The World Bank has warned that Bangladesh’s poverty situation could worsen because of the Iran war and the wider Middle East crisis. The number of people in poverty had already risen for various reasons, including COVID-19, the Ukraine war, high inflation, and post-2024-uprising uncertainty.
The World Bank said 1.7 million people were expected to rise above the poverty line in 2026. But because of the Middle East crisis, only 500,000 people will be able to escape poverty this year. The remaining 1.2 million people who were expected to escape poverty will not be able to, due to surrounding conditions. Not only that, the World Bank has also warned that 600,000 people could lose their jobs this year.
These findings appear in a World Bank assessment report finalized on June 15, after the Bangladesh government sought budget support to cover import costs, including for fuel oil and fertilizer purchases, amid the Middle East crisis.
Sources familiar with the matter say the current government had sought budget support from the World Bank after the Middle East crisis began. The World Bank agreed, but on the condition that unused funds sitting idle in various projects for a long time be pooled together and provided as budget support. These funds had already been allocated in Bangladesh’s favor. On June 26, the World Bank approved $713 million in budget support.
Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), a private research institution, said the number of people escaping poverty is falling, which is quite concerning. He said the expectation that the economy would recover under the interim government has not been fully met. At the time, the expectation was that investment would increase and new jobs would be created under the new political government.
Moazzem, who also serves as president of the Knowledge Hub Institute Trust, said this finding in the World Bank report is embarrassing for the new government. It suggests, he said, that the economy remains stuck. He said that alongside the government’s announced popular initiatives, attention should be paid to the economy’s weak structural issues. Since fewer people are escaping poverty, he said, the various social safety net programs the government has announced should be designed to genuinely serve the poor. He said beneficiaries should be identified objectively, setting aside political considerations.
How will the budget support funds be spent?
The World Bank’s budget support funds will primarily be used to pay for fuel purchased on the international market. In addition, cash assistance and livelihood support will be provided to families affected by the crisis and to micro, small and medium enterprises. This is expected to help stabilize incomes and preserve employment during the crisis.
The budget support funds have already been allocated in Bangladesh’s favor. Sources say spending has already begun on imports of fuel oil, LNG, fertilizer and other goods.
What the World Bank assessment says
The World Bank report says that between 2022 and 2025, limited job creation, falling real wages and high inflation slowed the pace of poverty reduction. The number of people in poverty is estimated to have risen by roughly 1.4 million in 2025. It had been forecast that roughly 1.7 million people would escape poverty in 2026. But because of the ongoing Middle East conflict, the World Bank believes only 500,000 people will be able to escape poverty this year.
The World Bank believes much of what had been expected to be achieved this year will not be. Instead, roughly 600,000 jobs are at risk of being lost. Rising prices of goods are being blamed for roughly 10 percent of the increase in poverty expected in 2026.
A complicated situation
The World Bank says Bangladesh is facing a multidimensional crisis and set of risks. Natural disasters, food insecurity, health emergencies, and severe geopolitical and macroeconomic shocks are making the situation more complicated.
According to the World Bank, Bangladesh’s structural economic weaknesses have severely limited the government’s capacity to withstand major shocks. For the first time in 15 years, the tax-to-GDP ratio fell below 7 percent in fiscal year 2024-25. Inflation has remained near 9 percent for three consecutive years. Roughly 80 percent of workers are employed in the informal sector. The fiscal deficit could widen further, to roughly 5 percent, due to rising energy subsidy costs and bank recapitalization expenses.
On the energy sector
The World Bank assessment says Bangladesh’s heavy reliance on imported energy, particularly liquefied natural gas (LNG), has created a major structural weakness, one repeatedly exposed during periods of geopolitical instability.
The World Bank said more than 50 percent of the country’s primary energy supply comes from gas. Bangladesh sources 60-65 percent of its crude oil and 55-60 percent of its LNG from the Middle East. As an example, the ongoing Middle East conflict has already created volatility in energy markets. Five of Petrobangla’s six LNG supply contracts have been declared “force majeure,” and LNG spot prices have risen to $24-28 per MMBtu, more than double normal levels.
The World Bank also said the total energy subsidy burden in 2026 could reach $2.5 billion to $4.8 billion. In recent years, that figure had been $1.5 billion to $2.5 billion. The rising subsidy cost is reducing the scope for spending on social and emergency sectors.
Bangladesh relies heavily on imports for fertilizers such as urea, diammonium phosphate, triple super phosphate and muriate of potash. Meanwhile, domestic urea production also depends on a stable gas supply. The ongoing Middle East conflict has already disrupted this system. Urea prices have risen 30 percent. The World Bank believes that if the crisis is prolonged, prices could even double.
Private sector and employment
The World Bank believes Bangladesh’s private sector and labor market face substantial structural weaknesses. The World Bank report says private businesses face power outages 26 times a month on average, causing losses equivalent to 9 percent of annual sales. Meanwhile, various regulatory rules have reduced businesses’ investment potential by 19 percent.
The World Bank also says labor market conditions have structurally deteriorated. Of the new jobs created between 2016 and 2024, seven out of every 10 were in low-productivity agriculture.