Dhaka Looks to Seoul for $1 Billion Buffer as Energy Costs Squeeze the Budget

Bangladesh is preparing to ask South Korea for about $1 billion in budget support to help the government cope with the fiscal and foreign-exchange pressures created by prolonged instability in the Middle East. The request is framed as a programme-based policy loan for the current 2026-27 fiscal year and would be channelled through Korea's Economic Development Cooperation Fund. Officials see the financing as one way to ease the strain from higher imported energy prices while also encouraging longer-term changes in how the power and fuel sectors are managed.

A senior government team is scheduled to travel to South Korea from 31 October to 7 November. Finance and Planning Minister Amir Khosru Mahmud Chowdhury is expected to lead the delegation, which will meet Korean government agencies, development finance institutions and potential investors. The energy-support proposal is among the main items on the agenda, alongside broader discussions on economic cooperation and investment.

Bangladesh depends heavily on imported liquefied natural gas, fuel oil and coal to meet its energy needs. When international prices rise, the cost quickly feeds into the budget through larger subsidies and delayed payments to power producers and fuel suppliers. Recent volatility linked to unrest in the Middle East has amplified these pressures, making it harder to keep both inflation and the external accounts under control. Policymakers have pointed to widening budget gaps, swings in commodity prices, tighter foreign-exchange conditions and greater exchange-rate instability as the main risks they want the Korean financing to help address.

The draft programme is built around three reform areas. One focuses on adopting a clearer renewable-energy policy so that the country can gradually reduce its reliance on imported fossil fuels. Another aims to open the door for government-linked non-bank financial institutions to put money into alternative energy projects. The third seeks to strengthen the financial management of state-owned energy companies, which have faced recurring difficulties with arrears and cash flow. Together, these steps are intended to make the sector more resilient to future price shocks and to improve the reliability and affordability of energy supply over time.

In addition to the budget-support request, the visit is expected to advance a separate Bangladesh-Korea investment promotion initiative. That effort would cover infrastructure, logistics, industrial development, urban services, digital solutions and public-private partnerships. A capacity-building component with the Korea International Cooperation Agency is also under discussion. It would concentrate on improving budget management, macro-fiscal forecasting and public debt oversight through training, technical assistance and better analytical tools. Officials hope the combination of financing and technical support will leave Bangladesh better prepared for both the current energy shock and longer-term fiscal risks.

The outreach comes at a moment when external energy costs continue to complicate macroeconomic management. Remittance inflows have remained relatively strong in recent months, yet higher import bills for fuel and related commodities still create pressure on reserves and the exchange rate. By seeking policy-linked financing rather than a simple cash transfer, the government is signalling that it wants the money to be tied to concrete steps in the energy sector. Whether the Korean side agrees to the full amount, and on what exact conditions, will become clearer after the delegation's meetings in Seoul. For now, the proposal reflects a clear recognition that imported energy remains one of the most significant external vulnerabilities facing the economy.