How Bangladesh’s Energy Crisis is Threatening its Reform Agenda
Bangladesh’s newly elected government is currently spending hundreds of millions of US dollars monthly to shield its citizens from an escalating energy crisis. This situation severely strains plans to reform troubled financial institutions and prepare the nation’s workforce for the era of artificial intelligence. Critics allege that during former PM Sheikh Hasina’s tenure, funds were siphoned from state-owned banks, leaving them burdened with non-performing loans, while the health and education sectors were pushed to the brink of collapse following her downfall in 2024.
PM Tarique Rahman assumed office on February 17 following a general election, promising extensive economic and social reforms to transform the country into a US$1 trillion economy within a decade. However, just 11 days after he took office, attacks on Iran by the US and Israel caused global oil and gas prices to skyrocket. Bangladesh, which imported nearly 65 percent of its energy needs last year, has since faced severe power outages, long queues at petrol pumps, rising transport costs, and surging prices for food and essential commodities.
Highlighting the gravity of the financial strain, the PM’s adviser Rashed Al Mahmud Titumir stated, ‘This has hit our citizens severely. According to estimates, our additional expenditure since late February stands at approximately US$4.1 billion.’ He also criticized past governance regarding sustainable power solutions, noting, ‘Solar power was supposed to help mitigate the impact of this crisis, particularly in a country growing increasingly hot due to global warming. However, the previous government failed to build any infrastructure for sustainable energy security.’
While multilateral lenders like the World Bank, Asian Development Bank, and the IMF have extended billions in support, the economic outlook remains challenging. The IMF recently lowered Bangladesh’s growth forecast for 2027 to 3.2 percent, down from 3.6 percent this year, while projecting inflation to reach 10.9 percent. However, the government maintained that these forecasts do not fully reflect the impact of structural reforms targeted at financial institutions, debt-burdened businesses, and the welfare system, while hoping to renegotiate its IMF loan terms.
To drive future growth, the administration is focusing on foreign direct investment in electronics, toy manufacturing, solar energy, deep-sea ports, and special economic zones, including a US$1.3 billion Chinese-assisted project in Anwara. Bangladesh aims to leverage its young population, manufacturing experience, and affordable labor to attract relocating overseas companies. However, building the necessary energy grid, skilled workforce, and digital infrastructure to capitalize on the global artificial intelligence revolution remains a critical challenge for the nation.
Source: South China Morning Post
