As tensions escalate between India and Pakistan—two powerful countries in South Asia—Bangladesh’s economy is being exposed to several challenges, experts have warned.
According to experts, while Bangladesh’s security is likely to be the most affected in this conflict, the economy, exports, imports, employment, and stock markets are also expected to suffer, as the country is deeply connected to its two neighbouring nations.
If the war continues for an extended period, inflation will likely rise as fuel and essential commodity prices will soar.
Industry insiders have identified some key areas likely to be affected by the India-Pakistan war:
a) The supply of food and essentials from the two countries may decrease.
b) Inflation is likely to rise.
c) The import of industrial raw materials may be disrupted.
d) A rise in fuel and raw material prices will flare up manufacturing costs.
e) The country’s export and import sectors will face uncertainty.
f) Bourses, investment, and employment will be negatively affected.
Sources said the food supply is at risk because Bangladesh has signed government-to-government (G2G) agreements with India and Pakistan to import rice. The price of rice is already high in the country, even during the harvest season. If the import of rice and wheat is disrupted, the prices of these essential items are expected to escalate further.
According to the Ministry of Food, earlier this year, Bangladesh signed deals to import 1,00,000 tonnes of rice from India and Pakistan under G2G agreements, most of which have already arrived. However, if the remaining supply is disrupted due to the war, it could trigger instability in the local kitchen market.
Former director general of BIDS, MK Mujeri, stated, “Disruption in food imports will increase the suffering of low-income people. If the war continues, production costs will rise, as raw materials for export-oriented industries are sourced from these two countries. The export sector will suffer losses as well.”
Dr Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), said, “A war between India and Pakistan could affect Bangladesh’s economy on multiple fronts. These two countries are significant for trade and transport for Bangladesh. If roads, ports, and air routes are blocked or limited during the war, it will interrupt trade. Since Bangladesh depends a lot on border trade with India, it may quickly face problems with the supply of goods.”
The economics professor from Dhaka University added, “If the war goes on, investors’ confidence may decline. They might pull withdraw or halt their investments, which would harm jobs and economic growth. The war could also make the global energy market unstable. Fuel prices may soar. That would increase manufacturing and transport costs in Bangladesh, making living costs more expensive for people.”
He also warned that international donors and development partners may start focusing more on security issues in the region, which could slow down the funding for development projects in Bangladesh. In short, the India-Pakistan war could create many problems for Bangladesh’s economy, both now and in the future.”
Translated & edited by Fariha Nowshin Chinika
