Commerce Minister Khandakar Abdul Muktadir on Monday said Bangladesh has to purchase liquefied natural gas (LNG) at nearly double the earlier price and crude oil at sharply higher rates due to volatility in the global energy market triggered by the Middle East conflict.
“Under G2G contracts, we used to buy LNG at $10 per unit, which now has to be purchased at $20. On the other hand, crude oil was priced at $50-60 per barrel, which has now crossed $110. Soon after the formation of the government, fuel prices doubled due to the Middle East war,” he told a seminar organised by the Dhaka Chamber of Commerce and Industry (DCCI) at a city hotel.
The sudden outbreak of war created an unexpected havoc that no one had planned for, and managing this situation has now become a major challenge, the minister said.
He also noted that fertiliser is being purchased at nearly double the price amid the volatile situation. “We require around 2.6 million tonnes of urea annually. A bulk portion has to be imported because for many years we have not been able to keep our fertiliser factories running throughout the year due to gas shortages. The gas we cannot use to run fertiliser plants has to be imported again using foreign currency. Gas that we used to buy at $456 now has to be purchased in excess of $800.”
Muktadir said bearing the high cost of fuel has become “difficult” for the government. “The government’s manoeuvring capability, its financial cushion to prioritise spending has become very limited. The ability to allocate expenditures according to priorities has become extremely difficult for this government.”
Highlighting the lack of fuel storage capacity in Bangladesh, he said the country will not have faced the current double cost burden if adequate reserves were available. “Bangladesh does not have proper fuel storage facilities. If we had the capacity to store LNG for two months, we would not have to buy LNG from the spot market at $20 instead of $10.”
The minister also said the government plans to expand the tax net rather than increasing taxes. “To bring fiscal discipline, we need to widen the tax base. We are not increasing individual taxes; rather we are expanding the tax net. I believe the NBR and the finance ministry are working with that goal and intention.”
He said the government will try its best in the upcoming budget to avoid additional pressure on people, while ensuring industries remain operational despite the energy crisis.
Muktadir noted that subsidy pressure remains high in the budget.
He said revenue collection as a share of GDP has remained low for a long time, while expenditure, particularly subsidies, continues to rise. Due to international price volatility in power and energy, the government has to provide large subsidies, while agricultural subsidies for fertiliser, electricity and other inputs also continue.
As a result, financing development projects is becoming difficult, the minister said, adding that investment in major infrastructure projects, social safety net programmes and human resource development is being constrained.
“To meet regular budget deficits, the government has to rely on domestic and foreign borrowing. This increases the debt burden and interest payments, which may create fiscal risks in the future,” he warned.
Muktadir emphasised modernising the tax system and expanding the tax net, expressing hope that strengthening digital tax collection platforms will increase revenue and help manage subsidy pressures.