Amid escalating military tensions between India and Pakistan, South Asia is witnessing widespread uncertainty and anxiety. The fallout is already being felt in Bangladesh, where the Dhaka Stock Exchange suffered a sharp decline on Wednesday, alongside growing concerns across multiple economic sectors. Bangladeshi news outlet Banglatribune unveiled a report on this regard.
Economic Ripple Effects on Bangladesh
Experts warn that if the conflict between the two nuclear-armed neighbors escalates into full-scale war, Bangladesh could face significant economic disruptions. Key areas of concern include trade, investment, inflation, remittance inflows, and diplomatic balance.
Trade and Export Vulnerabilities
Despite the ongoing tensions between India and Pakistan, both nations maintain trade ties with Bangladesh—India being one of its largest import partners. A war scenario may severely disrupt cross-border trade, transit routes, and maritime transport in the region. Potential delays and order cancellations in exports of garments, pharmaceuticals, and light engineering products could also occur.
Investment Uncertainty
Rising regional instability may lead foreign investors to classify South Asia as a high-risk zone, discouraging both existing and future foreign direct investment (FDI). Key sectors such as infrastructure, textiles, IT, and renewable energy could face project delays or suspension.
Strategic Recommendations
Economists urge the Bangladesh government to take proactive measures, including strategic diversification of export markets, boosting diplomatic engagement, and closely monitoring global commodity prices. A well-structured contingency plan is considered crucial to navigate the potential economic turbulence.
Stock Market Crash
The conflict’s impact was evident in the stock market, with the DSEX index falling by 149 points—approximately 3%—to close at 4,802, marking the lowest level in five years. Investor panic led to widespread sell-offs, with only nine companies recording gains, while 385 declined and five remained unchanged.
Ashiqur Rahman, Managing Director of Midway Securities, noted that geopolitical uncertainties have deeply shaken investor confidence. Although a high-level government meeting is scheduled for May 11 to discuss market stabilization measures, it has yet to ease investor concerns.
Inflation and Energy Crisis Risk
A potential war could cause oil prices to surge in international markets, pushing up import costs for crude oil and LNG. This would raise electricity production costs in Bangladesh, leading to inflation across industries and consumer goods. Rising transportation and agricultural costs could further escalate food prices.
Threat to Remittance Flows
A prolonged conflict could affect labor markets in the Middle East and Malaysia, where millions of Bangladeshi expatriates are employed. Any political instability in these regions could slow remittance inflows, affecting Bangladesh’s foreign exchange reserves.
Diplomatic Tightrope
Bangladesh maintains diplomatic relations with both India and Pakistan. In the event of open conflict, Dhaka may face pressure to balance its position carefully, avoiding alienation of either side while maintaining ties with key regional and global allies.