On December 31, 2025, hundreds of thousands gathered in Dhaka for the funeral prayers of former Prime Minister Khaleda Zia, an event that was not only political history, but also a real-time stress test for Bangladesh’s economic transition. The interim government declared a national mourning period and a public holiday, and regional dignitaries attended in large numbers, signals that the state wanted to project continuity and stability at a sensitive moment.
But the economy does not price symbolism. It prices expectations: who governs next, whether reforms stay on track, and whether day-to-day stability survives a competitive election season.
The people and the places that matter economically (not just politically)
Khaleda Zia (BNP)
Zia’s death closes a chapter defined by the BNP–Awami League rivalry and removes a unifying figurehead for a large share of the electorate. Even when not governing, such figures act as “anchors” for party cohesion; their absence can change coalition math, candidate discipline, and the credibility of policy promises.
Tarique Rahman (BNP)
Her son and BNP’s acting chair is positioned as a central electoral figure. For markets, this is relevant less as “who he is” and more as whether the BNP can convert popularity into a workable parliamentary majority (or whether Bangladesh moves into coalition bargaining and policy fragmentation).
Muhammad Yunus (Interim government / Chief Adviser)
Yunus’s interim administration emerged after the 2024 uprising and is tasked with steering reforms and delivering an election seen as credible. In economic terms, an interim government’s core value is reducing political risk premia until a stable mandate returns.
Dhaka: Parliament area, Gulshan, Zia Udyan
The funeral prayers near the national parliament and events around elite neighborhoods like Gulshan are not random geography: they are where governance, bureaucracy, and business elites intersect. Large peaceful gatherings in these areas tend to be interpreted as “state capacity intact,” which matters for investor confidence and capital flight risk.
The macro backdrop: Bangladesh is stabilising, but still vulnerable
Bangladesh is operating under an IMF-supported program, with policy priorities that are unambiguous: rebuild external resilience, reduce inflation, allow greater exchange-rate flexibility, consolidate fiscally via revenue measures, and address banking-sector stress.
That agenda matters because Bangladesh’s near-term constraints are classic emerging-market constraints:
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FX availability and import capacity (fuel, food, industrial inputs)
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Inflation and cost-of-living pressure
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Banking-sector vulnerabilities
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Investor confidence and export competitiveness
The IMF has explicitly linked near-term stabilization to a “tight” policy mix and reforms, while warning that political uncertainty and banking stress can worsen the outlook.
Why Zia’s death is an economic event (three transmission channels)
1) Political-risk premium → FX pressure → inflation
In open-economy macro (think Mundell–Fleming dynamics with imperfect capital mobility), political uncertainty increases the risk premium demanded by lenders and investors. That channels into:
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costlier external financing,
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higher pressure on the currency,
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and (in a high import-share consumption basket) more inflation.
Even without “hot money,” this mechanism can operate through trade credit, delayed investment decisions, and precautionary USD demand by firms.
2) Reform credibility → IMF program performance → external financing
Bangladesh’s stabilization strategy depends on credible execution: exchange-rate regime changes, revenue measures, subsidy rationalisation, and bank reforms. The IMF framing is clear that reforms are “critical” and that advancing them restores stability and supports inclusive growth.
When a major political figure dies weeks before a national vote, the question becomes: will all major contenders “own” the reform path, or will reforms become electoral bargaining chips?
3) Election coalition dynamics → governance capacity → real-economy continuity
Reuters reporting ahead of the February 12, 2026 election highlights how coalition talk is becoming central, including Jamaat-e-Islami signaling openness to a “unity government” and emphasizing anti-corruption as a shared platform.
Coalitions can be stabilizing or paralyzing. Economically, the difference is whether the next government can:
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pass budgets on time,
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keep energy and import logistics functioning,
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avoid sudden regulatory swings for exporters and banks.
A practical read on “real economy” impacts (next 3–9 months)
Households
If uncertainty pushes the taka weaker (or even just keeps USD scarce), households feel it first via:
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imported food inputs,
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cooking fuel and transport,
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and electricity pricing reforms (often phased, but politically sensitive).
Export sector (especially garments)
Bangladesh’s export base is concentrated; any disruption in port operations, compliance signaling, or buyer confidence becomes a jobs story quickly. The IMF has highlighted export diversification and investment climate improvements as priorities for medium-term resilience.
Banks and credit
When politics heats up, banks often become channels for quasi-fiscal pressure (directed lending, delayed recognition of losses). The IMF has called for orderly bank restructuring frameworks and safeguarding stability - an area where political continuity matters more than rhetoric.
Prediction: three scenarios for Bangladesh through mid-2026
This is best framed with institutional economics: growth and stability depend less on personalities and more on credible rules, enforcement, and policy continuity.
Base case (most likely): “volatile politics, steady macro”
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The February election proceeds with manageable disruption.
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Any new government stays within the IMF program’s corridor (FX flexibility, revenue, cautious subsidies).
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Growth remains subdued but stabilizes as confidence gradually returns.
This is consistent with the IMF view that reforms and a balanced policy mix are essential to restore internal and external balance.
Upside case: “credible mandate + reform acceleration”
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Clear election outcome reduces coalition bargaining.
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Faster progress on revenue administration and bank reforms lowers the risk premium.
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External financing becomes easier, FX markets calm, inflation eases faster.
Reuters has noted how IMF-linked reforms and partner budget support are tied to institutional changes (including revenue governance).
Downside case: “fragmentation + street pressure”
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Coalition disputes delay budgets and reforms.
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Policy becomes reactive (controls, discretionary interventions).
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FX pressure returns, inflation becomes sticky, and banks weaken.
Where this matters most: a downside case would not require a crisis headline - just months of drift. Drift is enough to raise the risk premium and slow investment.
What to watch (simple indicators to track)
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Election credibility signals: turnout, violence, acceptance of results.
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FX policy consistency: whether exchange-rate flexibility continues or reverses.
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Revenue measures: evidence of durable tax administration improvements.
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Banking reforms: legal steps enabling restructuring and protecting depositors.
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Export order stability: buyer sentiment and shipment continuity.
