Published : 27 October 2026
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Updated : 26 October 2026, 23:23
Jagaran Chakma
The government is looking to secure $1 billion in budget support from South Korea to help manage the economic fallout from prolonged unrest in the Middle East, as rising energy costs put pressure on public finances and foreign exchange reserves.
The loan is expected to be sought for the ongoing fiscal year 2026-27 under a programme-based policy loan financed through Korea’s Economic Development Cooperation Fund (EDCF), according to a Finance Division proposal seen by The Daily Star.
Such loans typically support policy reforms and institutional changes over a defined period.
The proposal was prepared ahead of a high-level government delegation’s visit to South Korea from October 31 to November 7.
The proposed financing aims to help Bangladesh withstand external energy shocks and address structural weaknesses in the sector
Finance and Planning Minister Amir Khosru Mahmud Chowdhury is scheduled to lead the delegation. It will meet Korean government agencies, development finance institutions and investors to explore economic cooperation, financing and investment opportunities.
The proposed financing aims to help Bangladesh withstand external energy shocks and address structural weaknesses in the sector. These include the growing fiscal burden of subsidies and outstanding payments to power producers and fuel suppliers.
Bangladesh relies heavily on imported liquefied natural gas (LNG), fuel oil and coal, which leaves the economy exposed to international price movements.
Government officials, experts, and international organisations have repeatedly warned that prolonged instability in the Middle East could intensify those pressures, complicating efforts to contain inflation and maintain macroeconomic stability.
The proposal identifies widening budget deficits, commodity-price volatility, foreign exchange pressure and exchange-rate instability as key risks the programme would seek to address.
As per the proposal, the loan would support three broad reform 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 Finance Division expects the programme to strengthen the sector’s financial sustainability and improve preparedness for energy-price volatility and supply disruptions. It also aims to address environmental concerns.
The financing is intended to help restore a more stable and affordable energy supply while improving the financial position of state-owned energy companies.
The delegation is expected to meet officials of KEXIM, Korea’s export-import bank, which is relevant to the proposal because of its role in the country’s development finance framework, including EDCF.
The Bangladeshi team is also scheduled to meet SK Gas to discuss the energy sector. The agenda does not specify whether the meeting will cover fuel supply, investment or the proposed budget-support programme.
The draft programme also includes a Bangladesh-Korea investment promotion initiative. It will focus on infrastructure, logistics, industrial development, urban services, digital solutions and public-private partnerships.
Alongside the energy-sector proposal, the Finance Division has outlined a separate capacity-building initiative with support from the Korea International Cooperation Agency (KOICA).
The initiative aims to strengthen Bangladesh’s capacity in budget management, macro-fiscal forecasting and public debt management. Proposed support includes specialised training, technical assistance, study visits and upgraded analytical tools.
The areas of support would include fiscal-risk analysis, debt sustainability assessments, medium-term debt strategy, borrowing plans and negotiations over policy-based loans.Expected outcomes include stronger fiscal projections, more effective debt-risk assessments and greater transparency in public debt and fiscal reporting.