Bangladesh Economic Crisis Deepens: Unemployment Rises and RMG Sector Collapses

Bangladesh, long hailed as the world’s second-largest exporter of ready-made garments (RMG), is facing an unprecedented economic storm. The sector that once stood as a testament to the country’s resilience and development is now collapsing under a toxic combination of internal mismanagement, regional competition, political instability, and a growing sense of disillusionment with the current leadership. With over $38 billion in annual exports and employing more than four million people—most of them women—the RMG sector has traditionally been the cornerstone of Bangladesh’s economy. Today, however, that cornerstone is crumbling.

Following the removal of Prime Minister Sheikh Hasina’s Awami League government on August 5, a new chapter was supposed to begin. Many placed their hopes in Nobel Laureate Dr. Muhammad Yunus, who was entrusted with leading the interim administration. Known internationally for his pioneering work in microfinance and social business, Dr. Yunus was seen by his supporters as a moral leader capable of guiding Bangladesh through a period of transition and reform.

Eight months into his tenure, however, the initial optimism has all but vanished. The country is grappling with a deepening economic crisis, spiraling industrial shutdowns, rampant unemployment, and a freefall in foreign direct investment. Far from stabilizing the economy, the Yunus-led government appears to have accelerated its decline.

RMG Sector in Disarray: A National Crisis

The decline of the RMG sector is arguably the most visible and damaging indicator of the current economic malaise. Once a symbol of empowerment and economic stability, the sector now epitomizes chaos and collapse. In just seven months, approximately 95 garment factories have shut down in key industrial areas including Gazipur, Narayanganj, Savar, and Narsingdi. This has resulted in over 62,000 workers losing their jobs, most of whom remain unpaid, abandoned by their employers and neglected by the state.

Reports from Deutsche Welle reveal that Gazipur alone has seen 51 factory closures, with an additional 17 in areas like Savar and Dhamrai. In Chittagong, another RMG hub, over 50 factories have closed in six months. Out of 611 registered factories in the city, only 180 are currently receiving foreign orders. This 25% decline in production is devastating, both economically and socially.

Factory owners cite several reasons for the closures: a sharp increase in operational costs, tightening of credit lines due to stricter financial regulations, and a dramatic fall in foreign purchase orders. However, many argue that the most debilitating factor is the political uncertainty created by the current regime. Under Dr. Yunus’s administration, accusations of political vendettas and retaliation against former government loyalists have become commonplace.

Numerous factory owners affiliated with the previous ruling party have reportedly been subjected to legal harassment, surveillance, and arbitrary detention. The state’s approach appears less about economic revival and more about settling political scores. This environment has created a chilling effect across the business landscape, deterring new investments and slowing down production to a crawl.

Ethical Capitalism or Political Opportunism?

Dr. Yunus’s much-publicized vision of “ethical capitalism” now appears increasingly hollow. While he continues to receive accolades abroad for his microcredit initiatives and social entrepreneurship, his administration at home has done little to address the urgent needs of workers displaced by the industrial crisis. The very garment workers who form the backbone of the economy—many of whom helped build the nation’s international image—are now struggling to feed their families.

The government has failed to roll out any substantial social safety nets or worker relief packages. As a result, many displaced workers have been forced to return to rural areas or take up low-paying informal jobs. For those who remain in the cities, survival has become a daily battle. The disconnect between the administration’s international rhetoric and domestic policy is stark, and public frustration is mounting.

Foreign Investment in Freefall

Foreign direct investment (FDI), a key indicator of international confidence in an economy, has seen a dramatic drop under the current administration. In just eight months, Bangladesh has witnessed a reported $208 million decline in FDI—a severe blow to an economy already on the ropes.

Law and order issues, politically motivated violence, and an unpredictable regulatory environment have all contributed to the exodus of foreign investors. Incidents of looting and vandalism have increased, and even multinational brands like Pizza Hut and Bata have suffered from attacks and disruptions. Instead of intervening to protect businesses and restore stability, the government has largely remained passive, allowing fear and uncertainty to fester.

