CPD calls for strategic fuel reserve in budget

The ongoing conflict involving the United States and Israel and Iran could pose potential risks to Bangladesh’s economy, with possible implications for inflation and the country’s import costs, the Centre for Policy Dialogue (CPD) said on Tuesday.

The think tank made the observation during a media briefing while presenting recommendations as the government begins preparations for the national budget for the fiscal year 2026–27, which will commence in July.

Speaking at the briefing at CPD’s Dhaka office, Executive Director Fahmida Khatun said Bangladesh’s significant reliance on imported energy, particularly liquefied natural gas (LNG) and crude oil, leaves the economy vulnerable to global price fluctuations and potential supply disruptions.

She noted that Bangladesh imports a substantial share of its fossil fuels from the Middle East, and that the ongoing tensions involving Iran could pose longer-term risks for the country’s energy supply and broader economic stability.

According to CPD, disruptions in global energy supply chains could contribute to higher domestic prices and place additional pressure on the economy.

Fahmida Khatun added that rising global energy prices, linked in part to instability in the Middle East, may further complicate Bangladesh’s inflation outlook.

The think tank also observed that increased energy costs are having an impact on the prices of several key commodities, including palm oil, wheat and sugar.

CPD Distinguished Fellow Mustafizur Rahman said Bangladesh currently does not have a strategic fuel reserve and suggested that the government consider developing one as part of a medium-term plan to reduce the need for urgent purchases during periods of supply disruption.

CPD also noted that the country’s energy sector is facing financial pressures due to operational losses and a continued dependence on imported LNG, which may have implications for fiscal stability.

The organisation recommended that the forthcoming national budget place greater emphasis on energy security while encouraging increased domestic capacity and diversification.

To mitigate potential risks, CPD suggested expanding energy import sources, including exploring options from Southeast Asian countries such as Malaysia, and making greater use of the LNG spot market during supply shortages.

The think tank also recommended accelerating the expansion of renewable energy through a dedicated subsidy mechanism and by reducing import duties on renewable technologies.

However, CPD cautioned against restarting domestic coal exploration, noting that such steps could be inconsistent with Bangladesh’s climate commitments.