Govt secures $3.11b from dev partners

Bangladesh has secured about $3.11 billion in emergency budget support from four development partners, including the World Bank and the Asian Development Bank, this month to cushion the economic fallout from the US and Israel’s war on Iran.

Officials said the assistance, equivalent to about Tk 38,132 crore at the prevailing exchange rate, would help ease budgetary pressures, strengthen foreign exchange reserves and finance higher import costs stemming from the conflict.

The WB approved $450 million on June 24 to support banking sector reforms. Yesterday, it approved another $1.1 billion for food security and energy-related emergency financing, bringing its total budget support this month to $1.54 billion.

Earlier, the ADB approved $1 billion, the Japan International Cooperation Agency (JICA) provided $314 million, and the Asian Infrastructure Investment Bank (AIIB) cleared $250 million.

The war in the Middle East broke shortly after the current government assumed office in February, sending global prices of fuel, liquefied natural gas, fertiliser and other essential commodities sharply higher while disrupting supplies.

International financial institutions, including the IMF, WB and ADB, warned that import-dependent economies such as Bangladesh would face mounting external pressures.

In response, the government formed a committee in March to assess the likely economic impact of the conflict. Based on its findings, Bangladesh sought emergency budget support from development partners.

The finance ministry prepared a position paper in this regard, requesting an additional $3 billion in rapid-disbursing assistance to address urgent balance-of-payments needs and growing budgetary pressures during the final four months of FY2025-26.

The paper described the Middle East conflict as an external and temporary terms-of-trade shock that had sharply increased the country’s import bills for fuel, LNG, fertiliser and food, while adding pressure on subsidies and social protection spending.

The war created a “time-critical external financing need that cannot be met prudently through rapid reserve drawdown or disruptive import compression”, the paper said.

It estimated that Bangladesh would require an additional Tk 385.42 billion (around $3.2 billion) in subsidies between March and June.

The ministry also noted that foreign exchange reserves had fallen from $30.36 billion at the end of February to $29.39 billion by March 25 under the IMF’s balance of payments methodology, reflecting tighter external financing conditions.

According to the paper, the emergency financing would help preserve reserves while ensuring continued imports of fuel, LNG, fertiliser and food, create fiscal space for targeted and time-bound support, and reduce the risk of a disorderly adjustment.

The government also pledged to use existing public financial management systems and ensure transparent reporting on the use of the funds and related emergency spending.

The paper said any price-smoothing measures and subsidies supported by the financing would be temporary, progressively better targeted, and implemented alongside continued reforms to strengthen revenue mobilisation, prioritise public spending and improve the foreign exchange market.

Bangladesh’s foreign exchange reserves stood at $31.53 billion under the IMF methodology on June 25.

Announcing the latest $1.1 billion package yesterday, the WB said in a statement that the financing would support two projects aimed at helping Bangladesh cope with fertiliser and fuel price volatility, strengthen food security and improve emergency response capacity.

The package includes $300 million for food security and $713 million under a contingent emergency response component to finance quick-disbursing expenditures during crises.

The emergency financing will support cash transfers and livelihood assistance for affected households and micro, small and medium-sized enterprises (MSMEs), helping stabilise incomes and protect jobs.

It will also finance fuel and energy supplies needed to maintain essential services, including food distribution, healthcare, electricity and water supply, the WB said.

The funds under the emergency response component are expected to be disbursed by June 30.

Jean Pesme, WB country director for Bangladesh and Bhutan, said in the statement that rising food, fertiliser and fuel prices, combined with tighter fiscal conditions, had hit small farmers and vulnerable households the hardest.

“The World Bank has stepped up with immediate support to help Bangladesh mitigate this impact, ensure fertiliser supply for rice production, protect households, jobs and livelihoods, and maintain essential services,” he said.

The $300 million food security project will finance imports of 6 lakh tonnes of fertiliser, including 5 lakh tonnes of urea, enough to support rice cultivation on about 1.4 million hectares during the Aman (July-October 2026) and Boro (October 2026-April 2027) seasons.

Bangladesh imports more than 85 percent of its fertiliser requirements.

Souleymane Coulibaly, WB lead economist and task team leader, said the Aman and Boro seasons account for about 90 percent of the country’s annual rice production.

“Any disruption in fertiliser supply would not only threaten food security, but it would also deepen poverty and cost jobs,” he said.

Lesley Jeanne Yu Cordero, WB lead disaster risk management specialist and task team leader, said the project would repurpose unutilised financing from existing projects to channel resources quickly to the areas of greatest need.