War and Pandemic VS Economy

War and Pandemic VS Economy

Md. Sohel Rana, Assistant Professor, Department of History, Chandpur Government Mohila College, Chandpur, 35th BCS (Education)

Abstract

After the devastating period of the COVID-19 pandemic, the Russia–Ukraine war has emerged as a global crisis affecting almost every country. Under the leadership of the United States, NATO seeks to weaken Russia, while Russia attempts to resist NATO’s expansion. This polarization has severely affected developing countries, pushing many toward economic instability and the risk of default.

Russia is the world’s largest country by land area and ranks 11th globally in terms of GDP. It supplies nearly one-third of the world’s wheat and cotton and produces approximately one-tenth of global oil. Russia is also the third-largest oil producer and the second-largest natural gas producer in the world. In addition, it exports sunflower oil and corn to many countries. When such a major supplier is suddenly isolated through sanctions, the global economy inevitably suffers.

Europe, heavily dependent on Russian energy, has faced its worst crisis since World War II. Given Europe’s central role in the global economic system, the impact has spread worldwide. Ukraine, often referred to as the “breadbasket of the world,” exports food grains and edible oil across Europe and beyond. The disruption of exports from both Russia and Ukraine has caused severe instability in global commodity markets.

This article analyzes how post–Cold War tensions between Russia and the Atlantic bloc escalated into war, how Europe plunged into crisis, the impact on inflation, trade, and the global economy, and finally the effects on Bangladesh’s domestic market and currency situation. The discussion is presented in six systematic stages.

Introduction

Just as the world began to recover from two years of pandemic disruption, long-standing security tensions between the United States and Russia resurfaced. The United States and its allies continued NATO’s expansion policy, while Russia sought to block it. This confrontation intensified into open conflict in February 2022, rooted in post–World War II Cold War rivalries.

Following the collapse of the Soviet Union, analysts argued that NATO expansion was unnecessary. Nevertheless, NATO continued to expand, reigniting Russian security concerns. When Ukraine, a former Soviet republic bordering Russia, expressed interest in joining NATO, Russia perceived this as a direct threat. On 24 February 2022, Russia launched a military invasion of Ukraine. The consequences of this war extended far beyond Europe and Russia, affecting the entire world.

Objectives

To raise awareness of global instability and its economic impact on Bangladesh

To encourage public cooperation with government economic initiatives

To analyze domestic and international economic crises and explore recovery pathways

To provide policy recommendations for crisis mitigation

Background

For decades, global political and economic decision-making has been dominated by the Atlantic bloc—comprising North America, Western Europe, and the United Kingdom—often referred to as Atlanticism. However, Russian thinkers have increasingly promoted Eurasianism, advocating a Russia-led geopolitical and economic order spanning Europe and Asia.

Under this vision, Ukraine represents a critical geopolitical barrier. Ukraine’s potential NATO membership threatened Russia’s security and undermined its Eurasian ambitions. Consequently, Russia viewed military intervention as its only remaining option to prevent NATO expansion into Ukraine.

The COVID-19 pandemic and the subsequent Russia–Ukraine war have exerted significant pressure on the economies of not only developing countries but also whole world including Bangladesh. In this context, inflation, depletion of foreign exchange reserves, rising import costs, and declining consumer purchasing power have emerged as critical issues in Bangladesh’s economic reality.

As the US Dollar functions as the dominant international currency, Bangladesh’s import–export trade is largely dependent on it. When the value of the Dollar rises against the Taka, foreign investment may increase; however, the cost of imported goods becomes significantly higher in local currency terms. Since Bangladesh is heavily import-dependent, most essential commodities are sourced from abroad. Consequently, increased import costs directly affect domestic prices. This situation intensified during the COVID-19 pandemic and the Russia–Ukraine war.

Moreover, even before the pandemic, a substantial portion of Bangladesh’s foreign currency reserves had reportedly been siphoned abroad through illicit channels. During and after the pandemic, Bangladesh Bank’s reserves declined sharply, resulting in an acute shortage of Dollars in commercial banks. Importers were therefore compelled to purchase Dollars at higher prices, fueling inflation and forcing consumers to pay more for essential goods—a trend that continues to this day.

Unethical business practices further aggravated the situation. As a result of rising prices, domestic markets have experienced prolonged instability. Many low-income households are suffering from malnutrition, government employees are demanding wage increases, and the government is struggling to manage fiscal pressures due to limited financial resources

Research Methodology

Both primary and secondary data sources were used.

