To observers of South Asian geopolitics, few events would be simultaneously so muted in their rhetoric, yet so consequential, as the thawing of relations between Bangladesh and Pakistan in 2025. This easing of tensions in the last year has seen an exploratory deployment of diplomatic moves morph into a taut web of economic cooperation and strategic dialogue.

“This is not mere diplomatic talk; it is the roadmap to prosperity based on shared realities.”

This is a realignment, now brought about by practical leaders on both sides, a breakaway, after decades of rocky relations that are rooted in the scars of 1971. With the volume of bilateral trade increasing steadily now and new horizons opening in fields such as textiles and technology, the two countries are writing a tale of win-win that may redefine the nature of regional relationships, as both sides will be reassured of the viability of such a partnership in the long run.

The agent of positive change, another illustration of inspirational leadership, can be dated back to August 2024, when the pressure of domestic politics propelled Prime Minister Sheikh Hasina to resign, which led to the interim government of the Nobel laureate Muhammad Yunus. Yunus, whose tag line is to concentrate on grassroots economics and not on ideological posturing, has helped Bangladesh take up a more balanced foreign policy.

The change has enabled Dhaka to go beyond its conventional dependence on India and consider new collaborations that hold economic promise without historical overtones. On the Pakistani side, stabilization of the economy with a single-digit inflation, a 7 percent appreciation rate of the rupee, and a re-conversion of Moody rating into stable instead of negative in May 2025, has helped it regain confidence in reviving relations with neighbors.

There has been a succession of diplomatic high points. Projected was the new round of foreign secretary-level dialogue that resumed in early 2025 after a 15-year freeze. By April, formal talks had restarted, and there were agreements in July on visa-free entry of diplomatic and official passport holders.

The first high-level visit to Dhaka in decades will be by the Foreign Minister of Pakistan, Ishaq Dar, who is to arrive on August 23, indicating an intention to strengthen the relationship. These actions were also reiterated in sideline talks at the D-8 summit and UN General Assembly, putting the focus on economic convergence and not on history. The emphasis is on forward-looking connectivity and avoiding reliving past grievances, as set by one Bangladesh official in a recent briefing.

“Dhaka’s shift beyond dependence on India has unlocked new economic opportunities.”

The trading statistics show a promising future for the Bangladesh-Pakistan bilateral trade. The bilateral trade increased to an estimated US 865 million in the fiscal year 2024-2025 (July 2024-June 2025) as compared to the previous year of 782 million, primarily due to increased Pakistani exports to Bangladesh of US 690.47 million in the year 2023 and an estimated US 745 million in the fiscal year 20242025 as per data presented on the Observatory of Economic Complexity and UN COMTRADE.

On the other hand, Bangladesh’s exports to Pakistan rose by 20% to 54 million in FY 2024, with jute, garments, and light industrial inputs as the main items. Formal estimates indicate that bilateral trade would increase to have an annual value of up to 3 billion dollars by the year 2028, as opposed to less than 1 billion dollars before 2024.

The export of Pakistan to Bangladesh has grown to a total of 690.47 million dollars in 2023, with the main products being cotton, cement, wheat, and sugar. No third-party networks/direct maritime connectivity were reopened in late 2024, following a nearly 52-year hiatus. This simplifies the cargo process and reduces reliance on third-party networks, thereby boosting trade potential.

The importance of Bangladesh as a readymade garments producer and the world’s second-biggest exporter would lead to the demand for Pakistani raw materials. Pakistan is a major cotton producer, whose lint contributes to the high-quality yarn and grey fabric, making Bangladesh a country with a $54.5 billion export industry. Pakistani engineering companies are also moving to supply the machinery and textile spare parts to upgrade.

Meanwhile, in joint efforts, ventures are being pursued over synthetic fabrics and the use of the EU GSP+ preferential access avenue enjoyed by Bangladesh to Western markets. The latter has seen recent memorandums being signed, like the one between the Bangladesh Garment Manufacturers and Exporters Association and its Pakistani counterpart, which seeks to increase bilateral apparel trade by 40 percent in the following year.

