Year of high-stakes election: Will 2026 reset Bangladesh's politics and economy?

Highlights:

• Will February election be another game-changer?
• A New Year that has much hope to offer for economy, politics
• 2026: A make-or-break year for Bangladesh's politics, economy
• 2026: Make or break year seen never before
• 2026: Make or break year for economy, politics never seen before

Look back to 2025. No past year in Bangladesh's history was so eventful. Look ahead – the new year begins amid high hopes, but full of challenges and risks. It is a make-or-break year seen never before for the country's both ailing economy and unpredictable politics.

At the fag end of 2025, the death of Khaleda Zia on 30 December and death sentence delivered in the month before to Sheikh Hasina, now sheltered in India after being toppled in the August 2024 mass uprising, are the most significant events in Bangladesh politics. These happened at a critical time ahead of Bangladesh's political transition through the next national election scheduled for February. This is the first time since the restoration of democracy following the fall of HM Ershad's autocratic regime in December 1990 that an election is set to take place without two dominant politicians – Khaleda Zia and Sheikh Hasina who commanded Bangladesh politics for the past four decades.

Rise of mob violence which is now called "mobocracy", destruction of Dhanmondi 32 house, killing of Inqilab Mancho spokesperson Sharif Osman bin Hadi, meeting between Chief Adviser Muhammad Yunus and BNP's acting chairperson Tarique Rahman in London, announcement of election schedule amid looming uncertainty, return of Tarique – among other significant and major events of the year have gone down to history.

Expectation runs high in new year centring the February election for democratic transition which is expected to become a game changer for both politics and ailing economy.

The year is set to become an election year – a year of electoral democracy beginning with the parliamentary election in February. Then elections to thousands of local government bodies – city corporations, upazila parishads, municipalities and union parishads. This could be a perfect year for political transition.

But the February election will set the tune. A credible election can open the window for political and economic opportunities in both national and grassroots levels as local government body elections may be expected to be held in free and fair manner even under a partisan government.

The February election already appeared to be the most crucial election in the history. After the AL being disqualified for the election, the unprecedented rise of Jamaat-e-Islami Bangladesh appeared to be one of the two main contenders of power. As the year was ending, NCP's joining with the Jamaat-led alliance has increased the stakes of the election. Many are not certain about what possible impact on politics and economy if the election produces a win of the Jamaat-led alliance as the party was never in power.

Tarique Rahman, who returned home on 25 December to lead his party BNP in the polls, will not have by his side mother Khaleda Zia, known for her uncompromising leadership and leading the BNP in elections since 1991. The death of Khaleda, loved by millions, may create sympathy among voters, which could help Tarique to fight against the Jamaat alliance.

Economy waits on a credible election

As 2025 draws to a close, Bangladesh's economy shows signs of stabilisation. External balances have improved, supported by steady remittance inflows, while foreign exchange pressures have eased. Yet the recovery remains fragile.

Export growth continues to lag even as Bangladesh managed to cushion the impact of last year's US tariff hike, which was eventually reduced to 20%. Despite this relief, competition in key markets – particularly from India and China – has intensified, eroding Bangladesh's price advantage.

Debt servicing pressure keeps mounting, with foreign loan repayments now almost matching monthly disbursements. At home, private investment remains sluggish, job creation weak, and confidence subdued.

Although Bangladesh Bank's corrective measures have slowed deterioration, the banking sector continues to struggle with more than a third of total loans defaulted. Liquidity stress persists, limiting banks' ability to lend or even meet depositor demand. The merger of five banks into a single entity, if implemented effectively, could mark a turning point in banking governance.

Public finance remains under strain. With the tax-to-GDP ratio stuck at around 7% – among the lowest globally – revenue mobilisation continues to fall short. Reform efforts face institutional resistance, forcing the government to cut development spending while relying heavily on bank borrowing to finance routine expenditures and election-related costs.

Energy insecurity remains another drag. Despite some improvement prospects – such as new renewable energy deals and the expected trial run of the Rooppur nuclear plant in 2026 – Bangladesh remains heavily dependent on imported fuel, exposing it to global price volatility.

Economic growth has slowed to around 4%, while inflation, though easing slightly, remains in high single digits – a situation described by economists as a mild stagflationary phase, marked by weak growth, eroding purchasing power and stagnant employment.

Against this backdrop, the February election assumes outsized importance. Business leaders and economists believe a credible, participatory election could restore confidence, unlock stalled investment, and set the stage for recovery.

The expectation is not unfounded. Studies, including those by American political scientist Mike Touchton, show that countries holding free and fair elections attract higher investment and achieve stronger economic performance, regardless of who wins. Fair elections signal institutional stability, rule of law, and policy predictability – conditions investors value most.

For Bangladesh, the message is clear: economic recovery now hinges as much on political credibility as on fiscal or monetary policy.

Law and order situation ahead of the election remains a big concern. Yet the peaceful atmosphere of the last day of filing nomination papers seeking candidacies has made the Election Commission optimistic to hold a credible and peaceful election.

Amid volatility, uncertainty and a sense of insecurity that mark the end of 2025, businesspeople, like most other segments of the society, hope for the election will bring in political stability, restore order and public security. They hope for predictability and consistence in policy decisions, institutional trust when an elected government takes office.

There is another reason to be optimistic. Bangladesh has so far seen three elections in February, the fourth one coming next also falls in February. No single month saw so many national elections. The past three elections that defined Bangladesh's political transition in different perspectives in 1979, 1991 and 1996 were held in February. The election in 1979 brought an end to the martial law imposed in August 1975. The 1991 election, described as the first ever credible election, set the country on a democratic journey. And the election in February 1996, though one-sided and controversial, paved the way for amending the constitution to introduce the election time non-partisan caretaker government and end the then political crisis.

Chief Adviser Muhammad Yunus on 4 December reassured the people that a new Bangladesh will be born through the upcoming parliamentary election in February 2026. "This election will open the door to that new Bangladesh."

This now remains to be seen how the interim government plays the role of midwives, as the chief adviser himself described, to ensure "the birth takes place smoothly and properly."

Let's not forget about the referendum to be held along with the parliamentary election. Its outcomes... win of Yes or No.. will determine the fate of the implementation of the contentious July Charter which  proposed major constitutional reforms in the new parliament. 
Therefore, the new year is not only a mere election year, but a make or break year for Bangladesh' politics and economy.