Primary data: Interviews with expatriates returning from Russia and Ukraine; field surveys and market observations

Secondary data: National and international newspapers, journals, government and private websites, books, and academic articles

Daily television news and online media were analyzed

Data were collected and verified with neutrality and minimal redundancy

This research is descriptive, analytical, and historical in nature. As a preliminary study, it also serves as a foundation for future comprehensive research.

The research framework includes:

Crisis analysis

Inflation and its impacts

Import–export trade analysis

Domestic market price analysis

Social impacts of currency depreciation

Field-level market surveys

Findings and policy recommendations

European Energy Crisis

Europe has long relied on external sources for energy. Approximately 40% of Europe’s energy supply came from Russia. Following Western sanctions—exceeding 5,500 in total—Russia reduced gas supplies and demanded payment in rubles. Several countries refused, leading to severe shortages.

Major Consequences:

Gas crisis

Electricity shortages

Water scarcity

Food shortages

Labor unrest

Political instability

Europe faced unprecedented hardship, arguably worse than during the two World Wars.

Major Gas Pipelines from Russia to Europe:

Nord Stream-1

Nord Stream-2

Yamal Pipeline

Brotherhood Pipeline

Soyuz Pipeline

Blue Stream

TurkStream

As gas supplies dwindled, energy prices soared, forcing governments to subsidize consumption. Inflation and social unrest spread rapidly across Europe.

Global Inflation

The war disrupted oil, gas, and food supplies, causing global inflation to surge. Even the United States experienced inflation exceeding 9%. According to DW and IMF data, inflation rose sharply across Europe, North America, South Asia, and Africa.

Countries such as Turkey, Sri Lanka, Venezuela, and Sudan experienced record-high inflation, while developing nations suffered the most severe consequences.

Impact on Trade and Economic Crisis

Russia is a major exporter of oil and gas. After the invasion, oil prices peaked near USD 147 per barrel. Europe, heavily dependent on Russian energy, faced escalating costs. Bangladesh, as an energy-importing country, experienced rising transport costs, production expenses, and consumer prices. Sectors affected include:

Wheat imports

Edible oil

Livestock feed

Fertilizers

Fuel

Remittances

Ready-made garments

Bangladesh’s trade deficit widened significantly, while garment exports to Europe and Russia faced payment and demand risks. Since independence, Bangladesh has gradually transitioned toward an industrial and export-oriented economy. However, it remains heavily dependent on imports for food grains, energy, and industrial raw materials. Until the late 2010s, remittances and export earnings—particularly from the ready-made garment sector—ensured relative stability in foreign currency inflows, allowing reserves to reach historic highs.

The COVID-19 pandemic disrupted global economic activity, sharply reducing exports, imports, and remittance flows. #Bangladesh Economic Review 2023; ADB, Asian Development Outlook

Bangladesh’s large population relative to domestic production capacity necessitates heavy reliance on imported essential goods. Prior to COVID-19, trade flows were relatively stable, with strong remittance and export earnings. Foreign reserves peaked at nearly USD 50 billion, enabling the completion of several mega-projects. However, prolonged pandemic-induced disruptions severely weakened economic activity.

Simultaneously, widespread financial mismanagement, including fraudulent loans within the banking sector, forced the government to inject additional liquidity into the economy. This expansionary monetary policy contributed to inflation, eroding the value of the Taka and destabilizing commodity prices.

The Russia–Ukraine war further aggravated the situation. Sanctions excluding Russia from the SWIFT system disrupted global trade, driving up prices of food grains, oil, and gas. As a major energy exporter, Russia’s reduced supply caused a sharp surge in fuel prices worldwide, significantly increasing transportation and import costs in Bangladesh.

Impact on Global Food Markets

Russia and Ukraine jointly account for nearly 30% of global wheat exports and almost half of sunflower oil exports. The closure of Ukrainian ports disrupted global food supply chains, increasing prices by 20–30%.

Currency depreciation and inflation have sharply increased the cost of living for low- and middle-income households. Rising expenses in food, housing, education, healthcare, and transportation have reduced savings and heightened poverty risks. Government subsidy and debt-servicing burdens have also increased. UNDP; CPD

Fuel price hikes led to steep increases in transportation fares, further exacerbating economic pressure on ordinary citizens. As incomes failed to keep pace with rising prices, purchasing power eroded significantly, leading to widespread public dissatisfaction.

Impact on Bangladesh’s Domestic Market

The war triggered:

Depreciation of the Bangladeshi Taka

Increased transport fares

Rising food prices

Higher LNG and electricity costs

Agricultural input inflation

Declining foreign exchange reserves

Food inflation exceeded 8%, with many essentials increasing by 40–60% in retail markets.

