ADB to provide $1b as Bangladesh seeks to cushion Mideast war shocks
Discussions underway with WB, Jica, AIIB, EIB, South Korea for further support
The Asian Development Bank will provide Bangladesh with $1 billion in budget support to help the country cope with economic pressures arising from the ongoing US-Israel war against Iran.
The funds are expected to be released between May and June, according to officials at the Economic Relations Division (ERD). The support will come under two separate budget assistance programmes.
During a recent meeting with ERD Secretary Shahriar Kader Siddiky, ADB Country Director Hoe Yun Jeong confirmed the funding and assured that both programmes would be processed quickly.
Last fiscal year, the ADB provided Bangladesh with $1.5 billion in budget support through three programmes.
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ERD officials said the Middle East conflict has created economic uncertainty in Bangladesh, particularly regarding oil and LNG supplies. Rising international oil prices and supply chain disruptions have increased fuel import costs, putting pressure on the economy and foreign exchange reserves.
In response, the government has sought budget support from development partners, with the Asian Development Bank's assistance forming part of this effort, officials added.
The ADB's budget support is being provided under two pre-planned programmes. However, the current war situation has accelerated the disbursement of these loans.
Under the "Strengthening Economic Management and Governance Program – Subprogram 2 (PBL)", the initial allocation of $500 million has been increased to $750 million due to prevailing circumstances.
The ADB will also provide $250 million under the "Second Strengthening Social Resilience Program – Subprogram 2 (PBL)".
Support expected from other partners
A senior ERD official, requesting anonymity, said discussions are underway with multiple development partners, including the World Bank, Jica, the Asian Infrastructure Investment Bank (AIIB), the European Investment Bank (EIB), and South Korea, to secure further support.
"These discussions build on post-Covid and Russia–Ukraine war-era arrangements, when Bangladesh received budget assistance from similar agencies," the official added.
The total amount of budget support for this fiscal year is still under review by the Finance Division, he said, adding that the ERD plans to issue formal letters once the figure is finalised.
Rashed Al Titumir, chief economic and planning adviser to the prime minister, recently told the media that, in response to global fuel price hikes caused by the Middle East conflict, Bangladesh is seeking around $2 billion in loans from multilateral institutions to address energy security concerns.
Also, Bangladesh Bank Governor Md Mostaqur Rahman yesterday also spoke about the government's plans to secure $2 billion in loans to support the balance of payments (BoP), although the initiative remains at an early stage.
At the same event, Deputy Governor Md Kabir Ahmed Khan expressed hope that Bangladesh will receive a $1.5 billion tranche from the IMF in June. Moreover, remittance inflows are expected to rise by up to $2.5 billion in the current fiscal year, which would help strengthen foreign exchange reserves, he added.
ERD officials said partners provide budget support subject to the fulfilment of specific reform conditions. To secure ADB financing, the Finance Division is preparing a policy matrix in consultation with the lender.
Officials added that Bangladesh may seek around $500 million in budget support from the WB to address ongoing economic challenges. One official said the government has received preliminary assurances from the WB, although the final amount has yet to be determined.
Last fiscal year, the WB provided Bangladesh with $1 billion in budget support. Officials added that discussions with the AIIB include a proposed $400 million package.
Until the last fiscal year, Bangladesh received a total of $14.49 billion in budget support from development partners, most of it during the post-Covid period and the Russia-Ukraine war.
According to ERD data, Bangladesh secured its highest budget support of $3.44 billion in FY25, compared with $2.03 billion in FY24, $1.767 billion in FY23, and $2.597 billion in FY22.
Zahid Hussain, former lead economist at the World Bank's Dhaka office, said the immediate priority should be a clear macroeconomic assessment, particularly to identify where pressures are building in the balance of payments.
According to him, pressure is emerging through three main channels: rising import costs, declining export earnings amid high shipping costs, and potential shocks to remittance inflows.
On the fiscal side, pressures are expected to intensify due to lower revenue collection, rising subsidies, and increased social protection spending.
"If these expenditures are not financed through low-cost, long-term borrowing, debt servicing burdens will rise, with adverse effects on inflation, growth and employment," he said, adding that priority areas include social protection, energy and food security, fertiliser stocks, and fuel management.
Fahmida Khatun, executive director of the Centre for Policy Dialogue, said budgetary support has become critically important in the current context.
"If the conflict persists, oil prices could rise further, intensifying these pressures."
She added that while the proposed $1 billion support is a positive start, actual requirements may be significantly higher. Bangladesh's daily energy needs require substantial foreign currency, making timely disbursement essential.
Overall, she said, swift and adequate budgetary support would help ease economic pressures, stabilise energy supply, and maintain macroeconomic stability.
