The national budget of Bangladesh for the fiscal year 2025-26, proposed at Tk7.9 trillion, reflects a complex interplay of economic priorities and challenges. It comes at a time when demand from various sectors far exceeds the availability of resources. Energy remains a critical resource for many industrial and economic activities of the economy. A stable and uninterrupted energy supply is inextricably linked to productivity, industrial growth and overall economic resilience. However, a closer look at the energy and power sector allocations exposes a worrying disconnect between fiscal priorities and the severity of the ongoing energy crisis. In recent times, energy security has emerged as a pressing concern, driven by supply crunches and extreme tariff hikes. Against this backdrop, the allocation of only Tk225.2 billion to the Power and Energy sector, down 0.8% from the previous year, indicates a stark disconnect between fiscal planning and the pressing realities on the ground. Rather than addressing the deepening energy crisis that has severely hampered industrial output, particularly in key export-orientated sectors, the budget appears conservative, reactive and lacking strategic depth. This conservative approach overlooks the urgent need to ensure a reliable and predictable energy supply for the private sector, which is essential to sustain industrial productivity and broader economic stability.

Adding to the concern is a significant 23.9% reduction in the ADP allocation for the Power and Energy sector, despite growing load shedding, gas shortages and rising industrial costs. Within the ADP, the Power Division received a comparatively larger share than the Energy and Mineral Resources Division, which received only 0.9% of the total ADP allocation, inadequate for addressing critical energy constraints. The Power Division’s budget dropped by 30%, and development spending declined by over 6% amid rising recurrent costs, and the number of ADP projects fell from 53 to 40, reflecting a notable decline in ambition at a time of growing demand. The power sector urgently needs cost rationalisation, especially as many unplanned and inefficient power plants continue to drain resources and should be gradually phased out.

Moreover, the budget does little to address Bangladesh’s overwhelming dependence on natural gas, particularly in energy-intensive industries like textile, chemical and steel. Despite this structural vulnerability, it provides no roadmap for domestic, foreign or offshore exploration, essential for long-term energy security. With industries facing prolonged load shedding, low gas pressure and rising input costs, leaving many textile and dyeing units operating at only 30-40% capacity or shuttered entirely, the absence of emergency support, a short-term gas supply plan, or any initiative to restart closed independent power producer (IPP) projects signals a critical failure of policy. What began as a supply-side crisis has now escalated into a threat to Bangladesh’s industrial competitiveness and thus demands urgent, strategic intervention.

While the government has taken some remarkable steps, such as repealing the Quick Enhancement Act and reinstating BERC’s authority over tariff regulation moves hailed for improving transparency, there remains no clear operational roadmap for implementation. Many power generation and transmission projects continue to suffer from delays and rising carry-over, while execution remains weak. The focus shift towards operational rather than development spending suggests a continuation of status quo policymaking. Moreover, under IMF directives, energy subsidies have been slashed from Tk62,000 crore to Tk37,000 crore. However, countrywide energy and gas infrastructure, such as gas pipelines for industrial zones, are essential now.

At the same time, the government has set an ambitious renewable energy target of 30% by 2040. Yet, actual renewable output remains stuck below 5%, revealing a significant gap between policy ambition and on-the-ground implementation. The budget offers no specific funding commitments for renewables and continues to impose high VAT and import duties on solar components, discouraging sector growth. Additionally, the plan to import 6.5 million tonnes of LNG, while exempting VAT on LNG imports and reducing tax at the source on electricity payments, reinforces an overreliance on external fuel sources. This reliance increases exposure to global price volatility and further strains production costs for the private sector. Multiple import sourcing can cut price shock on local users, and low-cost fuel imports need attention in the budget.

The Energy Division witnessed a 115.5% increase in development allocation to Tk2,086 crore, though it lacks a clear strategic direction. No concrete steps have been taken to resolve the persistent gas crisis, and progress on key goals such as drilling 100 new wells by 2028 remains sluggish. Meanwhile, domestic gas exploration continues to stagnate, and clean energy deployment lacks the incentives needed to scale effectively. These gaps are further exacerbated by the Power Division’s budget cuts and limited progress on renewable adoption, raising serious concerns about the government’s long-term commitment to building a secure and industry-supportive energy landscape.

Despite presenting itself as reform-orientated, this budget for FY2025–26 underdelivers in a sector facing acute challenges. It offers no credible solution to the gas shortage, falls short on renewable energy implementation and overlooks the energy requirements of the private sector, the engine of Bangladesh’s export earnings, employment and economic growth. The lack of urgency, weak allocation and vague reform direction reflect a reactive posture rather than a proactive strategy. What the country critically needs is long-term energy mapping aligning with growth trajectory upon economic graduation. The budget delivers no concrete plan to move forward the energy stalemate to bring in industrial and economic revival. Without an efficient energy sector plan, we may end up with more banking-led deficit budget burdens with various unsolicited impacts.

In this circumstance, the urgency for an integrated energy and resource extraction plan becomes paramount, one that prioritises both local and offshore gas exploration. Additionally, there is a pressing need to establish an Energy Sector Finance Fund, low-cost external financing sources like IDB and ITFC against inadequate gas development funds, encourage technology transfer, and foster joint ventures of local and IoCs to accelerate local offshore exploration and sustainable energy security. Above all, an integrated and timely mapping of the energy sector is necessary to guide our economic trajectory after 2026, with a particular focus on the energy demands of the next 20 years across local industry, electricity, fertiliser, and other urgent needs.

News Link: FY26 Budget: Has Energy Crisis Been Overlooked?