STAR BUSINESS REPORT

Bangladesh is facing intensifying energy-related risks with limited policy flexibility, as global supply disruptions and geopolitical tensions constrain its ability to manage shocks, according to a recent report by S&P Global Ratings.

The report by the American credit rating agency highlights that countries such as Bangladesh, Pakistan, and Sri Lanka -- despite showing some signs of macroeconomic recovery -- remain at “greater risk” due to their heavy reliance on imported fuel and weaker external positions.

“These countries are particularly vulnerable to rising oil prices and potential supply disruptions,” states the report published last week.

Bangladesh faces mounting growth, inflation, and external risks if the spike in energy prices endures longer than currently anticipated, it adds.

The duration of the US-Israel war on Iran and the associated price shock, as well as the physical availability of fuel supplies, will be key determinants of the impact on the sovereign’s creditworthiness, the report notes.

Higher fuel prices are likely to stall the gradual decline in inflation over the next three to six months and could weigh on recovery momentum.

Nearly 50 percent of Bangladesh’s electricity generation is gas-fired, and almost a quarter of its gas needs are met through imports.

Meanwhile, the economy is almost entirely reliant on imports for crude and refined oil products.

Oil supply reserves are likely to last less than one month, after which measures to curb consumption may become more pronounced if imports remain constrained.

While the government and national energy companies have recently secured additional supplies of gas, diesel, and petrol, availability could become scarcer if the conflict continues.

Officials have moved quickly to implement measures aimed at offsetting the impact of higher fuel prices.

These include a cap on retail fuel prices, a temporary rationing mechanism, cuts to operations at fertiliser plants to prioritise gas supply to power plants, and early school closures to manage energy consumption.