Bangladesh has unveiled a Tk 9.38 trillion national budget for the 2026–27 fiscal year, marking a notable shift in energy policy that blends legacy cost pressures with a stronger push towards green technology and tighter financial oversight.
Finance Minister Amir Khasru Mahmud Chowdhury presented the first budget of the new BNP-led administration on Thursday, outlining what he described as a more disciplined and “value-for-money” approach to public spending, particularly in the power and energy sector.
The strategy seeks to address long-standing structural vulnerabilities in the energy system, including high subsidy burdens, rising external debt, and exposure to volatile global fuel markets. It also signals an effort to move away from what the government characterised as opaque and politically driven infrastructure financing.
Legacy costs and energy sector liabilities
A central theme of the budget was the financial strain inherited from previous large-scale energy projects, particularly so-called “capacity charge” agreements in the power sector, which require payments to electricity producers regardless of actual output.
The finance minister said these arrangements had placed significant pressure on public finances, contributing to what he described as unsustainable liabilities in the sector.
Attention was also drawn to the Rooppur Nuclear Power Plant, a major infrastructure project expected to provide long-term baseload electricity but also requiring substantial debt servicing. The government said it would ensure the project is brought into operation as a future energy asset, while tightening scrutiny on further large-scale borrowing.
Public external debt has reportedly risen sharply over the past two decades, increasing from Tk 1.3 trillion in 2006 to Tk 8.12 trillion by 2024.
Energy security and global risks
The budget was presented against the backdrop of rising geopolitical tensions in the Middle East, which the government warned could affect Bangladesh through higher global oil prices, increased shipping costs, and rising insurance premiums.
Global inflation is projected to remain elevated, adding further pressure on import-dependent economies such as Bangladesh.
Higher taxes on fossil fuels
In response, the budget introduces measures aimed at discouraging fossil fuel consumption while raising revenue and reducing exposure to external shocks.
Key changes include a significant increase in taxation on imported internal combustion engine vehicles, with total duties on mid-range cars (1,200cc–1,600cc) rising from around 132% to 156%.
The government has also introduced value-added tax at the import stage for liquefied petroleum gas (LPG) cylinders, increasing upfront costs for households and businesses.
Incentives for electric vehicles and renewables
At the same time, the budget offers substantial incentives for cleaner technologies.
Import duties on electric vehicles valued up to $25,000 have been reduced from 93% to 64%, while higher-value EVs up to $50,000 will see tariffs cut to around 80%.
Additional exemptions have been introduced for plug-in hybrid vehicles, EV charging infrastructure equipment, and vehicle registration fees under the Bangladesh Road Transport Authority.
Solar energy components and related clean-energy infrastructure will also benefit from reduced import restrictions, as part of a broader push to expand decentralised renewable energy generation.
Reform and investment direction
The government said the overall aim is to replace discretionary contracting practices with a more transparent, performance-based system focused on return on investment and long-term fiscal sustainability.
Officials also signalled greater scope for private sector participation in renewable energy development as part of a wider transition towards a lower-carbon and more self-reliant energy system.
The budget concludes with a pledge to strengthen financial discipline while supporting what the government called a “climate-resilient” economic transition.