Japan to give $312m loan for energy security, economic resilience

Japan will provide Bangladesh a concessional loan of around $312 million to help bolster energy security and economic resilience as the conflict in the Middle East places growing strain on the country’s finances.

To that end, officials from both sides signed the “Emergency Support Loan for Enhancing Economic Resilience and Stable Energy Supply” agreement in Dhaka yesterday, according to a press statement.

Md Shahriar Kader Siddiky, secretary of the Economic Relations Division (ERD), and Takahashi Junko, chief representative of the Japan International Cooperation Agency (Jica) Bangladesh Office, signed the documents on behalf of their respective sides at the ERD in Sher-e-Bangla Nagar.

The loan -- equivalent to 50 billion yen and to be co-financed by the Asian Development Bank (ADB) -- is intended to help Bangladesh address socio-economic pressures stemming from higher energy prices and supply uncertainties linked to the Middle East conflict involving the US, Israel and Iran.

The signing comes as Bangladesh faces mounting fiscal pressure from the conflict. Finance Minister Amir Khosru Mahmud Chowdhury told parliament yesterday that preliminary estimates suggest the country will require an additional Tk 42,600 crore in subsidies for the oil, gas, electricity and fertiliser sectors by June of FY2025-26.

Preliminary estimates suggest the country will require an additional Tk 42,600 crore in subsidies for oil, gas, electricity and fertiliser sectors by June, finance minister said in parliament yesterday

He said the conflict has already affected fuel and fertiliser prices, import and transport costs, inflation, foreign exchange management, remittances and overseas employment. The Middle East also remains a key destination for Bangladeshi migrant workers, the minister noted, warning that prolonged instability could threaten remittance inflows and job opportunities abroad.

The Japanese loan is part of a broader push for external budget support.

The Daily Star reported on May 3 that Bangladesh expects around $3 billion from five multilateral and bilateral lenders by mid-June, including $500 million from Jica. The effort followed a government assessment estimating that an additional $4 billion in emergency budget support would be needed between May and June to offset higher fuel and fertiliser import costs resulting from the conflict.

The loan also marks the first Japanese official development assistance (ODA) project under POWERR Asia, a regional initiative launched by Japanese Prime Minister Takaichi Sanae in April. The initiative aims to strengthen energy and resource resilience across the region through emergency support and longer-term cooperation in energy procurement, supply-chain stability, diversification and industrial resilience.

According to the Japanese Embassy, the financing will also support the government’s efforts to strengthen fiscal management, improve the investment climate and maintain a stable energy supply -- areas considered critical to sustaining economic stability and long-term growth.

Speaking at yesterday’s signing ceremony, Japanese Ambassador Saida Shinichi, who exchanged notes for the loan with Siddiky, described the agreement as a reflection of Japan’s enduring commitment to Bangladesh at a critical juncture.

He called Bangladesh an important strategic partner and reaffirmed Japan’s support for the country’s stability, prosperity and sustainable development.