South Asia's Crisis Cycle: Economic Pressures Drive Regional Unrest

Since 2022, Australia's strategic neighbourhood has witnessed unprecedented political upheaval across South Asia, from fuel queues in Colombo to campus protests in Dhaka and street demonstrations in Kathmandu. These events represent more than isolated crises; they reflect systemic economic and social pressures reshaping the region's political landscape.

Sri Lanka's Economic Collapse and Recovery

Sri Lanka's crisis began with household economics turning into political consequence. Inflation surged to nearly 70 per cent in 2022, while World Bank estimates indicate poverty rates doubled from 13 per cent to 25 per cent within a single year. The resulting fuel shortages and medicine queues sparked mass demonstrations that culminated in protesters storming the presidential residence.

President Gotabaya Rajapaksa fled the country and resigned on July 13, 2022, after images of demonstrators in the presidential pool became symbols of state collapse. An International Monetary Fund programme has since stabilised fundamentals, with inflation under control and economic growth returning at approximately 5 per cent in 2024. However, public trust remains fragile following the trauma of empty shelves and endless queues.

Nepal's Digital Revolt and Political Transition

Nepal's unrest began with a seemingly minor trigger: a government ban on 26 social media platforms in September 2025, citing concerns over fake identities and hate speech. Generation Z organisers rapidly mobilised from campus discussions to street protests, spreading across multiple districts before security forces intervened.

The crisis claimed over 70 lives, injured more than 2,000 people, and caused an estimated $586 million in damages before Prime Minister KP Oli resigned. Former chief justice Sushila Karki now leads an interim government preparing for elections scheduled for March 5, 2026. The episode exposed deeper grievances about employment, governance, and political representation that constitutional reforms since 2015 failed to address.

Bangladesh's Quota System Uprising

Bangladesh experienced its most significant political upheaval when student protests against civil service quotas evolved into nationwide demonstrations in mid-2024. Initially triggered by a court ruling restoring controversial employment quotas, the movement expanded beyond campuses to encompass broader demands for democratic reform.

The government's response included curfews, military deployment, and internet blackouts, but failed to contain the unrest. A UN fact-finding mission later documented approximately 1,400 deaths during the July-August crackdown and identified serious human rights violations by security forces. Economic losses reached an estimated $1.2 billion.

Sheikh Hasina was forced from office in August 2024, replaced by an interim administration led by Nobel laureate Muhammad Yunus. The transition government faces the challenge of conducting general elections and a constitutional referendum scheduled for February 2026, while managing continued violence including the assassination of youth leaders and attacks on media outlets.

Regional Patterns and Implications

These crises reveal common underlying factors across South Asia. Macroeconomic stress creates household budget pressures, while large, digitally connected youth populations channel frustration into organised action. When institutional trust erodes and governments resort to internet shutdowns, these measures often accelerate rather than contain unrest.

The regional pattern suggests three key lessons for policymakers. First, macroeconomic stability provides essential political foundation, as demonstrated by Sri Lanka's gradual recovery. Second, youth demographics represent a structural rather than seasonal force, requiring sustained employment and participation opportunities. Third, digital policy now sits at the intersection of economics and politics, with internet shutdowns signalling institutional panic to both citizens and markets.

India's Stabilising Role

New Delhi has consistently prioritised regional stability throughout these crises. During Sri Lanka's worst months in 2022, India extended nearly four billion dollars in credit lines, currency support, and essential supplies, maintaining critical flows until IMF assistance could take effect.

In the energy sector, India's electrical grid facilitated the first trilateral power flow, enabling up to 40 MW of Nepali hydropower to reach Bangladesh. This demonstrates how regional connectivity can transform geography into functional economic corridors.

Looking Forward

Democratic dissent remains essential to political health, and South Asia will continue debating prices, representation, and promises. However, the region's future depends on building institutional resilience, establishing enduring governance frameworks, and creating societies capable of managing disagreement without fracturing.

For Australia, which maintains significant strategic and economic interests across the Indo-Pacific, South Asian stability represents more than regional concern. The unglamorous work of institutional strengthening provides the foundation for broader regional ambitions and the currency enabling ordinary life to proceed amid political change.