Bangladesh could face significant economic and social pressure if the ongoing conflict in the Middle East continues to disrupt global energy and commodity markets, with the country potentially losing around 600,000 jobs, according to an assessment by the World Bank.
The global energy crisis is already affecting Bangladesh through higher fuel prices, gas shortages and disruptions to industrial production and fertiliser manufacturing. The impact is gradually spreading to transportation, agriculture, food prices and household incomes.
The World Bank raised these concerns in an assessment conducted in mid-June as part of a proposed project to provide budget support to the Bangladesh government.
The risks come at a time when Bangladesh’s economy is already under considerable pressure, with high inflation, weaknesses in the banking sector and limited fiscal space.
Poverty Reduction Could Slow Sharply
Bangladesh has struggled to generate sufficient new employment in recent years, while household incomes have not increased significantly. High inflation has further weakened the purchasing power of ordinary people, limiting the benefits of economic growth.
According to the World Bank, the number of people living in poverty increased by an estimated 1.4 million in 2025.
Without the Middle East conflict, around 1.7 million people could have moved out of poverty in 2026. However, the World Bank now estimates that the number could fall to only around 500,000.
Rising prices could account for around 10% of the increase in poverty this year, according to the assessment.
Higher fuel prices could push up transportation and electricity costs, increase industrial production expenses and eventually raise the prices of food and other essential goods.
The World Bank estimates that if higher fuel costs are gradually passed on to consumers, inflation could increase by more than 0.5 percentage points.
Bangladesh Highly Exposed to Energy Shock
Bangladesh remains heavily dependent on imported energy, particularly liquefied natural gas (LNG).
More than half of the country’s primary energy supply comes from natural gas, while domestic gas production has fallen around 15% from its peak in 2016.
The country imports around 60–65% of its crude oil and 55–60% of its LNG from the Middle East, leaving Bangladesh particularly vulnerable to disruptions in the region.
The global LNG market has already become significantly more expensive. Spot LNG prices have risen to around $24–28 per million British thermal units (MMBtu), more than double previous levels.
Bangladesh recently had to pay more than $24 per MMBtu for two LNG cargoes scheduled for September.
Petrobangla has also declared force majeure on five of its six LNG supply contracts amid supply disruptions.
Government Subsidy Burden Could Increase
The energy shock is also creating additional pressure on government finances.
The World Bank estimates that government subsidies for the energy sector could rise to around 2.8% of GDP in fiscal year 2025–26.
Total government subsidy requirements could reach between $2.5 billion and $4.8 billion, compared with approximately $1.5 billion to $2.5 billion in recent years.
A larger subsidy burden could force the government to reduce spending in other areas, including social protection and essential public services.
Finance and Planning Minister Amir Khosru Mahmud Chowdhury has acknowledged the challenges, saying that the problems inherited from previous periods cannot be resolved overnight and will require time.
He also said inflation had fallen below 9% in July and could have declined further had the Middle East conflict not occurred.
Agriculture Faces Fresh Risks
The energy crisis is also affecting agriculture, particularly through fertiliser supply and prices.
Around 40% of Bangladesh’s population depends on agriculture directly or indirectly. Any disruption in the supply of fertiliser and other agricultural inputs could therefore have a major impact on farmers’ incomes and food security.
Bangladesh is highly dependent on fertiliser. The country uses an average of 391.9 kg of fertiliser per hectare, more than twice the global average.
The country also requires a steady supply of natural gas to produce fertiliser domestically. Five of Bangladesh’s six urea fertiliser plants have reportedly been forced to suspend production because of gas shortages.
Meanwhile, urea prices have increased by around 30%, and the World Bank has warned that prices could potentially double if the crisis continues.
The situation resembles the economic pressure Bangladesh experienced following Russia’s invasion of Ukraine, when global energy and fertiliser prices surged, pushing up food prices and increasing the government’s subsidy burden.
Healthcare Costs Also Rising
The impact of the energy crisis is extending to Bangladesh’s healthcare sector.
Rising electricity and fuel costs, combined with disruptions in global supply chains, are increasing operating expenses for around 19,000 government health facilities and 6,200 private hospitals and clinics.
Large public hospitals alone can spend around $600,000–$1.1 million a month on electricity.
Private hospitals and clinics also face higher fuel costs when they need to operate generators during power disruptions.
Bangladesh’s pharmaceutical industry remains exposed as well. Around 250 pharmaceutical manufacturers import raw materials from abroad, while more than 90% of medical equipment used by hospitals is imported.
Higher shipping and energy costs could therefore further increase healthcare expenses and put pressure on the sector’s ability to provide services.
Job Losses Could Become a Reality
The potential loss of around 600,000 jobs is perhaps the most serious concern highlighted by the World Bank.
According to economist and CPD Distinguished Fellow Professor Mustafizur Rahman, some of the risks identified by the World Bank are already visible in Bangladesh.
He said new gas connections are not being provided to industrial facilities in many cases, some factories have reduced operating hours, while others have been forced to shut down because of energy shortages.
Recent factory closures and reports of workers losing their jobs indicate that the employment impact is no longer merely a future risk.
As Professor Mustafizur Rahman noted, this is already becoming a reality on the ground, while the World Bank’s assessment has made the scale of the potential economic impact clearer.
Source: The Daily Star
