Bangladesh turns to Russia, India for fuel amid global energy volatility

Bangladesh is planning to diversify fuel import sources, including Russia and India, as global energy markets remain volatile due to ongoing Middle East tensions, Commerce Minister Khandakar Abdul Muktadir told the parliament today (20 April).

Meanwhile, Bangladesh's trade imbalance with regional partners – particularly India – remains a key concern in external accounts. The minister said Bangladesh recorded its highest trade deficit within Saarc with India in the fiscal 2024-25 at $7.86 billion. Imports from India stood at $9.62 billion, while exports were $1.76 billion.

The deficit with India is substantially larger than with other Saarc partners. Bangladesh also posted deficits with Pakistan ($681.30 million), Bhutan ($29.77 million) and Afghanistan ($10.71 million), while recording surpluses with Nepal, Sri Lanka and the Maldives.

He said rising global fuel prices have increased import costs, along with higher shipping and insurance expenses. The pressure is also expected to affect external balances, including export competitiveness and remittance inflows from key Middle Eastern markets.

Energy import diversification amid volatility

The government's decision to diversify fuel imports comes as global energy markets continue to fluctuate, with policymakers looking to reduce dependence on limited supply sources.

Officials said rising fuel prices have increased import bills, while higher shipping and insurance costs are adding further pressure on external payments. The overall situation is also being monitored for potential spillovers into trade flows and macroeconomic stability.

To manage domestic pressure, the government has increased imports of essential commodities and strengthened market monitoring to prevent hoarding and artificial shortages. It has also introduced early closure of shopping malls, markets and commercial establishments at 7pm to reduce energy consumption.

Diesel prices were recently increased by 15% to Tk115 per litre, along with upward adjustments in other fuel categories. The minister said fuel accounts for around 7-8% of production costs in most industries, suggesting limited pass-through effects on overall inflation.

He also said that a truck carrying around 10,000 kilograms of goods over a 200-kilometre distance faces an additional fuel cost of about Tk450 after the adjustment.

Lawmakers, however, raised concerns over inflation remaining above 9%, particularly food inflation, during the parliamentary session.

Trade policy shift ahead of LDC graduation

As Bangladesh prepares to graduate from least developed country (LDC) status, the government is restructuring its trade strategy around free trade agreements (FTAs), economic partnership agreements (EPAs) and comprehensive economic partnership agreements (CEPAs).

The minister said Bangladesh is moving away from a single-model trade framework towards a tiered approach based on the depth of economic engagement with partner countries.

Bangladesh has already signed its first EPA with Japan, with ratification underway. CEPA negotiations with South Korea have progressed through several rounds, while formal talks with the United Arab Emirates are expected to begin in May 2026. Discussions are also ongoing with Singapore, alongside broader engagements with China, Malaysia and Indonesia.

The country has also applied to join the Regional Comprehensive Economic Partnership (RCEP), which would provide access to major Asia-Pacific markets, including China, Japan and South Korea. However, the minister cautioned that this would require stronger domestic competitiveness.

The government is finalising the Import Policy Order 2026-2029 to simplify import procedures and reduce costs. The latest national budget has also reduced or withdrawn duties on around 175 products, including full exemption on 110 items and reduced duties on 65.

Trade facilitation measures, including the Bangladesh Single Window system and cross-border paperless trade initiatives, are being expanded to reduce clearance time and costs at ports.

Alongside these reforms, the government is also focusing on export diversification beyond the ready-made garments sector, targeting pharmaceuticals, ICT services, jute products, shipbuilding and light engineering to strengthen resilience and broaden the export base.