Energy shock pushes govt toward fresh foreign loans

The BNP government is seeking fresh loan assistance from multiple international financial institutions as it struggles to manage mounting economic pressure triggered by the ongoing conflict between the United States and Iran, which has disrupted global energy supply chains and pushed up fuel import costs.

In a country of nearly 180 million people that remains heavily dependent on imported energy, the crisis threatens to significantly widen the import bill and place additional strain on foreign currency reserves.

Bangladesh spends almost $10 billion annually on crude and refined petroleum imports, making the economy particularly vulnerable to volatility in global fuel markets.

According to research organisation Zero Carbon Analytics, Bangladesh had initially planned to import around 293,000 tonnes of diesel in March.

However, orders for approximately 60,000 tonnes have already been cancelled due to disruptions in global supply chains.

If instability in the Middle East continues, annual fuel import costs could rise by around $5 billion — roughly 40 percent higher than projected for 2025.

Against this backdrop, several international partners have signalled readiness to extend financial support to help Bangladesh stabilise its economy and sustain fuel imports.

Government sources said discussions were held last week with a delegation from the International Monetary Fund regarding the release of $1.3 billion in loan funds.

The Asian Development Bank has already approved $500 million in budgetary support, which may increase to between $750 million and $1 billion.

The Islamic Development Bank has indicated willingness to provide up to $2.1 billion in financing, while the private-sector arm of the World Bank Group, the International Finance Corporation, may extend an additional $500 million.

Officials said a significant portion of this financing could be used to maintain energy imports during the crisis.

Prime Minister’s adviser on finance and planning, Rashed Al Mahmud Titumir, said international institutions are demonstrating growing confidence in Bangladesh’s economic management.

“Confidence from global institutions will lead to investment, investment will boost production, and production will create employment. Through this cycle, the economy can regain momentum,” he said.

Economists, however, have cautioned that increased external borrowing could put further pressure on foreign exchange reserves.

Bangladesh’s import coverage — the number of months imports can be financed with existing reserves — could fall below five months if the crisis deepens.

There are also concerns that rising import costs and additional borrowing could fuel inflation.

If the central bank raises interest rates to contain inflationary pressure, economic growth could slow, creating additional challenges for businesses and consumers.

Md Ainul Islam, former general secretary of the Bangladesh Economic Association, said the government must absorb much of the economic shock rather than shifting the burden to consumers.

“The pressure created by the crisis will have to be carried by the government,” he said. “It cannot simply be passed on to consumers.

Bangladesh should focus on securing loans at the lowest possible interest rates in the current global situation.”

The strain on energy supply is already visible.

A total of 18 fuel tankers were scheduled to arrive in Bangladesh this month, but only nine have reached the country so far.

Since the outbreak of conflict in the Middle East on 28 February, Bangladesh has stepped up efforts to secure alternative sources of oil and gas.

The country remains heavily reliant on Middle Eastern energy supplies, which have been disrupted after shipping routes through the Strait of Hormuz became severely constrained due to the conflict.

Data from the National Board of Revenue show that during the first eight months of the 2025–26 fiscal year, around 80 percent of crude oil imports, 65 percent of liquefied natural gas (LNG), and 51 percent of liquefied petroleum gas (LPG) came from the Middle East.

Even refined diesel imported from other Asian countries ultimately depends on crude sourced from the same region.

State Minister for Power, Energy and Mineral Resources Anindya Islam said the duration of the conflict remains uncertain and its impact is already being felt across the global energy market.

“The ongoing war has disrupted supply chains worldwide and created pressure on energy-importing countries. Bangladesh is no exception,” he said.

The government is prioritising the maintenance of fuel supplies and has begun negotiating with multiple international suppliers to avoid shortages.

Officials said the strategy includes sourcing oil and gas from alternative markets, even if global prices rise.

Despite rising import costs and pressure on foreign exchange reserves, the government has indicated that there are currently no plans to increase domestic fuel prices for diesel, octane or petrol.

Instead, it intends to absorb higher costs to shield consumers from the immediate impact of the global energy shock.

Fuel imports are handled by the state-owned Bangladesh Petroleum Corporation, which usually procures refined fuel through government-to-government agreements and international tenders.

In the current volatile market, the corporation has also started exploring direct procurement to ensure uninterrupted supply.

Officials said negotiations are underway with at least 11 international suppliers, with two companies already confirming supply commitments.

Singapore-based AP Energy Investments Limited will supply 100,000 metric tonnes of diesel with a $3 per barrel discount, while Hong Kong-based Superstar International (Group) Limited will deliver 200,000 tonnes of diesel at discounts of up to $40 per tonne compared to Platts benchmark prices.

Officials said these measures are aimed at stabilising fuel supply and protecting the economy from the ongoing global energy shock.