lives. Over 10,000+ have been detained and thousands injured. The interim government is committed to ensuring justice for those involved during the protest. The economy is already strained with a fragile banking sector riddled with non-performing loans (~10% of total loans officially and unofficially is projected to be 25%) and capital flight (~ USD 94 Bn), high inflation (~9.72% in FY23-24), rapid devaluation of BDT against USD (1 USD = 86 BDT to 118 BDT within 2 years), declining FX reserves and widespread corruption.
While the country goes through a transition with a democratic election to take place at the end of the interim government term (expected to be at least 2 years) – the people are facing law & order challenges with the police force yet to fully come back to their posts, factories operating at sub-capacity, gridlock at ports and disruption in logistics. To make matters worse, the country has been facing declining exports and depleting foreign exchange reserves, with rising government payables in the energy sector. However, with the interim government established, reforms are now on the horizon. The independent caretaker government system to host elections is expected to be re-established. We are witnessing changes in leadership positions at the Bangladesh Bank (Central Bank), Bangladesh Securities and Exchange Commission (BSEC), and the appointment of a new Supreme Court Chief Justice.
Political appointees are being replaced with credible resources with strong track records. Perhaps the most significant outcome is the emergence of a politically conscious younger generation, paving the way for a more democratic future. The general populace is now more outspoken, actively engaging in open dialogues to push for reforms. Furthermore, there is renewed optimism among businesses as the economy begins to stabilize, with expectations of fairer market practices and reigning in corruption. The interim government has also gained support from the US and Western European nations which will possibly help attract Investments, development assistance, and stronger trade relations. Despite the geopolitical tensions with India, it has since welcomed the new government, and both countries are expected to collaborate to maintain regional harmony and existing trade relationships.
While July was a dark month for Bangladesh, the future looks promising. Now that there is an opportunity to bring about strong institutional reforms we all expect to move towards a fairer society, better governance, and stronger inclusive economic growth. For any questions on the Bangladesh market, please do not hesitate to reach out to me via [email protected]
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