Middle East Unrest to Cost Bangladesh $426 Million Extra in Subsidies

Bangladesh faces significant economic pressure as the oil, gas, electricity, and fertilizer sectors are projected to need an additional subsidy of around Tk 42,600 crore by June. Finance Minister Amir Khosru Mahmud Chowdhury announced this preliminary estimate in parliament, attributing the increased costs to recent unrest in the Middle East. The minister detailed that the subsidy requirement includes approximately Tk 10,258 crore for oil, Tk 11,170 crore for gas, Tk 19,821 crore for electricity, and Tk 1,350 crore for fertilizer.

The escalating prices of fuel oil, LNG, and fertilizers on the international market are driving up both import and production costs. This surge has a ripple effect, potentially increasing expenses in the electricity, transport, agriculture, and industrial sectors. Consequently, these rising costs could indirectly fuel market price increases and contribute to inflation. Furthermore, the Middle East is a crucial destination for Bangladeshi expatriate workers, and prolonged instability in the region poses a risk to foreign employment opportunities and the flow of remittances, a vital source of foreign currency for Bangladesh.

In response, the government is actively monitoring the evolving situation. Strategic steps are being implemented, including diversifying energy import sources, intensifying efforts to explore domestic gas reserves, ensuring the normal supply of essential goods, exercising caution in foreign exchange management, and exploring alternative labor markets. The minister also noted that the National Board of Revenue's focus on automation and combating tax evasion is partially mitigating revenue shortfalls. As of April, revenue collection reached Tk 3,26,928.16 crore, representing 64 percent of the Tk 5,03,000 crore target for the outgoing 2025-26 fiscal year. Several factors, including political instability and reduced investment, have contributed to not meeting revenue targets in recent fiscal years.

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The oil, gas, electricity, and fertiliser sectors alone will require an additional subsidy of about Tk 42,600 crore by June as per preliminary estimates due to the recent unrest in the Middle East.