Economic Factors Leading to Sheikh Hasina Wajid’s Downfall

Sheikh Hasina Wajid, former Prime Minister of Bangladesh, once guided the nation through remarkable economic growth. However, her political standing has recently faltered due to rising unemployment, widening income inequality, and a persistently low tax-to-GDP ratio. As Bangladesh prepares for new leadership under Muhammad Yunus, understanding the economic challenges that contributed to Hasina’s decline is crucial. This article delves into these key issues and outlines the strategic steps Yunus must take to address them, restore economic stability, and strengthen the country’s democratic institutions.

High Unemployment Rates in Bangladesh

Unemployment remains a critical issue in Bangladesh, despite its economic growth. This problem has been exacerbated by several factors:

1. Structural Unemployment
   • Mismatch of Skills: The rapid evolution of technology and industry has outpaced the skillsets of job seekers. According to the World Bank, the education system in Bangladesh has struggled to adapt, creating a significant skills gap. This mismatch results in high unemployment among recent graduates who lack the practical skills required by modern employers.
   • Underemployment: Many employed individuals are in low-productivity jobs. A report by the International Labour Organization (ILO) highlights that underemployment is prevalent, meaning workers are not fully utilizing their skills or earning adequate wages. This situation leads to economic insecurity and dissatisfaction.
2. Youth Unemployment
   • Educational Attainment vs. Job Availability: Despite improved educational attainment, youth unemployment remains high. A 2023 study by the Asian Development Bank (ADB) found that many young graduates struggle to find jobs that match their qualifications. This disconnect between education and job availability creates frustration among the younger population.
   • Lack of Job Creation Initiatives: Large-scale infrastructure projects have not translated into significant job creation. Projects like the Padma Bridge have not created enough jobs to meet the population’s needs. The absence of localized job creation initiatives further exacerbates the issue.
3. Economic Growth vs. Job Growth
   • Growth Without Job Creation: Bangladesh’s impressive GDP growth has not led to proportional job creation. According to the International Monetary Fund (IMF), economic growth has not translated into significant employment improvements, leaving many without adequate opportunities.
   • Informal Sector Dominance: A substantial portion of employment is in the informal sector, where job security and benefits are minimal. The World Bank’s 2023 report notes that informal sector jobs often lack stability, contributing to economic insecurity.

Growing Gap Between the Rich and the Poor

Income disparity has widened in Bangladesh, impacting Sheikh Hasina Wajid’s political fortunes:

1. Wealth Distribution
   • Concentration of Wealth: Economic growth has primarily benefited the wealthy, leading to a concentration of wealth among a small segment of the population. Forbes reports that the number of billionaires in Bangladesh has increased, while economic benefits have not been evenly distributed, exacerbating social inequality.
   • Limited Social Mobility: Social mobility is restricted, with those born into poverty facing significant barriers to improving their economic status. The Economist highlights that limited access to quality education and healthcare perpetuates the cycle of poverty.
2. Economic Policies and Inequality
   • Regressive Tax Policies: Critics argue that Bangladesh’s tax policies are regressive, disproportionately affecting lower-income individuals while benefiting the wealthy. The IMF’s 2023 report points out that the tax system has not adequately addressed income inequality.
   • Subsidies and Welfare Programs: Government subsidies and welfare programs have been criticized for inefficiency and failure to reach the most vulnerable populations. Reports from Human Rights Watch suggest that these programs are inadequate in addressing poverty and inequality.
3. Urban-Rural Divide
   • Economic Disparities Between Urban and Rural Areas: The urban-rural divide is stark, with urban areas experiencing significant development while rural areas remain underdeveloped. The United Nations Development Programme (UNDP) reports that this disparity has led to uneven economic benefits.
   • Migration and Urban Strain: Rural-to-urban migration has strained urban infrastructure and services. The World Bank notes that this migration has led to informal settlements and increased urban poverty.
4. Impact of Corruption on Inequality
   • Corruption and Wealth Distribution: Corruption has exacerbated inequality by diverting resources meant for public welfare. Transparency International’s Corruption Perceptions Index highlights that corruption remains a significant issue in Bangladesh.
   • Ineffective Anti-Corruption Measures: Weak enforcement of anti-corruption measures has allowed the wealthy to maintain economic advantages. The Guardian reports that corruption remains pervasive, limiting the impact of anti-corruption efforts.

