Last week, Nepal became the third South Asian country in three years to see its government collapse under the weight of mass protests. On September 8, after the government banned twenty-six social media platforms, young Nepalis poured into Kathmandu’s streets, furious at what they saw as an attempt to silence criticism. The protests escalated, leaving more than seventy people dead and causing hundreds of millions of dollars’ worth of damage. Analysts have rushed to dissect the political intrigue behind the resignation of Prime Minister KP Sharma Oli and the appointment of former Chief Justice Sushila Karki as interim leader.
But focusing only on the political aspects of these crises misses the bigger picture: economic despair fueled this uprising, just as it did in Bangladesh in 2024 and Sri Lanka in 2022. Across these three South Asian countries, shaky economies, undermined by corruption, unemployment, remittance dependence, and policy missteps, have become the true fault lines of political instability.
This pattern suggests a region-wide crisis of governance linked to economic precarity. In Nepal, over 60 percent of the population is under thirty, and youth unemployment exceeds 20 percent. In Bangladesh, inflation surged to double digits while billions of dollars were allegedly siphoned abroad. In Sri Lanka, foreign reserves dropped to near zero, leaving the state unable to pay for basic imports. These are not just abstract statistics but economic realities that cut into the daily survival of ordinary people—rising food prices, queues for fuel, stagnant wages, and lost jobs. No political settlement, however carefully negotiated, can hold for long without addressing these economic grievances.
From macro crises to daily struggles
In all three countries, citizens reached a breaking point because economic conditions collapsed, both at the national and household levels. Sri Lanka provides the most dramatic example. Years of reliance on foreign borrowing and “white elephant” infrastructure projects—ports, airports, and highways that generated little revenue—left the country deeply indebted. In 2019, newly elected President Gotabaya Rajapaksa slashed taxes, costing the state $1.4 billion annually in lost revenue. When the COVID-19 pandemic hit, the tourism sector, which had contributed nearly 12 percent of gross domestic product (GDP), collapsed. Foreign exchange reserves dwindled, fuel and medicine imports stalled, and inflation spiked above 69 percent in 2022. An abrupt ban on chemical fertilizers shrank harvests by up to 40 percent, leaving farmers destitute. For ordinary Sri Lankans, this meant days without power, hours-long queues for petrol, and an inability to afford staple foods. Their frustration crystallized in the Aragalaya (Sinhala for “the struggle”) protests, which ultimately chased the Rajapaksas from power.
Bangladesh’s crisis unfolded differently but had similar roots. For years, the country celebrated its status as one of the world’s fastest-growing economies, powered by the ready-made garment sector (more than 80 percent of its exports) and remittances from overseas workers (around 7 percent of GDP). Yet by 2023–24, the sheen of growth had faded. Inflation reached 9 percent, unemployment persisted, and allegations of corruption exploded. Reports accused elites of laundering billions of dollars out of the country, even as millions struggled with the soaring cost of rice, onions, and cooking oil. Public discontent mounted as the government cracked down on dissent under draconian digital security laws. Student activists, long a significant part of Bangladesh’s political history, mobilized mass demonstrations. The military’s withdrawal of support from Prime Minister Sheikh Hasina’s government in August 2024 sealed her fate, pushing her into exile.
Nepal’s uprising this month revealed a different kind of vulnerability: the fragility of a remittance-driven economy. Remittances contribute more than a quarter of Nepal’s GDP, masking the weakness of domestic job creation. Remittance dependence leaves Nepal and other South Asian countries uniquely vulnerable to external shocks; any downturn in Gulf economies or tightening of labor migration policies directly translates into lost income for many households. High youth unemployment and underemployment in the informal sector have left recent graduates disillusioned, as a weak education system, poor vocational training, and ineffective public employment services have left them mismatched to labor market needs. The government’s inability to diversify beyond remittances and tourism meant that when political instability hit, the economic fallout was catastrophic. Protests and riots have inflicted unprecedented economic damage, with losses worth an estimated at $22.5 billion—nearly half of Nepal’s GDP. The tourism sector, which should have been thriving during the festive season, was devastated as cancellations poured in. Investor confidence evaporated, and national growth projections are expected to fall below 1 percent. For Nepalis, this meant not just fewer jobs but also a sense that their future had been stolen.
