Diplomatic reset with Pakistan would be a lose-lose game for Bangladesh

New Delhi: “Unforeseen circumstances” have forced Pakistan’s Deputy Prime Minister and Foreign Minister Ishaq Dar to postpone his April 27-28 visit to Bangladesh, thus pushing forward the foreign ministerial-level meeting between the two countries which was to be held after a gap of 13 years.

The two countries had prepared to sign several Memorandums of Understanding (MoUs) in the context of the meeting. Earlier, Pakistan’s Foreign Secretary Amna Baloch visited Dhaka on April 17 to attend the Foreign Secretary-level meeting, during which the dates for Dar’s visit were finalised.

While the diplomatic outreach aims to reset historically strained ties, Bangladesh risks engaging with a partner whose economic fragility undermines the potential for meaningful bilateral gains. Islamabad’s economy remains mired in structural weaknesses: chronic debt, low investment, and reliance on consumption-driven growth.

The diplomatic reset between Bangladesh and Pakistan faces significant structural challenges for a variety of reasons.

Bilateral trade currently totals around USD $782 million, heavily favouring Pakistan, as Bangladesh’s exports — mainly jute and pharmaceuticals — face limited demand due to Pakistan’s import restrictions. These include non-tariff barriers and anti-dumping duties on certain Bangladeshi goods like hydrogen peroxide. Meanwhile, Pakistan’s exports to Bangladesh remain substantially higher, mainly consisting of cotton textiles and yarn, underscoring the persistent trade imbalance.

This disparity is further exacerbated by Bangladesh’s reliance on more lucrative Western markets for its key export sectors, such as Ready-Made Garments (RMG), rather than Pakistan’s relatively small and import-constrained market. Pakistan’s foreign exchange reserves, although having improved recently, still barely cover a few weeks of imports during the economic crisis, limiting its ability to absorb substantial Bangladeshi goods. Despite efforts to revive trade relations through mechanisms like the Pakistan–Bangladesh Joint Business Council, political factors and structural trade barriers continue to limit Bangladesh’s export potential to Pakistan.

Furthermore, closer ties with Pakistan pose geopolitical risks for Bangladesh, potentially straining its relationship with India, its largest regional trade partner, without offering sufficient compensatory economic benefits.

India and Bangladesh share a robust trade relationship valued at around USD $13 billion in the 2023-2024 financial year, with India maintaining a substantial trade surplus of USD $9.2 billion. Key Indian exports to Bangladesh include textiles, refined petroleum, machinery, and electricity, making India a critical supplier for Bangladesh’s economy, especially its garment industry. Any warming of Bangladesh-Pakistan relations risks unsettling this vital economic partnership, particularly as India has shown sensitivity to shifts in Bangladesh’s foreign policy alignment. Thus, while diplomatic engagements have resumed after 15 years with high-level talks and agreements to boost trade, the economic realities and geopolitical complexities suggest that the reset may be more of a diplomatic gesture than a robust economic breakthrough.

Pakistan’s economic decline over the past 50 years has been stark. Once South Asia’s wealthiest nation by per capita income, it now trails Bangladesh, India, and Sri Lanka. Pakistan faces several inter-linked economic challenges. A significant portion of government revenue — nearly two-thirds — is consumed by interest payments, severely limiting fiscal space for development. Economic growth remains sluggish, with GDP projected to grow by only 2.5 per cent in FY-2025, trailing behind Bangladesh’s average of 5–6 per cent. This underperformance is further reflected in Pakistan’s industrial sector, which contributes just 19 per cent to GDP compared to Bangladesh’s 29 per cent. Additionally, inflation has been highly volatile, peaking at 38 per cent in 2023 before recently easing to 0.7 per cent, a fluctuation that has eroded purchasing power and discouraged foreign investment.

In the above mentioned context, Bangladesh gains little from closer economic ties with Pakistan due to several fundamental factors. The country’s USD $55 billion ready-made garment sector, which drives much of its export revenue, primarily depends on Western markets such as the US and Europe, rather than Pakistan’s small and shrinking consumer base. This heavy reliance on Western buyers limits the potential benefits of expanding trade with Pakistan. Additionally, focusing on relations with Pakistan, which is burdened by significant debt and economic challenges, risks diverting Bangladesh’s attention and resources away from more lucrative partnerships with dynamic regions like South East Asia and the Gulf.

Furthermore, the limited economic complementarity between the two nations poses a challenge: Pakistan’s economy remains largely driven by low-value agriculture and stagnant industrial sectors, offering little synergy with Bangladesh’s manufacturing-focused growth model. As a result, the opportunity costs and structural mismatches suggest that closer economic engagement with Pakistan is unlikely to yield substantial gains for Bangladesh’s export-driven economy.

While cultural and military exchanges might yield soft-power dividends, Bangladesh should approach economic collaboration cautiously. Pakistan’s recurring balance-of-payment crisis and protectionist tendencies make it an unstable partner. For Dhaka, the reset’s success hinges on Pakistan undertaking structural reforms—reducing debt, boosting exports, and stabilising macroeconomic policy — which appear unlikely in the near term.

In its current state, Pakistan’s economy cannot be a growth multiplier for Bangladesh. Dhaka would benefit more from deepening ties with economically resilient partners while advocating for regional stability through non-aligned engagement.

(The writer is an expert on South Asia and Eurasia. He was formerly with Manohar Parrikar Institute for Defence Studies and Analyses. Views expressed are personal)

–IANS

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