The Takeaway
Seven months after the ouster of Bangladesh’s long-serving prime minister, Sheikh Hasina, the student-led movement that unseated her has launched the National Citizen’s Party in a bid to reshape the country’s political future. The interim government under Mohammad Yunus is grappling with entrenched corruption, economic turmoil, and the challenge of ensuring fair political competition. Its decision to lift the ban on Islamist parties and release detained leaders has intensified fears of an Islamist shift, and recent attacks on Hindu minorities have strained ties with India.
Whether the interim government can carry out other systemic reforms before the planned 2025 elections may determine whether Bangladesh can avoid spiralling into instability.
In Brief
- A recent UN fact-finding report found 'reasonable grounds' to believe that Sheikh Hasina’s government and security forces committed crimes against humanity by orchestrating a violent crackdown during the July–August 2024 protests, which left up to 1,400 people dead.
- Hasina was forced to resign and fled to India. Her exit cleared the way for longtime rival Khaleda Zia of the Bangladesh Nationalist Party (BNP) to make a comeback in the next election, tentatively scheduled for late 2025 or early 2026. Zia was freed from house arrest in August and acquitted of corruption charges.
- The interim government has made some controversial moves, including lifting the 2013 ban on Jamaat-e-Islami, Bangladesh’s largest Islamist party, and releasing Islamist leaders, along with a former State Minister of Home Affairs who was imprisoned for corruption and aiding anti-India insurgent groups.
- Bangladesh is grappling with the economic fallout of Hasina’s tenure. A 12-member committee commissioned to produce a white paper on the state of the economy exposed systemic corruption, regulatory failures, and US$240 billion in illicit financial outflows under Hasina’s rule (2009–2023).
- Hasina’s presence in India has also fuelled diplomatic tensions, with Bangladesh demanding her extradition for judicial proceedings over the crackdown on the student-led movement that was initially sparked by frustration with government job quotas. India has been silent on the matter.
Implications
- Hasina’s Exile Strains India Ties
Once close allies, India and Bangladesh are now caught in a spiral of distrust, largely driven by India’s reluctance to extradite Hasina. Hasina’s remarks from exile have provoked outrage, such as her February 5 speech to supporters, which ignited mass protests in Bangladesh. In response, India summoned Bangladesh’s Acting High Commissioner, clarifying that her remarks were made in a personal capacity and do not reflect India’s official stance.
While India weighs the extradition request, Bangladeshi Hindus—perceived as Hasina allies—face escalating threats and attacks, fuelled by rising anti-India sentiment and amplified by misinformation. While Hindus, who account for eight per cent of the population, were not entirely safe under Hasina, her party’s secular stance provided some security.
- Economic re-development and corruption
Bangladesh’s economy is showing signs of recovery, particularly in its garment industry, which saw a 13 per cent increase in exports between June and December 2024 compared to the same period in 2023. Inflation, while still high, has started to ease, dropping from 11.38 per cent in November 2024 to 9.94 per cent in January 2025.
However, the country inherited a significant economic burden from the previous government. Between 2009 and 2024, the governing Awami League accumulated US$44.38 billion in foreign debt, and widespread corruption plagued the banking, infrastructure, energy, and power sectors. Among the most controversial deals is a 25-year power agreement with India’s Adani Power, awarded without competitive bidding, allegedly denying Bangladesh US$28.6 million in tax benefits. Meanwhile, investigations are ongoing into potential financial irregularities involving Hasina and her niece, U.K. Anti-Corruption Minister Tulip Siddiq.
Interim government leader Yunus is working on economic reforms, including efforts to recover laundered money and attract new investments. A stable political environment, coupled with improved governance and financial sector reforms, could help Bangladesh’s GDP growth rise from 4.1 per cent in FY25 to 5.4 per cent in FY26, according to World Bank estimates.
What’s Next
1. Power Struggle Could Deepen
Hasina’s ouster has upended Bangladesh’s political landscape, with her once-powerful Awami League (AL) in disarray. Zia’s recent acquittal on corruption charges and release from house arrest have revitalized the BNP, but allegations of grassroots corruption remain a challenge. Yunus’ interim government is under pressure to finalize electoral reforms, including a credible voter registry, as recently reinstated Islamist parties seek registration and attempt to re-enter electoral politics after years of exclusion.
The rise of a third political force, born from the 2024 student-led uprising, signals a potential break from AL-BNP dominance. The new National Citizen’s Party, led by several student leaders, is shaping its agenda based on a nationwide public survey that highlighted priorities such as corruption-free governance, accountability, transparency, and social justice. The launch saw an overwhelming turnout, largely from youth, who make up about 28 per cent of the population. While this new party seeks to foster a more competitive and participatory political environment, navigating a politicized state apparatus and entrenched elite resistance will test its resilience.
2. Washington takes a step back on Bangladesh
As Bangladesh grapples with these internal shifts, global dynamics are also changing. During Indian PM Modi’s U.S. visit on February 12-13, 2025, President Trump, when asked about Bangladesh, stated, "I will leave Bangladesh to PM Modi." This marks a shift from the Biden administration, which was critical of election integrity and human rights abuses under Hasina but still granted USAID funding for political and developmental programs—later dropped by Trump as a cost-saving measure. Reduced U.S. involvement and cuts to USAID-backed initiatives will leave Bangladesh’s fragile economy more vulnerable.
3. Bangladesh's Shifting Alliances Worry India
At the same time, Bangladesh is recalibrating its foreign policy, strengthening ties with Pakistan and expanding co-operation with China. For the first time since 1971, direct shipping routes and flights with Pakistan have been announced, and military leaders from the two nations have met. Meanwhile, China has hosted Bangladeshi political figures, including opposition parties and student movement leaders.
• Edited by Erin Williams, Senior Program Manager, and Vina Nadjibulla, Vice-President Research & Strategy, APF Canada
