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Eminent economist Debapriya Bhattacharya has warned that Bangladesh’s recent reciprocal trade agreement with the United States could significantly constrain the country’s energy sourcing options, particularly amid mounting macroeconomic pressures and limited fiscal space ahead of the new budget.
Speaking at a media briefing organised by the Centre for Policy Dialogue (CPD) on Tuesday Debapriya, said clauses in the agreement restrict Bangladesh’s ability to trade with countries under US sanctions and label several economies as “non-market”, thereby complicating energy imports from alternative sources such as Russia and China.
“These legal ambiguities make a formal US waiver a prerequisite for accessing cheaper Russian oil, directly constraining multilateral trade flexibility during the crisis,” he said.
Bangladesh is seeking to import around 600,000 tonnes of oil from Russia and has requested clearance from Washington. However, the evolving geopolitical landscape is increasingly tying foreign policy decisions to economic management, raising concerns over future engagement with key trading partners.
He noted that surging global energy prices could raise Bangladesh’s annual energy costs by $4.8 billion, equivalent to about 1.1 percent of GDP, further widening deficits in the external accounts. Increased demand for dollars to finance fuel imports may accelerate depreciation of the taka, while regional instability could disrupt remittance inflows, particularly from Gulf countries that account for nearly half of total remittances.
“Increased fuel costs, if fully passed through, risk fuelling higher inflation,” he added.
Focusing on the upcoming national budget, Debapriya said the new government is preparing its first fiscal plan under a “hard budget constraint,” driven by structural weaknesses, incomplete reforms, and growing economic strain.
He outlined four key challenges shaping the budget. These include lingering structural issues and unfinished reforms from the previous administration, pressure to deliver electoral commitments while advancing critical reforms, limited fiscal space due to weak revenue mobilisation, and persistent external sector imbalances.
“Without sufficient resources, expanding the size and effectiveness of the budget becomes extremely difficult,” he said.
He also pointed to ongoing pressures on the balance of payments, including challenges related to remittances, exports, foreign direct investment, external assistance, and debt servicing.
Amid global uncertainties, including geopolitical tensions and rising energy prices, Debapriya stressed the need for disciplined fiscal management and strategic prioritisation of spending.