Low Tax-to-GDP Ratio

The low tax-to-GDP ratio has contributed to Bangladesh’s economic challenges:

1. Tax Revenue Shortfalls
   • Insufficient Tax Collection: Bangladesh has one of the lowest tax-to-GDP ratios globally. According to the World Bank, this low ratio limits the government’s ability to fund essential services and infrastructure projects, contributing to budget deficits.
   • Dependence on Foreign Aid: The low tax revenue has led to increased dependence on foreign aid and loans. The IMF’s 2023 report highlights that this reliance on external funding creates vulnerabilities in the financial system.
2. Challenges in Tax Administration
   • Inefficiencies and Corruption: The tax administration system is plagued by inefficiencies and corruption. The Asian Development Bank reports that tax evasion and avoidance are widespread, and efforts to improve tax collection have been partially ineffective.
   • Limited Tax Base: A narrow tax base reduces the government’s ability to generate sufficient funds. This limitation impacts public services and development projects, exacerbating economic disparities.

What Should Muhammad Yunus’ Government Do to Rebuild the Country and Democracy?

As Bangladesh looks towards a new government under Muhammad Yunus, several key actions should be taken to address the economic challenges and rebuild both the country and its democratic institutions:

1. Address Unemployment and Job Creation
   • Invest in Skill Development: The new government should prioritize investing in education and vocational training programs to bridge the skills gap. Collaborations with the private sector can ensure that training programs align with job market needs.
   • Promote Small and Medium Enterprises (SMEs): Supporting SMEs can stimulate job creation and economic growth. Policies that provide financial incentives, reduce bureaucratic hurdles, and offer training can encourage entrepreneurship and create employment opportunities.
   • Enhance Infrastructure Projects: While large infrastructure projects are important, the government should also focus on smaller-scale projects that can create jobs at the local level. Investments in rural infrastructure can help reduce regional disparities and create employment opportunities.
2. Reduce Income Inequality
   • Implement Progressive Tax Policies: Reforming the tax system to make it more progressive can help address income inequality. Ensuring that higher-income individuals and corporations contribute a fair share of taxes can provide the government with additional resources for public services and social programs.
   • Improve Welfare Programs: The government should reform and enhance welfare programs to ensure they effectively reach the most vulnerable populations. Targeted programs that address poverty and provide social safety nets can help reduce economic disparities.
   • Strengthen Anti-Corruption Measures: Implementing robust anti-corruption measures is crucial. The new government should enhance transparency, enforce anti-corruption laws, and improve the accountability of public officials to ensure that resources are used effectively and equitably.
3. Increase Tax-to-GDP Ratio
   • Enhance Tax Collection Efficiency: Improving the efficiency of tax collection and administration can increase revenue. Implementing modern tax collection technologies and reducing corruption in the tax system can help boost the tax-to-GDP ratio.
   • Broaden the Tax Base: Expanding the tax base by including more individuals and businesses in the tax system can increase revenue. Efforts to formalize the informal sector and improve tax compliance can contribute to a higher tax-to-GDP ratio.
4. Strengthen Democratic Institutions
   • Promote Political Transparency and Accountability: Ensuring transparency and accountability in government operations is essential for rebuilding democracy. Implementing measures to enhance the transparency of government processes and encourage public participation can strengthen democratic institutions.
   • Support Civil Society and Media Freedom: Encouraging a vibrant civil society and protecting media freedom are crucial for a healthy democracy. Supporting non-governmental organizations (NGOs) and independent media can promote accountability and provide a platform for public discourse.
   • Reform Electoral Processes: Ensuring free and fair elections is fundamental to democracy. The new government should implement electoral reforms to prevent electoral fraud, ensure transparency, and uphold the integrity of the democratic process.

Sheikh Hasina Wajid’s political decline is closely linked to high unemployment, increasing income inequality, and a low tax-to-GDP ratio. Addressing these economic challenges requires a comprehensive approach, including effective job creation strategies, progressive tax policies, and robust anti-corruption measures. As Bangladesh transitions to a new government under Muhammad Yunus, it is crucial to implement policies that address these issues, rebuild democratic institutions, and promote economic stability. By focusing on these areas, the new government can work towards a more inclusive and prosperous future for Bangladesh.