War on Iran risks inflation and higher import costs for Bangladesh: CPD

The ongoing US-Israel war on Iran poses serious risks to Bangladesh’s economy, potentially driving up inflation and raising the import bill, said the Centre for Policy Dialogue (CPD) today.

The think tank made the observations during a media briefing to present recommendations as the government has started an exercise to frame budgetary measures for the fiscal year (FY) 2026-27, which will begin in July.

Bangladesh’s heavy reliance on imported energy, particularly liquefied natural gas (LNG) and crude oil, has made the economy highly vulnerable to global price shocks and supply disruptions, said CPD Executive Director Fahmida Khatun at the briefing at its office in Dhaka.

She said Bangladesh depends heavily on imported fossil fuels from the Middle East, and the ongoing war on Iran poses serious long-term risks to Bangladesh’s energy supply and economic stability.

Any disruption in the global energy supply chain could quickly translate into domestic inflation and economic pressure, the CPD said.

She said rising energy prices in global markets, driven by instability in the Middle East, have begun worsening Bangladesh’s inflation outlook.

The CPD observed that higher energy costs are already influencing essential commodity prices like palm oil, wheat, and sugar.

Mustafizur Rahman, a distinguished fellow of CPD, said that Bangladesh lacks a strategic fuel reserve. He urged the government to build such reserves under a medium-term plan to prevent panic buying.

CPD highlighted that the energy sector is burdened by financial losses and overreliance on imported LNG, weakening fiscal stability.
It suggested that the upcoming budget prioritise energy security and a transition toward domestic self-sufficiency.

To mitigate risks, CPD recommended diversifying import sources, including Southeast Asian countries like Malaysia, and using the spot market for LNG during disruptions.

The CPD called for accelerating renewable energy through a dedicated subsidy fund and lower import duties.

However, it warned against reviving domestic coal exploration, stating that such initiatives contradict Bangladesh’s climate commitments.