Bangladesh’s economy is coming under increasing strain from a prolonged energy crisis, forcing policymakers into difficult trade-offs between inflation control, fiscal stability and growth, according to a new report by the General Economics Division.
The Economic Update & Outlook (March 2026), released on Thursday by the Planning Commission, said that while strong remittance inflows and a recent rise in foreign exchange reserves have offered short-term relief, persistently high global energy prices could reverse these gains by pushing up import costs and widening the trade deficit.
The report noted that policymakers now face a delicate balancing act. Efforts to stabilise the exchange rate risk depleting reserves, while allowing the currency to weaken could further stoke inflation.
Similarly, maintaining energy subsidies helps shield consumers but adds to fiscal pressure, whereas raising fuel prices to curb demand may intensify inflation.
Inflation Climbs, Driven by Food Prices
Inflation continued to accelerate, rising to 9.13% in February from 8.58% in January, largely driven by food costs. Food inflation climbed to 9.30%, overtaking non-food inflation for the first time in recent months.
Vegetables were the biggest contributor to rising prices, followed by fish and fruits. Although rice prices eased due to imports and seasonal harvests, overall inflation remained elevated as higher energy costs pushed up transportation and production expenses.
Wages Lag Behind Prices
The report highlighted a growing mismatch between wages and living costs. Wage growth stood at 8.06% in February, lagging behind inflation and eroding real incomes, particularly for low-income households. This gap could dampen consumption in the months ahead.
Revenue Shortfall, Slower Development Spending
On the fiscal side, revenue collection by the National Board of Revenue fell short of expectations. The collection in February reached Tk30,559 crore against a revised target of Tk42,051 crore, leaving a gap of more than Tk11,000 crore.
While revenue grew 8.15% year-on-year, it declined sharply compared with that of January, pointing to a slowdown in monthly collection.
Implementation of the Annual Development Programme has also slowed compared with the previous fiscal year, held back by delays in project approval, procurement and fund disbursement.
External Sector Under Pressure
The external sector presented a mixed picture. Foreign exchange reserves rose to above $35 billion in February, supported by monthly remittance inflows exceeding $3 billion.
However, export earnings—particularly from the readymade garments sector—showed signs of weakening amid softer global demand and rising production costs. At the same time, higher energy import bills are increasing pressure on the balance of payments.
Import payments continue to rise, driven largely by fuel and non-capital goods, while imports of capital machinery remain subdued, indicating weak investment momentum.
Outlook Remains Cautious
The GED warned that the global energy crisis is likely to keep inflation elevated and increase the fiscal burden through subsidies.
It said Bangladesh’s economic stability will depend on careful coordination of fiscal, monetary and external policies. Priorities should include improving energy efficiency, rationalising pricing through targeted subsidies, and strengthening external sector management.
While strong remittance inflows and improved reserves provide some buffer, the report cautioned that persistent inflation, weak income growth and rising external pressures leave the overall outlook fragile.