Another lucrative sector is the information technology industry. The IT market in Bangladesh is divided into hardware, software, and services market segments. It is expected to expand extremely quickly, driven by demand for fintech, cloud infrastructure, and e-commerce. Based on the well-developed software industry, Pakistani companies are also providing tailored solutions as well as business process outsourcing.

For instance, Pakistan BPO companies are exploring opportunities in Bangladesh for customer support and data center outsourcing, while online marketplaces are seeking collaboration in logistics and digital marketing. This is in line with the Perspective Plan of Bangladesh 2021 2041, where upper-middle-income status would be achieved by 2031 through the process of digitalization.

“For the first time in decades, bilateral trade has crossed $850 million with forecasts of $3 billion by 2028.”

The healthcare and pharmaceuticals industry has unexplored potential. Bangladesh supplies 98 percent of the domestic medicine requirement, whereas it imports active pharmaceutical ingredients (APIs) and special drugs. Pakistan, which already has an apparent API production, is positioning itself as a major supplier. Also, the competitively priced and high-quality surgical equipment of Pakistan is being sold in Bangladesh hospitals.

Technology, if innovated in the field of health technologies like Telemedicine and Hospital Management software by Pakistani companies, has the potential to bridge the disparities in the growing health sector in Bangladesh. Recent encounters by authorities have raised the prospect of exporting high-end medicine, which is yet to be produced in the country.

The roads, bridges, and power plants have been growing at an ambitious rate and have catalyzed the infrastructure and construction industry in Bangladesh. Pakistan is supplying cement to meet this demand, while its engineering companies provide advisory services. There is a demand for light engineering products, such as pumps and motors, and joint ventures are being formed to bid on large contracts.

Pakistan’s fruits, including mangoes and kinnows, along with technology in agribusiness, such as tractors and irrigation systems, are entering the market. The cold storage investments aim to reduce post-harvest losses in Bangladesh’s food supply system, thereby meeting the needs of its growing urban population.

Consumer goods complete the picture. The emergence of middle-income earners in Bangladesh is increasing sales of Pakistani personal products, including personal care items, leather shoes, and sports-related products like cricket gear. Retail Franchising of Pakistani brands is also becoming a phenomenon, and snacks and packaged foods are being exported.

Such areas are structural synergies: both nations are young, well-equipped with ports and manufacturing capabilities, and their integration equals a match in the diversification of supply chains in the era of global changes, in having to avoid over-dependence on one market.

Beyond economics, defense and connectivity are binding more strongly. The presence of the Bangladesh Navy at the Pakistan-25 Aman-25 joint naval exercise is an indication that it is interested in military ties with Pakistan, such as equipment and training negotiations. Dhaka views freight corridors through Pakistan as a means to access Iran, Central Asia, and Turkey, thereby reducing its reliance on eastern corridors.

Long-term relationships are built through educational programs, which are currently strengthening the ties between Pakistan and Bangladesh, such as the 300 scholarships in STEM-related fields in Pakistan and the renewed university exchanges. People-to-people connections are proposed through cultural exchanges, including suggested cricket series and film festivals, aimed at bridging the historical divide.

But there are problems on the horizon. The interim government of Bangladesh is also politically fragile, as there have been more than 600 lynching events reported in the last year, and elections will take place in February 2026. Sensitive issues that occurred in the past include the repatriation of assets and the Bihari citizenship, which both parties have prudently left on the back burner at the moment.

“The new peace is an unusual window into what is possible when neighborhoods—too often marked by rivalry, work together.”

Foreign obstacles, especially overtures by India, which sees the thaw in defense with suspicion, and China, an investor in infrastructure in both countries, may not make things easy. In the absence of institutional gains, regional veterans caution that the momentum may not last as new leadership or geopolitical flare-ups take place.

Nevertheless, the forecasts are on the positive side. In response to India’s aggressive policies and global realignments, South Asia should stabilize through a pragmatic Pakistan-Bangladesh axis. Trade is 40 percent higher in Q1 2025, with $2-3 billion targets in 2028. This is not mere diplomatic talk; it is the roadmap to prosperity based on shared realities. The new peace is an unusual window into what is possible when neighborhoods, which are all too frequently characterized by competition, work together.

Disclaimer: The opinions expressed in this article are solely those of the author. They do not represent the views, beliefs, or policies of the Stratheia.