Govt eyes $3.25b budget support to secure energy, food supply
Efforts under way to finalise loan deals, timely disbursements within current fiscal.
The government is seeking to secure $3.25 billion in budget support from development partners to tackle potential economic stress and ensure energy and food security amid the ongoing Middle East tension.
Officials at the Economic Relations Division (ERD) said efforts are also under way to finalise loan agreements and ensure timely disbursements within the current fiscal year.
They added that initial plans include seeking $1 billion each from the World Bank and the Asian Development Bank (ADB), $750 million from the Asian Infrastructure Investment Bank (AIIB), and $500 million from Japan.
The ERD has already approached development partners based on requirements set by the Finance Division, sending formal loan requests while continuing ongoing discussions.
A senior ERD official, speaking on condition of anonymity, said talks were continuing with partners that had previously extended budget support during earlier crises, including the post-Covid period and the Russia-Ukraine war.
Keep updated, follow The Business Standard's Google news channel
"The government is placing strong emphasis on ensuring energy supply and food security in light of the global fallout from the ongoing conflict," the official said. "Without stabilising energy supply, food security cannot be guaranteed."
Economists say budget support is currently essential for stabilising Bangladesh's economy amid external shocks, including higher import costs, weaker export earnings, and potential risks to remittance inflows.
However, they say timely disbursement is crucial as delays could limit its impact on stabilising energy supply, managing the budget deficit, and sustaining overall macroeconomic stability.
$1b from WB
ERD officials said a request for $500 million in budget support was sent to the WB last week, with initial assurances already received. A further $500 million is expected to be placed before the Bank's senior management soon.
The IMF-World Bank Group Spring Meetings for 2026 will be held in Washington from 13 to 19 April, where Bangladesh is expected to hold a series of high-level discussions with World Bank officials.
During these meetings, negotiations will focus on securing a total of $1 billion in budget support from the World Bank, with efforts under way to finalise the loan agreement by June.
$1b from ADB
The ADB is set to provide $1 billion in budget support, with disbursement expected between May and June, according to ERD officials.
The financing will come under two programmes. Under the "Strengthening Economic Management and Governance Program (Subprogram-2)", the initial $500 million allocation has been proposed to be increased by $250 million in response to evolving economic pressures, raising the total to $750 million.
In addition, $250 million will be provided under the "Second Strengthening Social Resilience Program (Subprogram-2)", bringing ADB's total support to $1 billion.
$750m from AIIB
Officials said $750 million in budget support is being sought from the Asian Infrastructure Investment Bank. Discussions have already taken place, and a formal request under the "Water Resilience and Climate-Smart Urban Service Delivery Program (Subprogram-1)" is expected to be submitted next week.
$500m from Jica
According to ERD sources, discussions have begun with the Japan International Cooperation Agency (Jica) for $500 million in budget support. Efforts are under way to secure the loan within the current fiscal year.
Other possibilities
ERD officials said the volume of budget support secured from major development partners will determine how much additional assistance is sought from bilateral partners, including Korea, European countries and Middle Eastern agencies. Discussions with these partners are already under way.
Meanwhile, Bangladesh's loan programme with the International Monetary Fund remains ongoing, with the next tranche of $1.5 billion expected to be released in June, according to the Finance Division.
Officials also noted that development partners typically link budget support to the fulfilment of reform conditions. To that end, the finance division is working to develop a policy matrix in consultation with lenders to secure the assistance.
$14.49b last year
Bangladesh received a total of $14.49 billion in budget support from development partners up to the last fiscal year, with most of it mobilised during the post-Covid period and in response to economic pressures triggered by the Russia-Ukraine war.
According to ERD data, the country secured a record $3.44 billion in budget support in FY25. This was preceded by $2.03 billion in FY24, $1.767 billion in FY23, $2.597 billion in FY22, and $1.09 billion in FY21.
Clear macroeconomic assessment needed: Zahid
Zahid Hussain, former lead economist at the World Bank's Dhaka office, said the current situation has increased demand for low-interest, long-term financing.
However, he said such financing would not fully ease the pressure. "There is a need for a clear macroeconomic assessment, particularly to identify emerging pressures in the balance of payments."
He added that pressures are building through three main channels: rising import costs for fuel and fertiliser, weaker export earnings due to a subdued global market and higher shipping costs, and a potential slowdown in remittance inflows.
The financial account may also come under strain, he added, particularly through higher risk premia in trade financing. Fiscal pressures are also expected to rise, driven by lower revenue collection, higher subsidy needs and expanded social protection spending.
"If these costs are not met through concessional long-term financing, debt servicing pressures could rise in the future, along with risks to inflation, growth and employment," he said.
Against this backdrop, he said development partners are likely to seek clarity on the government's crisis response strategy. A coordinated crisis management programme, with a clear roadmap and costing framework, is needed, he added. Priority areas should include social protection, energy and food security, fertiliser stocks and energy management.
He further stressed the importance of coordination among development partners, with the IMF focusing on the balance of payments, while the World Bank and ADB support social and infrastructure sectors.
He also cautioned against reversing earlier reforms, particularly the automatic fuel pricing mechanism, warning that it would send the wrong signal and undermine policy credibility.
Timely disbursement crucial: Fahmida
Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), said budget support has become critically important for Bangladesh's economy in the current context.
She said the sharp rise in global fuel prices and ongoing supply chain disruptions have placed significant pressure on the economy. In many cases, Bangladesh is now forced to import energy from alternative sources at higher prices, further raising import costs.
At the same time, foreign exchange reserves remain limited and fuel stocks are sufficient only for a short period. Fiscal space has also narrowed, reducing the government's capacity to absorb additional expenditure. Export growth is showing a negative trend, while remittances remain the main support, though they could weaken if global uncertainty persists, she added.
The key question, she said, is how these rising costs will be financed.
She said budget support from development partners can play an important role. Assistance from the IMF, World Bank and ADB could help ease reserve pressures and manage the budget deficit.
The economist further noted that Bangladesh's daily energy needs require substantial foreign currency outflows, making timely disbursement of such support crucial.
Overall, she said prompt and adequate budgetary assistance would help ease economic pressure, stabilise energy supply and support broader macroeconomic stability.
