Around 1.4 million more people in Bangladesh fell into poverty in 2025, while the economic fallout from the Middle East conflict could significantly weaken the country’s prospects for reducing poverty this year, according to an assessment by the World Bank.

The World Bank estimates that, in the absence of a war in the Middle East, around 1.7 million people could have moved out of poverty in Bangladesh in 2026. But under the impact of the conflict, that figure could fall to roughly 500,000. This means nearly 1.2 million people could lose the opportunity to escape poverty because of the economic consequences of the war.

The risks were highlighted in a World Bank assessment conducted in mid-June as part of a proposed project to provide budget support to the government.

The assessment attributes the rise in poverty in 2025 to several pressures within the domestic economy. High inflation, weak employment and stagnant household incomes have limited the extent to which economic growth has translated into better living standards for ordinary people.

The Middle East conflict has added another layer of uncertainty. Higher energy prices, shortages of gas, disruptions to industrial production and reduced fertiliser output are affecting transport, agriculture, commodity prices and household earnings. If the disruption persists, the World Bank estimates that Bangladesh could face the risk of losing around 600,000 jobs.

Inflation could deepen pressure on poorer households

The conflict is also expected to affect the prices of essential goods. The World Bank estimates that rising prices could account for around 10 per cent of the increase in poverty expected in Bangladesh this year.

If higher energy costs are gradually passed on to consumers, inflation could rise by more than 0.5 percentage points. The effects would extend beyond fuel itself, raising transport costs, electricity-generation expenses and industrial production costs. Businesses facing higher operating costs could eventually pass some of those increases on to consumers, putting further pressure on the prices of food and other essential goods.

Poorer households are particularly vulnerable because they have less room to absorb increases in the cost of basic necessities.

Finance and Planning Minister Amir Khosru Mahmud Chowdhury, however, has said that inflation fell below 9 per cent in July. He has also argued that inflation could have declined further had there been no war in the Middle East.

Energy dependence leaves Bangladesh exposed

Bangladesh’s energy sector is particularly vulnerable to developments in the Middle East. More than half of the country’s primary energy supply comes from natural gas, while domestic gas production has fallen by about 15 per cent from its peak level in 2016.

At the same time, Bangladesh remains heavily dependent on the Middle East for imported energy. Around 60 to 65 per cent of its imported crude oil and between 55 and 60 per cent of its liquefied natural gas come from the region.

The disruption has already affected liquefied natural gas supplies. Amid volatility in international energy markets, five of Petrobangla’s six liquefied natural gas supply contracts have been declared under force majeure provisions.

Spot-market liquefied natural gas prices have risen to between US$24 and US$28 per million British thermal units, more than double previous levels. Bangladesh also had to pay more than US$24 per unit for two liquefied natural gas cargoes scheduled for delivery in September.

Higher energy costs are putting additional pressure on the government budget. According to the World Bank, energy subsidies could rise to 2.8 per cent of gross domestic product in the 2025–26 financial year. The overall subsidy burden could reach between US$2.5 billion and US$4.8 billion.

Such a rise could constrain government spending in other areas, including social protection programmes, at a time when vulnerable households may require greater support.

Fertiliser shortages threaten agriculture

The energy crisis is also affecting agriculture, a sector on which around 40 per cent of Bangladesh’s population depends in one way or another. Disruptions in the supply of fertiliser and other agricultural inputs would particularly affect small farmers, who generally have less capacity to absorb higher production costs.

Bangladesh uses an average of 391.9 kilograms of fertiliser per hectare, more than twice the global average. Natural gas is also required for domestic fertiliser production.

Five of the country’s six urea fertiliser factories have already had to suspend production because of gas shortages. Urea prices have risen by around 30 per cent, while the World Bank warns that prolonged disruption could push fertiliser prices to twice their current levels.

Higher input costs could squeeze farmers’ incomes and create additional pressure across the food supply chain. Any sustained rise in agricultural production costs could ultimately affect food prices and household budgets.

Employment under growing pressure

The impact on employment is already becoming a concern, according to Professor Mostafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue.

He said new gas connections were not being provided to industrial plants, while some factories had reduced working hours. In other cases, production had been halted because of fuel shortages.

According to Professor Rahman, recent factory closures and job losses among workers indicate the seriousness of the situation. The World Bank’s estimate of a potential loss of around 600,000 jobs, he said, reinforces those concerns.

The employment impact is significant because weaker job creation and falling working hours can directly reduce household incomes. For families already struggling with higher food and energy costs, even a modest reduction in earnings can make it harder to meet basic expenses.

Healthcare costs also face pressure

The effects of energy and supply disruptions are extending into the healthcare sector. Bangladesh has around 19,000 government health centres and approximately 6,200 private hospitals and clinics.

When electricity supplies become unreliable, private healthcare facilities may have to rely on generators, increasing their fuel and operating costs.

The pharmaceutical industry also remains dependent on imported inputs. Around 250 medicine manufacturers in Bangladesh import raw materials used to produce medicines, while more than 90 per cent of hospital equipment is imported.

As a result, disruptions in international supply chains and higher energy costs can raise expenses across the healthcare system. Increased operating and procurement costs may eventually place additional financial pressure on healthcare providers and patients.

Poverty reduction faces a major setback

Bangladesh entered 2026 with the prospect of reversing some of the increase in poverty recorded the previous year. That prospect has now been weakened by external economic shocks.

The World Bank’s assessment suggests that the combination of high inflation, weak employment, energy-market instability and rising production costs could make poverty reduction considerably harder. The Middle East conflict is adding pressure to sectors that directly affect household welfare, including energy, agriculture, manufacturing, transport and healthcare.

The immediate concern is not only the number of people who may fall into poverty, but also the number who may be prevented from escaping it. If the conflict continues to disrupt energy supplies and raise global commodity prices, Bangladesh could face prolonged pressure on household incomes and living costs.

After an estimated 1.4 million people were pushed into poverty in 2025, the country’s expected progress in reducing poverty during 2026 now faces a significant setback.