Dr. Yunus’s international stature has failed to translate into domestic leadership. His silence on critical issues and inability to craft or implement policies that inspire confidence have left many wondering whether he is out of his depth in the political arena. If the investment climate does not improve soon, Bangladesh risks long-term damage to its reputation as a viable destination for global capital.

Trade Diplomacy: A Missed Opportunity

Trade diplomacy under the Yunus administration has also faltered significantly. One of the most glaring failures has been the imposition of a 37% tariff by the United States on Bangladeshi RMG exports—a punitive measure that has further strained an already struggling sector. While other countries, such as Vietnam, face even higher tariffs, they have managed to thrive by diversifying their export base and embracing strategic trade partnerships.

Bangladesh, on the other hand, remains heavily reliant on low-cost, low-margin garments and has shown little initiative in pursuing high-value manufacturing or market diversification. The government’s response to the crisis has been reactive at best, marked by policy inertia and a lack of strategic vision. The absence of meaningful engagement with international partners or efforts to renegotiate trade terms is costing the country dearly.

Former BGMEA President Rubana Haque has sounded the alarm, warning that without swift policy reforms and investment in innovation, Bangladesh risks losing its competitive edge in global markets. The WTO recently revised Bangladesh’s export data downward by $9 billion due to reporting discrepancies—a clear sign of institutional dysfunction within the trade bureaucracy.

Unemployment: A Ticking Time Bomb

The economic crisis has fueled a surge in unemployment, particularly in the RMG sector. In Gazipur alone, 33,244 workers from 14 Beximco factories have lost their jobs. The government's response has been woefully inadequate. There are no comprehensive employment programs, no retraining initiatives, and no meaningful financial support for the newly unemployed.

The social impact of this neglect is profound. Urban slums are swelling with jobless, desperate workers, many of whom are taking to the streets in protest. Road blockades, strikes, and clashes with police have become regular occurrences. The government’s heavy-handed response—deploying industrial police and cracking down on demonstrators—has only deepened the crisis.

The failure to address the growing joblessness represents not just economic mismanagement but a threat to national stability. Social unrest is escalating, and the country teeters on the edge of wider disruption.

A Hollow Administration

Dr. Yunus’s entry into national governance was seen by many as a welcome change—an opportunity for reform and ethical leadership. Unfortunately, the reality has been far from promising. Instead of bringing vision and pragmatism, his administration has been marked by inaction, poor coordination, and a disturbing reliance on moral posturing over concrete results.

Inflation continues to rise, foreign reserves are dwindling, and the cost of living has skyrocketed. Crime rates are climbing, with law enforcement unable—or unwilling—to maintain order. Corruption, once a key issue Yunus vowed to eliminate, appears unchecked. For everyday Bangladeshis, life has become increasingly uncertain and difficult.

Moreover, the civil service and other key institutions appear paralyzed. Bureaucratic inefficiencies, outdated regulations, and weak governance structures persist, and in many cases, have worsened under the current administration. Instead of delivering transparency and reform, the Yunus-led government has become synonymous with chaos and disappointment.

The Need for Urgent Rethinking

Bangladesh stands at a crossroads. The current trajectory is not only unsustainable—it is perilous, with far-reaching consequences for the economy, society, and future generations. The government led by Dr. Yunus, once celebrated as a beacon of hope and reform, is now increasingly seen as ineffective and disconnected from the realities on the ground.

The collapse of the RMG sector, the exodus of foreign investment, the stagnation of trade diplomacy, and the escalating unemployment crisis are not isolated incidents. They are interconnected symptoms of a deeper governance failure. Without urgent action to restore investor confidence, safeguard workers' rights, and reinvigorate industrial productivity, Bangladesh risks descending into a prolonged period of economic decline.

What the country needs now is a decisive shift in direction—one that embraces pragmatic solutions over performative moralism, inclusive growth over political score-settling, and national cohesion over partisan divisions.

The path forward is clear: free and fair elections must be held without delay, and power must be transferred to a democratically elected government. Yet, the Yunus administration continues to postpone elections, deepening instability and fueling public frustration.

The nation is watching. The world is watching. Bangladesh’s future hinges on restoring democratic legitimacy and placing the country back on a path of stability and progress.