From economic grievances to political collapse
What began as anger over inflation, joblessness, and shortages of food and goods became full-blown political crises because entrenched elites proved unable—or unwilling—to respond. In Sri Lanka, the Rajapaksa family had dominated politics since 2005, enriching themselves and their allies while hollowing out state institutions. Their failure to manage the crisis forced citizens from all walks of life into the streets—farmers, students, professionals, and trade unionists. In Bangladesh, Hasina had been in power since 2009, centralizing authority and silencing opposition. But once the economic base of her legitimacy cracked, protests led by Gen Zs spiraled into a nationwide revolt. Three parties rotated in and out of power in Nepal for over a decade without delivering jobs or stability. When Oli attempted to muzzle criticism by banning social media, he miscalculated: instead of silencing dissent, the ban fueled it. Like in Bangladesh, Gen Zs hit the streets of Kathmandu and other major cities in Nepal.
Gen Z and social media were crucial catalysts for mass protests in all three cases. In Sri Lanka, young activists transformed Colombo’s Galle Face Green into GotaGoGama, a protest commune complete with libraries, art exhibitions, and community kitchens. In Bangladesh, student groups organized nationwide strikes, using social media to document repression and rally support. In Nepal, social media accounts for 80 percent of internet usage, with Instagram videos and hashtags bypassing government censorship, turning online outrage into street-level mobilization. These movements were not exclusively youth-driven—farmers, trade unions, and retirees also joined—but younger generations’ energy, creativity, and digital savvy turned them into unstoppable forces. Their tactics—flash mobs, viral hashtags, and decentralized organization—made it harder for regimes to repress them.
The economics of instability
The fall of regimes in Sri Lanka, Bangladesh, and Nepal has underscored a fundamental truth: political stability cannot be separated from economic security. Sri Lanka’s foreign reserves and debt repayment crisis, Bangladesh’s corruption and inflation, and Nepal’s remittance trap all led to the same result: young people forcing entrenched elites from power. Leaders who ignore inflation, unemployment, and the everyday struggles of their citizens do so at their peril. The primary sufferers of the economic downturns are South Asia’s youth population, who are no longer willing to accept corruption as the cost of politics. Once dubbed a “demographic dividend,” this generation is increasingly a double-edged sword, demanding accountability and reform.
The international implications are profound. These countries sit at the heart of the Indo-Pacific, where India and China compete for influence. Instability in Dhaka, Colombo, or Kathmandu reverberates beyond borders, shaping regional geopolitics and economic flows. For example, there were similar youth protests last month in Indonesia. For policymakers in the United States, the lesson is clear: Supporting South Asia’s stability means going beyond election monitoring and diplomatic engagement. It requires confronting the economic roots of instability—unemployment, corruption, debt dependency, and overreliance on single sectors such as remittances, garments, or tourism. The region’s political crises won’t be settled with debates in parliamentary halls; they can only be resolved by lowering the price of food, creating jobs, and ensuring the daily survival of ordinary people.
Rudabeh Shahid is a nonresident senior fellow at the Atlantic Council’s South Asia Center and a visiting assistant professor of government at Wesleyan University.
Nischal Dhungel is a PhD candidate in economics at the University of Utah and a nonresident fellow at the Nepal Institute for Policy Research.
Shakthi De Silva is a visiting lecturer in international relations at several universities and institutes in Sri Lanka and a policy fellow at the Centre for Law and Security Studies (CLASS).
Further reading
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Image: Burnt remains lie inside a section of the Parliament house which was set on fire by the protesters, following Monday's deadly anti-corruption protests triggered by a social media ban, which was later lifted, in Kathmandu, Nepal, September 11, 2025. REUTERS/Adnan Abidi .