Impact on Bangladesh

1. Energy Sector

Repeated fuel price adjustments

Increased transport and production costs

2. Import Costs and Commodity Prices

Wheat and poultry feed shortages

Rising consumer prices

3. Exchange Rate and Dollar Crisis

Taka depreciated by over 30%

Reserves fell from USD 48 billion to USD 27 billion

4. Ready-Made Garments

Reduced orders

Increased payment risks

According to Bangladesh Bank reports and domestic media sources, the Taka has been steadily depreciating against the US Dollar since 2019. Between 2021 and 2024, the Russia–Ukraine war, global energy market instability, and the strengthening of the US Dollar intensified this trend. #Bangladesh Bank, Financial Stability Report 2022; Reuters

Bangladesh Bank reported that the Taka depreciated by 13.3% in 2022 alone. Prior to the war, the exchange rate stood at approximately BDT 84 per Dollar. By October 2023, interbank rates rose above BDT 110 per Dollar, while open-market rates exceeded BDT 117—representing a depreciation of over 30% within 19 months.

Foreign exchange reserves declined from nearly USD 49 billion to below USD 28 billion by late 2022 and fell further in 2024, intensifying Dollar shortages.

Key Causes of Taka Depreciation

Inflation and rising domestic prices #(BBS, CPI Reports)

Import-dependent economic structure #(UNCTAD)

Declining foreign exchange reserves #(Bangladesh Bank)

Trade deficits #(World Bank)

Global energy and food price hikes #(FAO)

Russia–Ukraine war and geopolitical instability #(The Economist)

Financial sector weaknesses and capital flight #(Transparency International Bangladesh)

Monetary Conditions and Depreciation of the Taka

According to Bangladesh Bank reports and domestic media sources, the Taka has been steadily depreciating against the US Dollar since 2019. Between 2021 and 2024, the Russia–Ukraine war, global energy market instability, and the strengthening of the US Dollar intensified this trend. #Bangladesh Bank, Financial Stability Report 2022; Reuters

Bangladesh Bank reported that the Taka depreciated by 13.3% in 2022 alone. Prior to the war, the exchange rate stood at approximately BDT 84 per Dollar. By October 2023, interbank rates rose above BDT 110 per Dollar, while open-market rates exceeded BDT 117—representing a depreciation of over 30% within 19 months.

Foreign exchange reserves declined from nearly USD 49 billion to below USD 28 billion by late 2022 and fell further in 2024, intensifying Dollar shortages.

Price Volatility and Domestic Market Survey

Depreciation of the Taka has significantly increased the prices of imported goods, including fuel, edible oil, food grains, and industrial products. Rising transportation costs have also driven up prices of domestically produced goods. Market rumors, hoarding, and supply disruptions further contributed to abnormal price hikes. Daily Ittefaq; Prothom Alo

Field surveys conducted in Dhaka and Chandpur between 2021 and 2023 revealed price increases ranging from 20% to over 80% across essential commodities such as rice, meat, vegetables, edible oil, and eggs.

Challenges Arising from Taka Depreciation

Increased government debt burden

Rising subsidy expenditures

Persistent inflation

Higher import costs

Increased education and travel expenses abroad

Reduced consumer purchasing power

Social and economic instability

Declining foreign exchange reserves

Policy Recommendations

Although global crises cannot be fully controlled, But we can adopt the following measures:

Reducing luxury imports

Fiscal austerity

Expanding agricultural production

Developing renewable energy

Preventing capital flight

Building skilled human resources

Increase domestic production and reduce import dependency

Diversify export sectors

Encourage remittances through formal channels

Strengthen financial governance and banking reforms

Enhance market monitoring and curb hoarding

Balance demand and supply

Regulate monetary expansion

Ensure effective fiscal and monetary policy coordination

Conclusion

The Russia–Ukraine war has compounded the economic devastation caused by COVID-19. The global economy faces a cascading “butterfly effect,” where disruption in one region triggers worldwide consequences. Bangladesh, like many developing nations, is deeply affected.

Timely and prudent economic management is essential to prevent long-term damage. Failure to recognize early warning signs may plunge economies into deeper crisis.

Keywords

#Subject-Class: Economics #Bangladeshi Taka; #Currency Depreciation; Inflation; Price Volatility; Import Dependency; Foreign Exchange Reserves; Russia–Ukraine War; COVID-19; Bangladesh Economy

Reference