As Bangladesh continues to struggle with maintaining law and order as well as protecting its minority citizens from violence a landmark election is about to get underway - today - February 12 2026.

However despite the upheaval that started with the ouster of former Prime Minister Sheikh Hasina in August 2024, the economic picture and regional implications present a compelling case of resilience intermixed with uncertainty.

Bangladesh's foreign exchange reserves climbed to $34.06bn on February 9, and expatriate remittances surged 45% y/y to $3.17bn in January 2026, according to a report by state owned BSS News. The figure represents the third highest monthly inflow on record, reached days before a highly anticipated general election that marks the first in a compressed South Asian electoral cycle extending through May.

The reserves milestone as confirmed by the country’s central bank Executive Director Arif Hossain Khan, at Bangladesh Bank, represents the strongest position since November 2022.

As a commentary published by the Atlantic Council opines, the February 12 election in Bangladesh precedes Nepal's March 5 parliamentary contest and state elections in India's West Bengal and Assam through May, creating a regional political sequence where institutional responses to economic pressures and social transformation will be scrutinised across borders.

Although outcomes will not mechanically replicate, market participants monitoring the subcontinent view Bangladesh's transition as an indicator of democratic adaptability under fiscal strain.

Economic growth decelerated sharply to 3.7% in FY2025 from 4.2% the previous year following production disruptions during July 2024 protests that dismantled the then prevailing political order led by Hasina’s party, the Awami League.

According to International Monetary Fund (IMF) Article IV, consultation data released in January 2026 GDP recovery is projected to be 4.7% in both FY2026 and FY2027, though inflation is forecast at 8.9% in FY2026 before moderating to 6% in FY2027.

Bangladesh secured critical trade concessions on February 9, with the US reducing tariffs to 19% under a bilateral agreement negotiated over nine months. Textiles and garments manufactured with US sourced cotton and synthetic fibres will enter American markets duty free, potentially offsetting competitive pressure from Vietnam's 20% rate, according to a statement by Bangladesh’s interim government chief and Nobel Laureate Muhammad Yunus.

The ready-made garment sector generates over 80% of export earnings, employs approximately 4mn workers and contributes roughly 10% to GDP in Bangladesh.

Bangladesh’s Commerce Adviser Sheikh Bashir Uddin and US Trade Representative Jamieson Greer signed the trade concessions agreement in Washington. Under the agreement Bangladesh will purchase 25 Boeing aircraft for an estimated BDT3 trillion to BDT3.5 trillion ($27.31bn to $31.87bn) alongside imports of American wheat, soya beans and liquefied natural gas, according to Bangladesh’s commerce ministry statements.

Banking sector fragilities threaten to constrain credit availability during a critical recovery period. Non Performing Loans (NPL) reached BDT6.44 trillion by September 2025, representing 35.73% of total disbursed credit, the highest ratio since 2000 after Bangladesh's central bank tightened classification rules, according to a report by Business Standard.

Bangladesh Bank Governor Ahsan H Mansur set a target in January to reduce NPLs to 25% by March from the current 36% level. Default concentrations among politically connected business conglomerates including S Alam Group and Beximco Group followed the August 2024 transition.

Approximately 300 companies applied for loan rescheduling or restructuring facilities worth roughly BDT20 trillion during the first nine months of 2025, according to Bangladesh Bank data.

The Asian Development Bank (ADB) also reported in August 2025 that Bangladesh maintains Asia's highest NPL ratio, with defaults surging to 20.2% of outstanding loans in 2024. Private investment growth slowed to 1.76% in FY2025 from 3.27% previously, whilst government expenditure growth decelerated to 3.21% from 9.77%, according to IMF consultation data.

Tax revenue as a proportion of GDP fell sharply in FY2025, though fiscal deficits were contained through under-execution of capital and social programmes rather than revenue enhancement. Cumulative remittances reached $19.44bn during July 2025 through January 2026, up 21.8% from $15.96bn in the corresponding period.

Calendar year 2025 recorded $32.82bn in total remittances, an all-time high exceeding 2024's $30.32bn by more than 8%, according to Bangladesh’s central bank data.

Currency depreciation compounds inflationary pressures, with the Bangladeshi taka weakening 43% against the dollar since 2021. The IMF noted in its January 2026 consultation that headline inflation fell from double-digit levels in early FY2025 but remained elevated at 8.2% y/y in October.

Foreign exchange reserves began rebuilding after the Awami League government's August 2024 fall as remittance inflows accelerated, supported by improvements in the current account balance.

According to analysis by the Atlantic Council, Nepal's electoral process will examine comparable tensions within distinct institutional frameworks. The country shares demographic characteristics with Bangladesh, including substantial youth cohorts confronting constrained economic prospects and governance dissatisfaction centred on corruption, patronage networks and uneven development. Political competition remains comparatively open though, potentially positioning Nepal's vote as an alternative model for integrating rather than excluding protest driven discontent.

Similarly in India's West Bengal and Assam, developments in neighbouring Bangladesh function less as foreign policy considerations than as catalysts for domestic political narratives.

Electoral discourse incorporates cross border dynamics into citizenship and identity debates, whilst Assam's strategic geography linking India's mainland to northeastern territories reinforces sensitivity to perceived instability or ideological shifts in Dhaka. Questions of demographic change and regional autonomy have defined Assam's political competition for decades.

For investors and policymakers across South Asia, the 2026 electoral cycle functions as a gauge of institutional capacity to accommodate demographic pressures, economic volatility and shifting public expectations.

Perceptions of Bangladesh's transition, whether orderly and competitive or characterised by instability and exclusion may influence confidence in democratic durability and governance resilience across neighbouring states during a period of fundamental transformation.