The Bangladeshi government is seeking $1 billion in budget support from South Korea to mitigate the economic impact of rising energy costs amid ongoing instability in the Middle East. The proposed loan, to be requested during the fiscal year 2026-27, would be structured as a programme-based policy loan financed through South Korea’s Economic Development Cooperation Fund (EDCF), according to a Finance Division proposal.
The loan aims to help Bangladesh manage external energy shocks that have strained public finances and foreign exchange reserves, exacerbated by the country’s heavy reliance on imported liquefied natural gas (LNG), fuel oil, and coal. Prolonged unrest in the Middle East risks further intensifying costly fluctuations in international energy prices, complicating efforts to control inflation and maintain macroeconomic stability.
Finance and Planning Minister Amir Khosru Mahmud Chowdhury is scheduled to lead a high-level delegation to South Korea from October 31 to November 7. During the visit, officials will meet with Korean government agencies, development finance institutions such as the Export-Import Bank of Korea (KEXIM), and private investors to discuss economic cooperation, financing, and investment opportunities. The delegation is also expected to engage with SK Gas, a major Korean energy company, although details of those discussions—whether related to fuel supply, investment, or the proposed budget support—have not been specified.
The proposed EDCF-supported programme targets three main areas: adopting a renewable energy policy, enabling government non-bank financial institutions to invest in alternative energy, and improving the financial management of state-owned energy companies. The reforms are designed to enhance the sector’s financial sustainability, prepare the country for volatile energy prices and supply disruptions, and address environmental concerns.
In addition to stabilizing and making energy supply more affordable, the government aims to reduce the fiscal burden stemming from subsidies and outstanding payments to power producers and fuel suppliers, which have grown amid the energy price increases.
The visit will also highlight a Bangladesh-Korea investment promotion initiative focusing on infrastructure, logistics, industrial development, urban services, digital solutions, and public-private partnerships. This initiative is intended to foster broader economic cooperation between the two countries.
Separately, the Finance Division has outlined a capacity-building effort supported by the Korea International Cooperation Agency (KOICA). This initiative seeks to enhance Bangladesh’s capabilities in budget management, macro-fiscal forecasting, and public debt administration. Proposed support includes specialized training, technical assistance, study visits, and upgraded analytical tools to improve fiscal-risk analysis, debt sustainability assessments, medium-term debt strategies, and borrowing plans. Expected outcomes include more accurate fiscal projections, stronger debt-risk management, and greater transparency in public debt and fiscal reporting.