Bangladesh was in the global spotlight this week after widespread, violent unrest forced the country’s long-time Prime Minister Sheikh Hasina to resign and flee to neighboring India.

The mass protests began as a student movement against quotas in the public service, but then escalated into a broader uprising against the government.

The quota system reserved more than half of the well-paid and secure government jobs for certain groups. Many protesters found it discriminatory and unfair, especially at a time when Bangladesh is facing economic problems.

“Not many jobs have been created in the private sector either,” Ahsan H. Mansur, economist and director of the Policy Research Institute of Bangladesh, told DW.

“The problem of unemployment is the real cause of the student movement,” he added.

Not enough jobs for young people

During Hasina’s 15-year rule, Bangladesh made some economic progress and developed major projects such as highways, railway lines and ports, as well as the electricity grid.

In addition, the country’s clothing industry developed into one of the most competitive in the world.

But the $450 billion (€412 billion) economy has been in trouble since the COVID-19 pandemic. Shrinking foreign exchange reserves even forced the government to take out a multi-billion dollar loan from the International Monetary Fund.

Although the South Asian country’s gross domestic product is currently growing by over 5% annually, the country is struggling to create enough well-paid jobs for its large young population.

Almost half of Bangladesh’s 170 million people are under 30 years old. While this is generally seen as a demographic advantage, it could become a “demographic curse” if these people cannot find productive employment, says Mansur.

According to the International Labour Organization, unemployment among 15- to 24-year-olds in the country was at a high 15.7% in 2023.

At the same time, hundreds of thousands of young university graduates enter the job market every year. “But they are unemployable due to the extremely poor quality of education and the lack of the necessary skills,” says Mansur. The young people “feel disadvantaged, cheated and have the feeling that they will never find a job.”

Rising prices are hitting people hard

Against this background, promoting job growth will be one of the major tasks of the transitional government sworn in on Thursday under the leadership of Nobel Prize winner Muhammad Yunus.

But that is not the only challenge. Bangladesh has experienced persistently high inflation in recent years, which will reach almost 10 percent in 2023.

In particular, the rising prices of food and raw materials are causing great concern for many Bangladeshis. “People are frustrated and income distribution and inequality in the country are getting worse,” said Mansur.

Fahmida Khatun, research director at the Center for Policy Dialogue think tank in Dhaka, told DW that the economic situation in Bangladesh has worsened in recent years.

She pointed to high inflationary pressures worldwide since the COVID-19 pandemic and the start of Russia’s war against Ukraine. “But in the last two years, almost all countries have managed to reduce their inflation, with the exception of Bangladesh,” she said.

Khatun attributed the situation to the central bank’s inability to take appropriate measures to combat the problem.

“They insisted on policies that do not benefit the country but only a certain group of people,” she said, accusing Hasina and her Awami League party of endangering the independence of all regulatory bodies in the country.

Khatun called on the new government to implement reforms to ensure the independence of these bodies.

Can Yunus implement structural reforms?

In response to the turmoil that followed Hasina’s dramatic exit, many shops and factories closed their doors this week.

These included factories in the textile sector, which is crucial to Bangladesh’s economy.

The country earns over $46 billion annually from exporting clothing abroad, with the majority of clothing going to Europe and the United States.

More than four million workers, mostly women, are employed in around 4,000 factories that supply many of the world’s leading brands, including Levi’s, Zara and H&M.

“From an economic perspective, getting factories back up and running will be the top priority,” Gareth Leather and Shilan Shah, economists at Capital Economics in London, said in a research note this week.

They warned that if the authorities fail to get the situation under control, garment manufacturers may shift production elsewhere. “But assuming peace and stability return to the streets soon, we suspect the long-term impact on the sector will be relatively small.”

On Friday, the interim government deployed the military to industrial areas to assist in the reopening and easing of production in garment factories, German news agency dpa reported, citing Shovon Islam, one of the directors of the Bangladesh Garment Manufacturers and Exporters Association.

Mansur said the country needs fundamental reforms to address the structural challenges facing the economy.

This includes strengthening regulatory institutions and combating corruption, as well as reforming the banking and financial sector and tax and customs policies.

“The government needs to set up several expert groups to deal with these problems. And it needs to do that very quickly. So that’s the big challenge,” he said.

Zobaer Ahmed contributed to this report.

Edited by: Shamil Shams