World Bank Support to Help Navigate Fuel Market Volatility in Bangladesh

OVERVIEW

• Financing overview: Additional financing for the Energy Sector Security Enhancement Project in Bangladesh
• Financing Amount: $350 million
• Approval Date: May 15, 2026

CONTEXT

Bangladesh relies on imported liquified natural gas (LNG) to meet electricity demand, particularly for power generation and industrial production. Disruptions in global energy markets due to the conflict in the Middle East have heightened price volatility and supply risks, placing pressure on foreign exchange reserves and public finances. A prolonged conflict in the Middle East would materially impact fuel and fertilizer supply and the poorest households would be hardest hit.

OBJECTIVES

The additional financing will help strengthen Bangladesh's energy security by facilitating cost-effective financing mechanisms to import LNG amid global fuel market volatility. It will scale up support to cover payments for LNG imports by Petrobangla, the state-owned oil and gas company.

The additional financing will help Petrobangla secure LNG supplies under longer-term contracts, reduce reliance on expensive spot market purchases, and support a more reliable and affordable electricity supply. Reliable and affordable energy generation will generate jobs, boost private sector growth and economy wide benefits.

FINANCING INSTRUMENT

The additional financing consists of an IDA payment guarantee-backed financing facility that will support payment security for LNG imports through standby letters of credit and short-term credit lines. These instruments are expected to help Bangladesh shift toward more predictable, longer-term LNG procurement arrangements while maintaining flexibility to respond to market disruptions.

ABOUT THE ENERGY SECTOR SECURITY ENHANCEMENT PROJECT

The original $350 million Energy Security Enhancement Project for Bangladesh was approved by the World Bank's Board of Executive Directors on June 18, 2025, and is scheduled to end on December 31, 2031.

QUOTES

Jean Pesme, World Bank Division Director for Bangladesh and Bhutan:

"The conflict in the Middle East has pushed up LNG prices and disrupted supply. As a net fuel and gas importing country, Bangladesh faces significant fiscal pressure to maintain its energy security and keep its economy running. As part of our broader dialogue with the authorities on energy and the response to the impacts of the war, the World Bank is stepping up its support to help Bangladesh maintain a stable supply of LNG imports, which is critical for protecting the economy and people from costly energy disruptions. By ensuring access to more reliable gas supplies, the additional financing will support electricity generation, industrial activity, and job creation."

Olayinka Edebiri, World Bank Senior Energy Expert and Task Team Leader of the project:

"As gas is a cheaper and less emissions-intensive energy source compared to other fuels, undisrupted LNG supply provides foundation for energy security in Bangladesh. It will also help generate fiscal savings by reducing dependence on more expensive liquid fuels.

CONTACTS

In Dhaka: Mehrin Ahmed Mahbub, [email protected]

In Washington: Diana Chung, [email protected]

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