The escalating conflict in the Middle East threatens to nearly triple Bangladesh’s liquefied natural gas (LNG) subsidy bill to Tk 40,000 crore ($3.3 billion) this fiscal year, forcing the government to turn to multilateral lenders for additional assistance.
Exacerbated by the choked Strait of Hormuz and collapsed long-term contracts, the energy crisis has laid bare the risks of Bangladesh’s heavy reliance on imported fossil fuels. With soaring spot market prices and physical supply shortages, the country is grappling with its worst economic shock since the COVID-19 pandemic.
LNG is draining state coffers. Last year, the government initially set aside Tk 6,000 crore for LNG subsidies, only to see the final bill swell to Tk 14,500 crore. For the current fiscal year, the energy ministry has submitted a primary projection of Tk 40,000 crore—nearly a three-fold jump from last year’s final payout.
One finance ministry official said this was merely an estimate based on the current trends. According to the same official, the government has already spent Tk 7200 crore in subsidies in the first two months of this fiscal.
To bridge the yawning fiscal deficit, Dhaka has opened negotiations with the World Bank, Asian Development Bank (ADB), and Asian Infrastructure Investment Bank (AIIB). The government is also weighing a freeze on low-priority infrastructure projects to free up capital.
The financial haemorrhage extends well beyond gas. The Power Division has warned that electricity subsidies could hit Tk 50,000 crore, up from the Tk 43,100 crore last year against an estimated Tk 36,000 crore.
Bangladesh has been forced back into the volatile LNG spot market after its long-term arrangement with Qatar—supposed to run through 2026—was disrupted. Qatar is among three major LNG suppliers to Bangladesh that have invoked force majeure on contractual obligations amid the regional conflict.
“The immediate supply crunch highlights a deeper vulnerability: Bangladesh’s growing dependence on imported energy,” international research group Zero Carbon Analytics (ZCA) said in a statement yesterday.
A day earlier, Bangladesh approved the purchase of an LNG cargo at over $28 per unit—its most expensive since 2022. That single shipment is worth more than $100 million.
Shafiqul Alam, lead energy analyst for Bangladesh at the Institute for Energy Economics and Financial Analysis, detailed the severe math of the current market. “At around $28 per MMBtu, the cost of LNG, excluding regasification and terminal charges, is already above Tk 118 per cubic metre,” Alam said.
Each unit of LNG, which is 1 MMBtu (or 1 million British thermal units) can light almost 3000 lightbulbs of 100 watts for one hour.
“Compared with the price received by Petrobangla, this means the government would need to provide a subsidy of more than Tk 95 per cubic metre.”
The lack of gas is devastating the real economy. ZCA data shows Bangladesh’s LNG imports between January and August were nearly 13 percent lower than the same period a year earlier. The sharpest decline hit between July and August, when imports plunged by 83 percent—from 630,000 tonnes to 110,000 tonnes—amid disruptions in Hormuz.
“But lower imports have not meant lower costs,” the research group noted. If energy prices remain at the January-August average for the rest of the year, Bangladesh’s fossil fuel import bill could rise by 30 percent in 2026. That additional cost equals roughly a tenth of the country’s trade deficit, adding immense pressure to the taka, inflation, and borrowing costs.
With 64 percent of Bangladesh’s electricity generation dependent on gas, the power grid is highly exposed. On August 11, one of the worst days, the power supply shortfall reached 3,592MW—roughly 20 percent of national demand. In rural areas, outages are lasting up to 10 hours a day.
The industrial fallout is severe. Six of Bangladesh’s seven major fertiliser plants have shut down or reduced production due to inadequate gas. The export-oriented garment sector, the backbone of the economy, is reporting production declines of 15-20 percent across key manufacturing hubs in Savar, Ashulia, and Dhamrai.
“Whatever the price, the government will have to import LNG,” said Zahid Hussain, former lead economist at the World Bank’s Dhaka office, adding that businesses face a lose-lose scenario of paying higher tariffs or suffering losses from idled factories.
The government recently approved spot cargoes for August and September, procured eight additional cargoes from suppliers in the UK, Australia, Malaysia, and Oman, and sought diesel from India. Long-term, Dhaka has signed an agreement for 117 LNG cargoes from the United States between 2026 and 2038.
Analysts warn this approach is financially ruinous. ZCA estimates that if current fuel prices persist, Bangladesh’s fossil fuel import bill could rise by up to $2.8 billion in 2026.
Alam cautioned against expanding LNG infrastructure. “By 2030, LNG imports could rise to around 730 billion cubic feet if all the proposed terminals are utilised at around 65 percent,” he said.
At an LNG price of $12 per MMBtu, that would cost Bangladesh around $8.5 billion a year, he said. If the average price rises to $20, the import bill could exceed $14 billion.
