Sonali Bank, a state-owned public commercial bank, has charged additional money from the Finance Division to repay the foreign debt of the national flag carrier, Biman Bangladesh. The information was confirmed by the foreign currency rate circular published by the Bangladesh Bank.
The Ministry of Civil Aviation and Tourism has paid for two Boeing 787-9 Dreamliner aircrafts, a spear engine and an auxiliary power unit (APU) in US dollars (USD). The government has paid the 16th instalment of this debt in two phases to Sonali Bank, which then made the necessary payments to the concerned party.
The process involves the government paying the equivalent amount of Bangladeshi taka (BDT) matching the dollar amount to the public commercial bank, which then pays the recipient in USD.
As per regulation, a copy of Sonali Bank’s formal demand letter was attached to the proposal letter from the finance ministry issued by the civil aviation ministry regarding the loan repayment.
The bank's demand letter mentioned that for the 16th instalment, the amount was claimed on November 21, 2023, at a USD/BDT BC Selling Rate of Tk 111. However, on the payment date, USD/BDT BC Selling Rate was Tk 110.25 and Tk 110, respectively. This discrepancy resulted in an additional amount of Tk 1.1 crore being charged by the bank during the transaction.
Mistake or carelessness?
Repeated attempts made to contact Sonali Bank PLC Managing Director and CEO Md Afzal Karim regarding this issue, were unsuccessful.
Meanwhile, a Finance Division officer involved in the matter revealed that they had noticed the issue and collected the forex rate circular for that day from the central bank. The excess amount will now be deducted from Sonali Bank PLC.
When asked about the deduction process, the official explained, "The excess amount collected in the 16th instalment will be deducted from the amount due for the 17th instalment. We will investigate to determine whether this issue was caused by a mistake or carelessness."
Former chief economist of Bangladesh Bank and former director general of the Bangladesh Institute of Development Studies, Mustafa K Mujeri, told The Business Post, "These issues are considered financial irregularities. Both the Finance Division and Sonali Bank are responsible for this."
Mujeri, who is also the executive director of the Institute for Inclusive Finance and Development, explained, "Sonali Bank committed an irregularity by claiming more than the forex rate on the specified day. Similarly, the Finance Division acted improperly by withdrawing the funds without proper verification prior to release.
“Hence, neither organisation can evade responsibility,” he added. “However, it is not possible to determine if a crime has been committed at this stage. This is a matter for legal due process, which will be decided by the court.”
Dollar rates bite again
After analysing the letters mentioned above, it can be seen that in the 16th instalment, a total amount of $1.13 crore (USD/BDT BC Selling Rate of Tk 111) or Tk 125.43 crore was paid to Sonali Bank in two phases by the Finance Division. However, according to the forex circular rate of November 21, 2023, the USD/BDT BC Selling Rate was Tk 110.25 and Tk 110, respectively.
Besides, USD/BDT BC Selling Rate has been calculated at Tk 110 per dollar in the bank’s demand letter of the 17th instalment which is currently payable as evidenced by the forex rate circular dated on January 31 of this year.
According to Sonali Bank's report, due to the increase in dollar prices, Biman had to pay Tk 109 crore in 2022 for instalments of foreign payments made for the aircrafts’ purchase. After that, the bank has charged an additional Tk 1.11 crore in 2023, citing the high price of US dollars.
Those concerned with the matter have said that due to the increase in the USD prices, Biman will have to pay a significant extra amount for the arrears. The dollar price stood at Tk 84.90 in December 2018 when the loan was taken to buy the aircrafts. Currently, the price of USD has increased to Tk 110 due to the fluctuations in the international markets.
An inter-ministerial meeting was held in the Finance Division on November 7, 2011 regarding the financing of aircraft loan repayments. A summary had also been approved by the then finance minister based on the recommendations made by the meeting.
Consequently, a tripartite agreement between Biman Bangladesh Airlines Limited, Sonali Bank Limited and the Finance Division and a loan agreement between Biman Bangladesh Airlines Limited and Finance Division had been made at that time.
In the loan agreement, the entire amount provided by the government ($157.50 million + interest) is to be repaid by Bangladesh Biman at a 2 per cent interest rate over a period of 15 years (in quarterly instalments) with a 10-year grace period.
A point to be noted is that the loan interest rate is determined by adding 1.5 per cent to the three-month LIBOR rate (London Inter-Bank Offer Rate). At that time the LIBOR rate was 1.75 per cent. However, the LIBOR era is over and the Secured Overnight Financing Rate (SOFR) is now being used.
