BANGLADESH is grappling with overdue fertiliser and energy bills, driven by $800 million in unpaid dues to international suppliers and compounded by limited foreign reserves and inflation. These challenges, worsened by poor decisions of the previous government, such as costly, poorly planned projects like the Adani Power deal and the Rupsha Power Plant, have left the interim government with significant financial burdens. Fertiliser shortages threaten the boro rice season, which accounts for over half of annual rice production, risking a 10 per cent yield drop, a three-million-tonne shortfall, and a 15鈥�20 per cent rise in rice prices. In energy, Adani Power has halved its supply due to unpaid bills, and the Rupsha Power Plant remains non-operational, causing load-shedding that disrupts households and businesses. With foreign reserves below $20 billion, barely covering four months of imports, securing critical supplies is increasingly difficult, especially as Ramadan and peak agricultural activities approach.
With the boro rice season underway and Ramadan approaching, quick and practical actions are needed to avoid further disruptions.
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Settle overdue payments
BANGLADESH鈥橲 immediate priority is to settle overdue payments to ensure a stable supply of fertilisers and energy. The Bangladesh Chemical Industries Corporation owes $800 million to international fertiliser suppliers, delaying shipments crucial for the boro rice season. Partial payments of at least 50 per cent of the outstanding dues could unlock shipments and prevent a 10 per cent decline in boro production, which would result in a three-million-tonne shortfall and cause rice prices to rise by 15鈥�20 per cent. Similarly, Adani Power, which supplies 10 per cent of Bangladesh鈥檚 electricity, has halved its supply due to unpaid bills of $800 million. Clearing a portion of these dues could restore full energy supply and avoid significant disruptions during Ramadan when electricity demand is high.
To fund these payments, Bangladesh can seek emergency loans from development partners like the Asian Development Bank or World Bank. These institutions have a history of offering quick-disbursing emergency loans, as seen in ADB鈥檚 $250 million package to Pakistan in 2020. Additionally, Bangladesh could issue short-term government bonds targeted at local and expatriate investors. India used a similar strategy during its 1991 economic crisis, raising critical funds from its diaspora through bonds.
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Use resources more efficiently
EFFICIENT resource use is vital for reducing costs without requiring significant new investments. In agriculture, improving irrigation techniques like canal rehabilitation and drip irrigation can cut electricity demand by 15鈥�20 per cent. Vietnam鈥檚 adoption of similar practices reduced water usage by 20鈥�30 per cent without affecting yields, saving millions in energy and operational costs. If Bangladesh adopts such measures, it could save $100 million annually in energy costs associated with irrigation.
In urban areas, incentivising off-peak electricity usage can help balance grid load. South Africa introduced time-of-use electricity tariffs in 2021, which cut peak demand by 10 per cent by encouraging consumers to shift usage to non-peak hours. Bangladesh can replicate this strategy by offering discounted rates for nighttime electricity usage, particularly for industries and commercial establishments, easing pressure on the grid during high-demand periods like Ramadan.
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Renegotiate energy agreements
UNFAVOURABLE energy contracts, such as the Adani Power deal, need urgent renegotiation. Flexible payment terms and cost reductions could help align these agreements with Bangladesh鈥檚 current financial realities. Pakistan renegotiated 47 energy agreements in 2020, saving over $1 billion annually by securing deferred payment schedules and reducing tariffs by up to 20 per cent. Bangladesh could achieve similar results, potentially saving $150 million annually by negotiating lower tariffs and more flexible payment terms. This would provide immediate relief while signalling to other suppliers that Bangladesh is serious about managing its financial obligations sustainably.
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Boost local fertiliser production
REDUCING dependency on imported fertilisers is a long-term solution to Bangladesh鈥檚 recurring crises. Currently, the country imports 60 per cent of its fertiliser needs, but upgrading domestic plants like those in Ghorashal and Ashuganj could increase production by 10鈥�15 per cent, saving $200鈥�$300 million annually. India鈥檚 successful modernisation of its Gorakhpur fertiliser plant in 2018 doubled its output, reducing imports by 1.2 million tonnes per year.
To fund these upgrades, Bangladesh can engage in public-private partnerships. Vietnam has successfully used public-private partnerships to modernise its fertiliser industry, attracting private investment and improving operational efficiency. Besides financial benefits, these upgrades would create jobs, strengthen the local supply chain, and enhance agricultural resilience by ensuring a steady supply of fertilisers.
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Strengthen foreign reserves
STRENGTHENING foreign reserves is essential for maintaining import capacity and stabilising the economy. Bangladesh鈥檚 reserves currently stand at $20 billion, enough for only four months of imports. Increasing remittance inflows is one way to boost reserves. Pakistan鈥檚 Roshan Digital Account, which offers convenient digital platforms and reduced fees for expatriates, increased remittance inflows by 25 per cent in one year. Bangladesh could replicate this model to encourage its large expatriate workforce to send more money home, potentially raising remittances by $2 billion annually.
Exports, particularly from the ready-made garments sector, can also bolster reserves. Targeting new markets like the European Union under the Generalised Scheme of Preferences Plus (GSP+) framework could increase RMG exports by 10 per cent, adding $3 billion annually. Diversifying into high-value garments would further enhance export revenues, helping Bangladesh reduce its reliance on low-margin products.
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Ensure timely fertiliser delivery
TIMELY fertiliser delivery is crucial to maintaining agricultural productivity. Delays in distribution can lead to reduced yields and increased costs for farmers. Establishing regional storage hubs and implementing digital platforms to monitor fertiliser distribution can address these issues. Pakistan鈥檚 e-monitoring system for fertilisers reduced delays by 30 per cent and curtailed black-market sales. Bangladesh could adopt a similar system, using real-time tracking to ensure fertilisers are distributed equitably and efficiently, especially during critical planting seasons like boro.
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Work with international partners
INTERNATIONAL partnerships can provide both immediate relief and long-term stability. Concessional loans or deferred payment agreements from nations like China, Saudi Arabia or Qatar could help alleviate financial pressures. Sri Lanka secured a $1 billion concessional loan from China during its financial crisis in 2021, providing much-needed relief for imports.
Currency swap agreements with trading partners like China or India could also reduce reliance on the US dollar, lowering import costs. India and Japan鈥檚 $3.5 billion currency swap agreement in 2018 helped stabilise India鈥檚 foreign exchange reserves during a challenging period. Bangladesh could pursue similar arrangements to enhance its financial flexibility and reduce exposure to exchange rate volatility.
Bangladesh鈥檚 fertiliser and energy crisis is a serious challenge, but it is manageable with the right approach. Settling overdue payments, improving resource efficiency, and renegotiating contracts are immediate steps that can stabilise the situation. Long-term strategies like enhancing local production and strengthening foreign reserves will help ensure sustainable growth. While the previous government鈥檚 poor planning and lack of foresight have contributed to this situation, the interim government now has the opportunity to turn this crisis into a chance for meaningful reform. Pragmatic actions today can build a stronger and more self-reliant economy for the future.
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Mostafizur Rahman is a research officer in the department of economics at North South University.
