Right before the announcement of the national budget, the government has delivered a sharp blow to consumers by aggressively hiking the prices of electricity and fuel.
This sudden energy shock arrives just as the administration is finalizing a massive Tk938,000 crore fiscal blueprint for FY27.
Facing deep revenue shortfalls and escalating foreign debt obligations, state planners have opted to cut subsidies, immediately triggering a chain reaction of rising costs across the economy.
Economists warn that introducing these major utility hikes right before the budget will make it much more difficult to achieve inflation targets.
With consumer wallets already strained by a weak macroeconomy, managing public expectations while servicing heavy debt burdens has become the first major trial for the newly elected administration.
Scheduled for presentation in Parliament on June 11 by Finance Minister Amir Khosru Mahmud Chowdhury, the proposed budget scales up spending by 19% over the current year's Tk790,000 crore baseline.
While state planners pitch this historic expansion as a roadmap for job creation, social safety net expansions, and economic recovery, analysts question its execution.
Deep revenue shortfalls, lagging private sector capital, and slowing foreign aid inflows continue to restrict financial flexibility.
The consumer price index remains a severe pain point, with inflation hitting 9.04% in April.
While the government aims to cool inflation to 7.5% next fiscal year, the recent pre-budget energy adjustments could put that goal entirely out of reach.
The Bangladesh Energy Regulatory Commission (BERC) raised bulk electricity tariffs by 19.85% and retail consumer rates by 16.68%, alongside a 24% hike in transmission charges.
Concurrently, liquid fuel prices saw a sudden Tk5 per liter increase for octane, petrol, and kerosene, driven by rising import costs and currency depreciation.
BERC chairman Jalal Ahmed admitted that the decision was rushed ahead of the budget, without a comprehensive assessment of how these overlapping hikes would impact public living costs.
Years of relying on external borrowing to finance megaprojects have locked the country into a steep repayment cycle.
Data from the Economic Relations Division (ERD) shows that external debt-servicing outlays climbed to $3.80 billion during the July–April window, up 8.41% from the $3.50 billion logged during the same period last fiscal year.
Concurrently, foreign loan disbursements met only 53.84% of their target ($4.23 billion), alongside a drop in new aid pledges.
Budget specialists project that foreign debt servicing alone will consume Tk46,000 crore in the upcoming fiscal year.
This heavy debt burden threatens to crowd out essential public funding for health, education, and infrastructure.
Rising business anxieties
Economists point out that increasing utility costs triggers an immediate chain reaction across the entire economy, raising costs across multiple sectors:
- Manufacturing & Steel: Doubled energy overheads increase factory production costs, squeezing corporate margins.
- Logistics & Transport: Higher fuel costs drive up freight fees, increasing retail prices for daily commodities.
- Export Competitiveness: The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) warned that rising utility bills weaken the global cost competitiveness of local garment exports.
- Agriculture: Increased power costs drive up irrigation costs, threatening crop yields and food production.
The proposed budget carries a record deficit of Tk243,000 crore.
To bridge this multi-billion Taka funding gap, the government plans to borrow Tk112,000 crore directly from the domestic banking system, alongside Tk15,000 crore from non-bank instruments and Tk116,000 crore via external loan lines.
Financial analysts express concern that such heavy reliance on central bank borrowing will crowd out credit for private businesses, putting a damper on investment, industrial expansion, and employment generation.
