Volatile Global LNG Market and Its Impact on Public Spending in Social Sectors: Case of Bangladesh

Natural gas supplied from domestic sources has historically dominated the energy landscape in Bangladesh. With the decreasing supply of domestic natural gas and increasing demand for gas and other energies in major economic activities, including power, Bangladesh had no choice but to use imported Liquefied Natural Gas (LNG) to meet the prevailing demand. Over the years, imported natural gas has been creating a fiscal burden on the economy. The government’s fiscal pressure owing to imported LNG has reached its new height because of the Russia-Ukraine war. Due to the government’s financial stress, the additional need for subsidies to cover LNG costs would have several negative effects on the government’s ability to apportion the budget funds. Against this backdrop, it is important to learn about how Bangladesh’s demand for LNG imports has grown over the past five years and how much has the cost and subsidy increased in this sector. What will the market for LNG import look like in the next five years? What are the potential effects of an increase in LNG subsidies on Bangladesh’s financial situation, pressure on the budget, and subsidies in the food and agriculture sector? The objectives of this study are threefold- (a) to estimate the amount of subsidy needed for the import of LNG over the next three years; (b) to highlight any prospective adverse effects of utilising extra subsidies for imports of LNG at higher import prices, especially with consideration to the social sectors, and (c) to present a set of suggestions for a medium to long-term perspective to address the concerns of the social sectors.