Reforms can power Bangladesh’s energy future

Bangladesh’s energy sector is entering a critical phase as rising global fuel prices, supply disruptions and mounting import dependence pose significant challenges to economic growth.

However, experts say strategic reforms, greater investment in domestic resources and a faster transition towards renewable energy could strengthen the country’s long-term energy security.

According to the World Bank’s South Asia Economic Update (April 2026) published on Sunday, global energy market disruptions—triggered largely by conflict in the Middle East—have emerged as one of the biggest risks to South Asia’s economic outlook, with Bangladesh among the countries most exposed because of its reliance on imported fuel.

The report notes that activity around the Strait of Hormuz, through which around one-fifth of the world’s petroleum and liquefied natural gas (LNG) supplies pass, has been disrupted by regional conflict.

Attacks on shipping, damage to production facilities and higher insurance costs have driven up international energy prices, increasing inflationary pressures and threatening economic growth across fuel-importing economies.

Bangladesh remains heavily dependent on imported LNG, petroleum products and coal to meet rising electricity demand.

The World Bank warns that a prolonged period of elevated energy prices could widen current account deficits, weaken fiscal balances and increase borrowing costs across South Asia.

Higher import costs are expected to place additional pressure on Bangladesh’s foreign exchange reserves while increasing subsidy requirements for the energy sector.

The report also highlights that energy market volatility has become a key downside risk to regional growth, with fuel-importing countries particularly vulnerable to prolonged supply disruptions.

South Asia’s economy is projected to slow from 7 per cent growth in 2025 to 6.3 per cent in 2026, mainly because of disruptions in global energy markets.

Although India continues to drive regional growth, countries such as Bangladesh remain vulnerable to external shocks due to their dependence on imported fuel.

The report says persistently high energy prices could increase inflation, raise production costs, weaken industrial competitiveness and reduce household purchasing power across the region.

Despite these challenges, the report identifies several opportunities that could strengthen Bangladesh’s long-term energy outlook.

Improving infrastructure remains one of the region’s highest priorities. Better transport, transmission and logistics networks would reduce energy losses, improve supply reliability and lower operating costs, making the economy more resilient to external shocks.

The World Bank also stresses that carefully designed structural reforms and prudent industrial policies can enhance productivity and attract investment, provided they complement broader market-oriented reforms rather than replace them.

For Bangladesh, this suggests the need to continue reforms aimed at improving energy governance, strengthening regulatory oversight and encouraging greater private investment in generation, transmission and renewable energy.

The report suggests that reducing reliance on imported fossil fuels will be crucial for improving long-term energy security.

Energy experts say Bangladesh has significant opportunities to diversify its energy mix through greater investment in solar power, wind energy, energy efficiency measures and domestic gas exploration.

Expanding renewable energy capacity could also help cushion the economy against volatile international fuel markets while supporting the country’s climate commitments.

The World Bank concludes that while global energy market disruptions present immediate risks, countries that improve infrastructure, pursue structural reforms and strengthen economic resilience will be better positioned to sustain growth.

For Bangladesh, this means balancing short-term energy security with long-term investments in diversified energy sources, modern infrastructure and improved governance to ensure reliable, affordable and sustainable energy supplies in the years ahead.