600,000 people may lose jobs in Bangladesh, poverty may increase: World Bank assessment

The World Bank has expressed concern that about 600,000 people may lose jobs in Bangladesh if the crisis continues for long due to the impact of the war in the Middle East. At the same time the number of people who were supposed to get the opportunity to come out of poverty this year may also decrease significantly.

These concerns have been mentioned in an assessment of the World Bank of mid-June. This assessment has been done as part of a proposed project for providing budget support to the government.

The government had sought budget support from the World Bank to meet the extra expenses of importing various products including fuel oil and fertilizer due to the crisis in the Middle East. In this context the World Bank finalized an assessment report on June 15. In this the possible risks in Bangladesh’s economy due to the conflict in the Middle East, increase in the prices of fuel and fertilizer and its impact have been analyzed.

Responsible sources informed that after the start of the crisis in the Middle East the government sought assistance from the World Bank to deal with the extra pressure on the budget. The World Bank agreed to provide this assistance. However the organisation put the condition that the unused money lying in various development projects will be gathered and the budget support will be coordinated with it. These monies had already been allocated in favour of Bangladesh.

In the continuity of this the World Bank approved 713 million dollars as budget support for Bangladesh on June 26. The concerned said this assistance will play an important role in somewhat reducing the financial pressure of the government to deal with the crisis in the Middle East and meet the import expenses.

The pace of poverty reduction may stop

According to the calculation of the World Bank, the number of poor people in the country has increased by an estimated 1.4 million in 2025 itself. The benefits of economic growth have not reached the common people in that way due to high inflation, limited employment and low increase in people’s income.

If the war in the Middle East had not started this year about 1.7 million people could have come out of poverty. But due to the impact of the war that number may come down to about 500,000. That is, due to the war the opportunity of another about 1.2 million people to come out of poverty may be lost.

The World Bank said the role of price increase in the increase of poverty this year will be about 10 percent. If the extra price of fuel is partially imposed on the consumers inflation may increase by more than another 0.5 percent.

If the price of fuel increases not only the cost of oil or gas will increase, the production cost of transport, electricity production and industrial factories will also increase. Its impact will ultimately fall on the prices of other products including food. The low-income and poor people will fall under the most pressure.

Bangladesh in big risk due to fuel crisis

One of the biggest impacts of the conflict in the Middle East has fallen on the fuel sector. Its impact is already being seen in electricity production, industrial factories and fertiliser production.

More than half of Bangladesh’s total primary fuel supply comes from gas. But the production of gas in the country has decreased by about 15 percent compared to the highest production of 2016.

On the other hand, 60 to 65 percent of the country’s imported crude oil and 55 to 60 percent of liquefied natural gas come from the Middle East. As a result if a big disruption occurs in the war or supply in that region Bangladesh directly faces its impact.

Instability has also been created in the international fuel market due to the conflict. Five of the six liquefied natural gas supply contracts of Petrobangla have been declared ‘force majeure’. That is, supply according to these contracts is not possible due to special circumstances.

Meanwhile the price of liquefied natural gas in the international market has risen to 24 to 28 dollars per MMBTU, which is more than double the previous price. In the midst of the supply crisis Bangladesh has had to pay more than 24 dollars per MMBTU to buy two consignments of liquefied natural gas for September.

The government is now looking for ways to increase the capacity of receiving and processing liquefied natural gas.

In this regard Finance and Planning Minister Amir Khasru Mahmud Chowdhury said this crisis cannot be solved in one day. The problems received from the previous time cannot be fixed overnight, it will take time.

Pressure of subsidy is increasing on the government

The financial pressure on the government is also increasing as the price of fuel is rising. According to the calculation of the World Bank, the government’s subsidy in the fuel sector may rise to 2.8 percent of the gross domestic product in the 2025-26 financial year.

Altogether the total amount of the government’s subsidy may stand at 2.5 to 4.8 billion dollars. In recent years this amount was about 1.5 to 2.5 billion dollars.

To arrange the money of extra subsidy the government may have to reduce expenses in other sectors. Due to this there is a risk of government expenses decreasing in the social security and emergency need sectors, the World Bank has warned.

Shock in fertiliser production also

The big impact of the fuel crisis is falling on agriculture. About 40 percent of the people of the country are dependent on agriculture in some way or other. If there is a problem in the supply of various inputs of agriculture including fertiliser the small farmers are most likely to be affected the most.

On average 391.9 kg of fertiliser is used per hectare of land in Bangladesh, which is more than double the global average. As a result if a big change occurs in the supply and price of fertiliser in the international market the agriculture and food production of the country quickly fall under pressure.

Uninterrupted supply of gas is also needed for fertiliser production in the country. Already five of the six urea fertiliser factories of the country have had to keep production closed due to the gas crisis.

Alongside this the price of urea has increased by about 30 percent. If the crisis continues for long the price of fertiliser may increase up to double, the World Bank has warned.

During the Russia-Ukraine war also the increase in the prices of fuel and fertiliser in the world market had increased the price of food in Bangladesh. At the same time the government’s expense on fertiliser subsidy for the farmers had also increased. The World Bank thinks a similar type of economic pressure may also be created in the current conflict in the Middle East.

Expense is also increasing in the health sector

The impact of the fuel and supply crisis is also falling on the health sector. Due to the extra expense of electricity and fuel about 19,000 government health centres and 6,200 private hospitals and clinics of the country have fallen under pressure.

The electricity bill of about 64 large government hospitals of the country alone costs about 600,000 to 1.1 million dollars per month. If there is a problem in electricity supply the private hospitals and clinics have to run generators. Due to this their fuel expense increases further.

The medicine industry is also not outside this crisis. About 250 medicine manufacturing institutions of the country import the raw materials for making medicine from abroad. If there is a problem in the international supply system the expense of importing these raw materials increases.

Besides, more than 90 percent of the equipment used in the hospitals has to be imported. As a result if the freight and fuel prices increase the expense of health services also increases.

According to the World Bank, this extra expense is creating pressure on the health sector at such a time when the country’s health system is already in various crises.