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Bangladesh’s economic stability faces a formidable challenge as it navigates the impacts of the Ukraine conflict and the enduring effects of the Covid-19 pandemic. The nation’s pillars of progress, including substantial forex reserves, growing remittances, robust exports, and a stable currency (Taka), have suddenly become less secure in the face of these crises.

The ruling Awami League (AL) now confronts tough questions about its election manifesto and must address the nation’s immediate economic future. From Prime Minister Hasina to homegrown economic advisors, the government is striving to prevent an economic downturn that seems increasingly inevitable.

Despite the announcement of several new measures by the Government of Bangladesh (GOB), the implementation and fruition of these changes require time, a luxury that a divided and impatient electorate may not afford, further complicating matters for the AL.

With just a few weeks remaining until January 7, 2024, the scheduled polling day, the current economic indices fail to instil confidence. Forex reserves have sharply decreased to $21 billion from the previous $40 billion-plus, while remittances now stand at $1.60 billion, marking a decline. The depreciation of the Taka against the US dollar (official rate: 110 Taka to a US dollar) has made essential imports more expensive.

This economic scenario was anticipated to bolster Bangladesh’s export of standard or higher-priced garments to the EU and the US/Canada. However, the economic strains within the EU have hindered this growth. The shift from Russian to US-sourced LNG has impacted EU-produced goods, making them more expensive compared to US-produced items, thereby adversely affecting exports.

Furthermore, disruptions in Russian imports of fruits and processed food from the EU have caused turmoil in European agriculture, leading to social unrest. Meanwhile, Russia’s pivot towards importing produce from Thailand and Turkey has compounded Europe’s economic challenges, aggravated by the ongoing support for Ukraine’s resistance against Russia and the influx of Ukrainian migrants and economic refugees.

Consequently, EU imports have declined, resulting in reduced orders for Bangladesh-made garments from the West. The precipitous decline in the Taka’s value against the US dollar has spurred illegal remittance transactions through the Hundi route, prompting fresh concerns for the GOB.

While Dhaka has initiated import substitution measures and domestic subsidy reductions, the critical question looms: What more can the AL government realistically accomplish in an election year? This unanswered question underscores the complex economic challenges facing Bangladesh.