AIIB Assistance Uncertain, Fuel Market Volatility Increases Pressure on Budget Implementation

Staff Reporter

New concerns have emerged regarding the implementation of the current fiscal year’s budget amid the ongoing war situation in the Middle East and instability in the international fuel market. In this context, the possibility of not receiving the nearly 900 million US dollars in budget support promised by the China-led Asian Infrastructure Investment Bank (AIIB) within the scheduled time is further complicating the situation.

This has raised indications of increasing pressure on foreign exchange reserves and overall economic management, according to concerned officials.Multiple sources in the Finance Division say that under two programmes — one on climate-resilient urban services and the other on energy sector reform — there was a plan to receive a large amount of budget support from AIIB in the 2025-26 fiscal year. However, due to lack of policy preparedness and procedural complications, receiving the funds by June has now become uncertain. This has created risks of increased pressure in managing the budget deficit and foreign exchange.

Former Finance Secretary Mohammad Muslim Chowdhury said that if programme-based budget support had been received on time, it would have brought relief to the reserves. But in the current reality, that possibility has become slim.In his view, in this situation, it is essential to take initiatives to collect funds from alternative sources while strictly prioritizing expenditure management.

According to Finance Division data, there is a plan to receive approximately 1.5 billion dollars over three years under the ‘Climate-Resilient Efficient and Clean Energy (CRECE)’ programme and around 800 million dollars under the ‘Water Resilience and Climate-Smart Urban Service Delivery’ programme. A significant portion of this was expected to be disbursed in the current fiscal year, but the reality now indicates otherwise.

Meanwhile, the conflict in the Middle East surrounding the United States, Israel, and Iran has created new risks on the international stage. Its impact has pushed global fuel prices upward, directly affecting the country’s import costs, fuel subsidies, and foreign exchange reserves. According to concerned officials, if oil prices remain high for a prolonged period, the subsidy burden in the budget could increase significantly.

In this context, uncertainty has also arisen regarding the expected assistance from development partners.In the current fiscal year, efforts are underway to secure additional financing alongside the assistance committed by the Asian Development Bank (ADB) and the International Monetary Fund (IMF). The government has requested the IMF to increase its support, with hopes that total assistance could reach 1 billion dollars. Positive responses are also expected from the World Bank.

However, economists believe that while bringing loans or assistance from external sources may help manage short-term pressure, sustainable solutions will not be possible without increasing revenue capacity and maintaining expenditure discipline in the long run. In particular, there is no alternative to caution in taking up large projects, reducing unnecessary expenditure, and improving efficiency in the energy sector.