Will a credible election reverse Hasinomics’ ills?

Less democracy, more development — this was the primary justification for ousted prime minister and convicted criminal Sheikh Hasina and her ilk to dismantle democratic norms and institutions in the country during their 16-year rule. 

For more than a decade, Bangladesh was held up as an unusual development success, a country that reduced poverty rapidly and expanded growth even as its politics became less and less competitive. 

The 'Bangladesh Paradox' emerged due to 'Hasinomics'. Yet, when her regime fell, the real condition of the economy was revealed, and the whole 'development narrative' fell apart. 

In its latest Bangladesh Development Update October 2025 report, the World Bank showed that economic progress cannot remain insulated from democratic backsliding. The report shows that Bangladesh's growth remained broadly inclusive until 2016, after which progress slowed sharply. 

This turning point coincides with deepening weaknesses in domestic governance, accountability and democratic erosion. 

While the World Bank does not draw political conclusions, its data aligns with a period that began after the disputed 2014 election, when electoral credibility weakened, institutions became less independent, and economic power shifted toward a smaller group of politically connected oligarchs.

How democratic backsliding fueled economic crisis

Until 2016, Bangladesh reduced poverty at a pace unmatched in South Asia. Rural incomes rose, manufacturing absorbed new workers, female labour participation expanded and the gains of growth reached households across regions and income groups. 

After 2016, however, the trajectory changed. Poverty reduction slowed, inequality widened and vulnerability increased to the point where 6.2 crore people are now at risk of falling back into poverty. The economy did not stop growing, but the benefits increasingly failed to reach ordinary citizens. 

The report suggests that the problem was not economic capacity, but the gradual erosion of the institutional safeguards that help ensure growth is broad-based. As the political system closed further, economic decision-making became more centralised and less contestable, allowing access and proximity to replace merit and competition. 

This did not produce an immediate crisis, but it quietly shifted the country from open-market dynamism to a model shaped by oligarchic accumulation. And it began major wealth inequality. 

At the same time, the financial sector became more fragile, non-performing loans grew unabated, private credit growth slowed and investment confidence eroded. The situation was exacerbated by the siphoning off of money from the banks. And economic activities slowed. 

The World Bank's findings show that democratic decline leads to economic fragility not through sudden collapse, but through gradual institutional atrophy. When elections lack credibility, governments face less pressure to respond to public costs. When democratic opposition shrinks, regulatory independence weakens. 

Over time, policymakers become more insulated from consequences, and projects continue without scrutiny even when they undermine long-term stability. Weak institutions rarely fail dramatically; they simply stop correcting mistakes, allowing inefficiencies to accumulate until they shape national outcomes.

Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), said, "There were political economic factors at play, and the banking sector was already under pressure. The momentum of economic growth could not be sustained because of corruption. The earlier economic reforms had been exhausted, and no new reforms were undertaken. So both political economy and economic factors were involved, and the two were interconnected." 

Jyoti Rahman, an applied macroeconomist and Director of International Affairs at the Sydney Policy Analysis Center, said, "Under the Hasina regime, mega project investments became a key driver of economic growth. Unlike remittances and RMG exports, the other two growth drivers, mega projects benefited the relatively affluent classes disproportionately. 

"For example, metro rail or expressways tend to serve the white collar middle or upper classes more than the working class. In addition, most of these projects were implemented at elevated costs, with benefits accruing to regime connected oligarchs. This is why inequality increased under Hasina," he added. 

Will a free and fair election speed up economic recovery? 

Following the fall of Sheikh Hasina, the World Bank notes early signs of economic stabilisation, including projections that poverty and inflation are expected to ease over the next two years and that labour markets may stabilise if policy reforms continue. Still, the rebound remains fragile, conditional and lacks sustainability.

This brings the country to the question that now defines its economic future: Will a free and fair election in 2026 shift the outlook in a meaningful way? 

From an economic point of view, the answer is not guaranteed, but a credible election could matter in several ways. Investor confidence has been in suspension for years, with domestic businesses delaying expansion under an atmosphere of uncertainty and uneven regulation. 

A legitimate political transition could unlock deferred investment decisions and create space for banking sector restructuring and formal sector job growth. Restoring the independence of regulatory bodies would allow enforcement of non-performing loans, improve transparency in procurement and rebuild central bank credibility — changes that are economic in nature even if they require political will. 

Most importantly, when voters matter, policymaking tends to align more closely with public demand, shifting priorities toward price stability, social protection and employment rather than large-scale spending without measurable returns.

Mustafizur Rahman said, "Overall, investment is still not picking up, nor is private sector growth recovering as expected. Many in the private sector are waiting for an election and what follows. If there is a smooth democratic transition, it would not be unreasonable to expect a positive outlook, although that too will depend on many other factors." 

He added, "But if there is a peaceful political transition through a democratic election, then I believe the uncertainty that currently exists may ease, and the private sector as well as FDI may begin to invest again. However, that will also depend on several other conditions. Still, one can expect that if there is a peaceful and democratic transition, this uncertainty will likely diminish and we will see a rise in investment growth, though that will depend on additional factors as well." 

Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office, is more optimistic. 

"If there is a peaceful democratic transition, and the reform initiatives already taken are carried forward, and if the incoming government — whoever comes to power for the next five years — has a clear outline for its reform plan and its first 100 days, and implements it, then economic recovery will follow," he said. 

"Oligarchic dominance will remain. The players may change, but I do not think the nature of the game will change substantially," he added, "However, we would hope that they learn from history — that ultimately power cannot be retained against the will of the Bangladeshi people, and they will have to take action accordingly. The previous scale of rampant, industrial-level corruption is unlikely to continue." 

Jyoti Rahman said, "The immediate problem with the economy is a stagnation in investment. Private investment ground to a halt in FY25, after two years of lacklustre growth. Political instability and uncertainty is the key reason. To the extent that a free and fair election can restore political certainty, an investment recovery can be expected in FY27. This, along with remittances and exports, can well result in a strong economic recovery."

What are political leaders saying? 

BNP Senior Joint Secretary General Ruhul Kabir Rizvi linked the prospects of recovery directly to democratic renewal, saying, "A government that is accountable to the people will take all measures in the public interest. Therefore, only through an elected government can our economy make significant progress, become more vibrant, and continue to move forward towards greater economic prosperity. 

"In our 31-point programme, we have outlined the measures we will take across every sector. In our Vision 2030, it is clearly stated that policies will prioritise public participation and the interests of the people," he added. 

His remarks reflect a broader argument within the BNP that economic reforms cannot be separated from political reform, and that economic recovery will speed up under a government with a clear mandate and public consent.

Bangladesh Jamaat-e-Islami Secretary General Mia Golam Parwar warned that administrative interference would undermine both the political transition and the policy environment, stating, "If there is interference in the administration or from external actors, the election will not be fair. If the election is not fair, genuine representatives elected by the people's vote will not come to power, and such a government will not be able to fulfil public expectations. 

"They will once again become confrontational, and both partisanship and corruption may resurface within the government and administration. As a result, if the election is fair, the public aspiration for a return to democracy can be realised. We have an economic recovery plan, and we will include it in our election manifesto," he added.