Bangladesh has moved to secure an urgent $3 billion loan from global development partners as the economic fallout from the Middle East conflict sharply increases import costs and fiscal pressure, according to official documents and sources.
The Finance Division has already initiated formal communication with the Economic Relations Division (ERD) to explore the possibility of mobilising the funds as budget support between March and June this year.
Quoting The Daily Industry, officials said: “The government is seeking an urgent $3 billion loan to manage rising import costs and maintain economic stability amid the global crisis triggered by the Middle East war.”
War Drives Up Import Costs: The urgency stems from a sharp spike in global prices of fuel oil, liquefied natural gas (LNG), and fertiliser following the conflict in the Middle East. These commodities are critical for Bangladesh’s energy security and agricultural production. According to a position paper prepared by the Finance Division, Bangladesh will require an additional $3 billion over the next four months to import essential goods at higher prices.
“The war has significantly increased the prices of fuel, gas, and fertiliser in the global market, creating immediate financing needs for Bangladesh,” The Daily Industry reported.
The document highlights that import expenditure on fuel and fertiliser alone could surge from $3.01 billion during March-June last year to $5.58 billion in the same period this year.
Pressure on Foreign Exchange Reserves: The surge in import costs is already putting pressure on Bangladesh’s foreign exchange reserves. Although reserves had recovered to over $30 billion in February, they declined again to around $29 billion in March, based on IMF’s Balance of Payments Manual (BPM6) calculation.
“The country’s balance of payments is under renewed stress due to rising import bills,” The Daily Industry noted. “The proposed loan will help stabilise reserves and ensure uninterrupted imports.”
The government plans to use the loan for three key purposes: maintaining foreign exchange reserves, supporting vulnerable groups, and controlling domestic price volatility of essential commodities such as fuel and fertiliser.
Rising Subsidy Burden: In addition to import costs, the government is facing mounting subsidy requirements. The Finance Division estimates that an additional Tk 385.42 billion will be needed for subsidies on fuel, gas, electricity, and fertiliser between March and June 2026.
This would push the total subsidy requirement to Tk 975.42 billion, significantly exceeding the allocated Tk 590 billion in the national budget.
“The rising subsidy burden is another major driver behind the government’s urgent financing needs,” The Daily Industry said. Despite global price increases, the government has so far refrained from raising domestic fuel prices, opting instead to absorb the cost through subsidies. However, a high-level committee has been formed to review electricity tariff adjustments.
Fresh Loan Talks with Development Partners: Bangladesh is expected to seek the $3 billion loan from multiple development partners, including the International Monetary Fund, World Bank, Asian Development Bank, and the Asian Infrastructure Investment Bank.
Discussions are already underway as part of the ongoing Spring Meetings in Washington, D.C., where a high-level Bangladeshi delegation is presenting the country’s economic situation.
Finance and Planning Minister Amir Khasru Mahmud Chowdhury is leading the delegation and is expected to formally request additional financial assistance.
“The government will present the overall economic situation and seek support from development partners,” The Daily Industry reported, citing official sources.
Lessons from the 2022 Crisis: The current situation has drawn comparisons with the economic crisis that followed the Russia-Ukraine war in 2022, when global commodity prices surged and Bangladesh’s foreign exchange reserves fell sharply.
At the time, reserves dropped from $48 billion to below $20 billion, while the exchange rate depreciated significantly and inflation surged. The impact on consumers was severe, with rising costs of fuel, electricity, and essential goods pushing many households into poverty.
A study by the Power and Participation Research Centre (PPRC) found that the poverty rate increased to nearly 28 percent within three years, up from 18.7 percent in 2022.
“The memory of the 2022 crisis remains fresh, and policymakers are keen to avoid a repeat scenario,” The Daily Industry noted.
Energy Route Disruption Adds Uncertainty: The crisis has been further compounded by disruptions in the Strait of Hormuz, a key route for global energy supplies. Although a ceasefire has been declared, the route remains partially closed, creating uncertainty in global oil markets.
Even if the situation stabilises, analysts warn that prices are unlikely to return to previous levels soon due to damage to energy infrastructure.
“This prolonged uncertainty in global energy markets is increasing Bangladesh’s vulnerability,” The Daily Industry observed.
Rising External Debt Concerns: Bangladesh’s external debt is also on the rise, adding another layer of concern. As of December 2025, the country’s total foreign debt stood at $113.51 billion.
While the government continues to rely on external financing to manage short-term pressures, experts caution that rising debt levels could pose long-term risks if not managed carefully.
Reform Conditions and Policy Questions: Securing new loans may also come with conditions, particularly from institutions like the IMF, which have historically pushed for subsidy rationalisation and structural reforms.
Development partners are expected to scrutinise Bangladesh’s policy decisions, including why domestic fuel prices were not adjusted despite global increases.
Zahid Hussain said that while seeking budget support is not unusual in the current global context, lenders will look for credible policy measures.
“Development partners will want to understand what policy steps the government has taken and how it plans to manage rising costs,” he said, as quoted by The Daily Industry.
Outlook: Balancing Stability and Reform: The government has indicated that subsidies will be targeted and temporary, while efforts will be made to increase revenue collection to ease fiscal pressure.
However, balancing immediate economic stability with long-term reform commitments will remain a key challenge. “The proposed loan is critical to managing short-term pressures, but sustainable solutions will require structural reforms and prudent fiscal management,” The Daily Industry concluded.
As Bangladesh grapples with rising import costs, subsidy burdens, and external uncertainties, the push for an urgent $3 billion loan underscores the severity of the current economic strain. The success of these efforts will depend not only on securing external financing but also on the government’s ability to implement reforms, manage resources efficiently, and navigate an increasingly volatile global environment.
