Asif Showkat Kallol (Dhaka Bureau)
While the geopolitical chessboard of the Middle East remains engulfed in violence, the shockwaves of the conflict are quietly devastating the economic backbone of nations thousands of miles away. Bangladesh, a South Asian country navigating a fragile democratic transition, is currently facing its most severe fiscal crisis in years- a direct casualty of skyrocketing global energy prices triggered by the war.
The government led by Prime Minister Tarique Rahman is now forced to prepare a heavily strained national budget for the upcoming 2026-27 fiscal year. What was projected as a year of stabilization has transformed into a battle for economic survival, highlighting how vulnerable Global South democracies remain to external geopolitical shocks.
The Collapse of Economic Calculations
Just a year ago, when Dhaka announced its 2025-26 budget, global crude oil prices hovered around $60 per barrel. At that rate, the state-owned Bangladesh Petroleum Corporation (BPC) was comfortably generating profits, allowing the government to eliminate fuel import subsidies entirely from its initial plans.
That stability vanished on February 28, 2026, with the outbreak of hostilities in the Middle East.
Within less than three months, global oil prices surged by nearly 87%, peaking at $112 per barrel. For Bangladesh, which imports between 6.5 and 7 million tonnes of fuel annually, this price explosion was catastrophic. To shield its citizens from sudden inflation, the government absorbed the cost, buying fuel at premium global rates while selling it domestically at controlled, subsidized prices.
The financial damage has been immediate. The finance ministry reveals that Bangladesh has already burned through nearly Tk 30,000 crore (approximately $2.5 billion USD) in unexpected fuel subsidies since the conflict began.
A Historic Subsidy Burden vs. Humanitarian Priorities
As Finance Minister Amir Khasru Mahmud Chowdhury prepares to present the new budget on June 11, the country faces a historic deficit. The government plans to allocate a record-breaking Tk 116,125 crore for subsidies—the highest in the nation’s history, swallowing roughly 1.7% of the country’s GDP.
More than 61% of this massive fund will be spent on just three vital sectors:
* Electricity & Energy: Tk 37,000 crore
* Fertilizer (Agriculture): Tk 27,000 crore
* Liquefied Natural Gas (LNG) Imports: Tk 6,500 crore
For an economy deeply dependent on gas-fired power plants and agriculture, these subsidies are not luxuries; they are life support systems. Without subsidized fertilizers and diesel, food production would plummet, threatening the food security of over 170 million people.
Furthermore, because of the global energy crunch, Bangladesh has been locked out of affordable long-term LNG contracts, forcing the nation to buy gas from volatile spot markets at two to three times the standard rate.
The IMF Dilemma: Structural Reforms vs. Human Survival
This ballooning subsidy bill has renewed friction between Dhaka and Western-led financial institutions like the International Monetary Fund (IMF). For years, Washington-based lenders have pressured developing nations to phase out subsidies in energy and agriculture, arguing they distort market mechanisms.
However, Bangladeshi policymakers argue that strict adherence to IMF formulas during a global humanitarian crisis is politically and socially impossible. Dr. Mostafa K. Mujeri, former chief economist of the Bangladesh Bank, notes the delicate tightrope the government must walk:
‘The government is under immense financial pressure because revenues have not grown alongside expenditures. While spending in other sectors must be restrained, subsidies in agriculture and energy remain absolutely essential given their public and humanitarian importance.’
In an effort to protect the most vulnerable from soaring inflation, the government is also allocating Tk 9,600 crore for social protection and open-market subsidized rice sales for low-income families.
The True Cost of War
The unfolding crisis in Bangladesh serves as a stark reminder of the interconnectedness of our modern world. A war fought in the Middle East does not just result in regional devastation; it actively drains the resources of developing nations, siphoning wealth away from healthcare, education, and poverty alleviation into the pockets of global energy markets.
For Bangladesh, the upcoming budget is no longer just a financial statement- it is a testament to how distant military conflicts shape the daily survival, peace, and stability of ordinary people across the globe.
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The Author:
Asif Showkat Kallol: Works for a German-based online outlet, The Mirror Asia, as Head of News and is a Contributor, Pressenza- Dhaka Bureau.
