Government Seeks $3 Billion Emergency Loan

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Dhaka, Bangladesh – Bangladesh is urgently seeking $3 billion in emergency budget support from international development partners to mitigate a looming economic crisis exacerbated by escalating global commodity prices due to conflict in the Middle East. The funds are needed to cover a projected $3 billion deficit in essential fuel, gas, and fertilizer imports over the next four months and to finance an additional 38,542 crore Taka in subsidies, aiming to stabilize its foreign exchange reserves and prevent a surge in domestic prices.

The ongoing geopolitical tensions in the Middle East have driven up global prices for these critical commodities, compelling Bangladesh to secure approximately $3 billion (nearly 37,000 crore Taka) for imports between March and June. Furthermore, the government anticipates an additional 38,542 crore Taka will be required for subsidies on fuel, gas, electricity, and fertilizer, pushing the total subsidy burden to 97,542 crore Taka against a budget allocation of 59,000 crore Taka.

To address this financial strain, the Finance Ministry’s Macroeconomics Branch has formally requested the Economic Relations Division (ERD) to explore avenues for this crucial budget support from development partners. An accompanying position paper highlights the severe pressure on Bangladesh’s balance of payments caused by the conflict, emphasizing that the loan would serve three critical functions: bolstering foreign exchange reserves, ensuring the import of essential goods, and providing targeted, short-term relief to specific population groups to prevent abnormal domestic price increases.

Bangladesh’s Finance Minister, along with fourteen senior officials from the ministry, is currently attending the World Bank and International Monetary Fund (IMF) Spring Meetings in Washington, where discussions are expected to include a request for additional IMF loans. The urgency underscores the government’s efforts to secure financial assistance amid the evolving global landscape.

The current situation echoes the economic challenges faced in 2022, following the Russia-Ukraine war, which triggered a sharp rise in global commodity prices. During that period, Bangladesh’s foreign exchange reserves plummeted from $48 billion to below $20 billion, while the Taka depreciated from 86 to over 120 against the U.S. dollar, fueling rampant inflation.

That economic downturn significantly impacted the populace, with a study by the Power and Participation Research Centre (PPRC) indicating a more than 9 percent increase in poverty, reaching nearly 28 percent from 18.7 percent in 2022. The previous government had passed on increased costs to consumers through multiple hikes in electricity, gas, fuel, and fertilizer prices, while wages failed to keep pace with inflation.

After a change in government in August 2024, foreign exchange reserves began a recovery under the new central bank governor, economist Ahsan H. Mansur, reaching over $35 billion by February. However, the new government, formed on February 18, saw its economic stability challenged just ten days later by renewed conflict in the Middle East, including actions that disrupted the Strait of Hormuz, a vital energy shipping lane.

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Despite a ceasefire beginning on April 8, the Strait of Hormuz remains partially disrupted, and the long-term impact on global energy prices remains uncertain due to extensive damage to energy infrastructure. This volatile environment has placed the new government in a precarious position, prompting the immediate search for emergency credit.

Bangladesh Bank data for the 2024-25 fiscal year shows total imports of $68.35 billion, with petroleum products accounting for $5.14 billion and fertilizer imports costing $2.62 billion. Additionally, liquefied natural gas (LNG) imports in 2025 were approximately $3.88 billion. The Finance Ministry’s position paper highlights that international prices for diesel have surged by 250 percent, LNG by 100 percent, and fertilizer by nearly 50 percent since the start of the conflict. This is projected to increase fuel and fertilizer import costs from $301 million in the March-June period last year to an estimated $558 million for the same period this year.

The nation’s foreign exchange reserves, measured by the IMF-prescribed BPM6 method, also reflect the pressure, dipping from over $30 billion in February to nearly $29 billion in March. Despite the global price increases, the government opted not to raise domestic fuel prices in April. However, a high-level cabinet committee, chaired by the Finance Minister, was formed on April 9 to address electricity price adjustments.

ERD sources indicate that communication has begun with the World Bank, IMF, Asian Development Bank (ADB), and Asian Infrastructure Investment Bank (AIIB). While Bangladesh has secured budget support loans in the past, these often came with reform conditions, some of which were not fully implemented. This could lead to scrutiny over reform progress for any new loan assistance. International lenders like the IMF generally oppose universal subsidies for sectors such as fuel, gas, and electricity. In response, the Finance Ministry’s position paper suggests that any subsidies provided would be short-term and highly targeted, alongside efforts to enhance revenue collection.

Bangladesh’s overall external debt has been steadily rising, reaching $113.51 billion (11,351 crore U.S. dollars or 13.96 trillion Taka) by December 2025. Former World Bank chief economist Zahid Hussain commented that Bangladesh’s pursuit of budget support is not unusual given the current global economic climate. However, he anticipated that development partners would likely question the government’s policy actions and its decision not to adjust domestic fuel prices despite international market increases.