The Bangladesh government has decided to make partial advance payments for the Rooppur Nuclear Power Plant (RNPP) project in Bangladeshi currency instead of US dollars. This decision is due to US sanctions on the contractor Atomstroyexport’s bank, Vnesheconombank and the ongoing USD shortage in Bangladesh.
The Project Implementation Committee (PIC) approved this change, allowing 10 per cent of the total contract value to be paid to the Russian contractor in local currency, amounting to approximately $15 million, according to the Ministry of Science and Technology.
The Bangladesh Atomic Energy Commission said the country is required to pay 10 per cent of the total annual allocation for the Rooppur project. The PIC meeting on June 2 discussed and recommended this new payment method, which was agreed upon to ensure the project's continuity amid current financial constraints.
The decision to pay part of the 10 per cent advance in Bangladeshi currency was initially made during the seventh Joint Coordination Committee (JCC) meeting in 2023. An additional contract under the Atomstroyexport General Contract was signed to facilitate this.
According to clause 1 of the signed contract, Atomstroyexport requested payment of $15 million out of the total $64.515 million advance for the first quarter of 2023 in Bangladeshi currency. The additional contract does not specify the exact portion of the amount that can be paid in Taka, allowing the contractor to make regular demands based on its needs.
Documents from the Project Implementation Committee (PIC) meeting, obtained by The Business Post, reveal that the contract value for the RNPP construction is $12.65 billion. Of this amount, 90 per cent ($11.38 billion) is covered by Russian loan assistance, while the remaining 10 per cent ($1.265 billion) is to be paid in advance by the Bangladesh government.
According to Article 4, clause 4.2 of the General Contract and Table 1 of the Construction Financing Schedule (Appendix 10), $1.265 billion is to be paid in 32 instalments from July 2016 to June 2024. Up to 2021, 22 instalments totalling $1,074.05 million have been paid to Vnesheconombank, upon receipt of the necessary invoices and bank guarantees, with approvals from the Ministry of Finance and the administrative ministry.
Sources from the Ministry of Science and Technology stated that the ongoing conflict between Russia and Ukraine has led to Western sanctions on the Russian contractor's bank, halting the 10 per cent advance payment process. To ensure the project's progress, a meeting chaired by the Ministry of Science and Technology's secretary on April 17, 2022, decided to open a foreign currency (FC) account in the name of JSC Atomstroyexport at Sonali Bank PLC, which was approved by Bangladesh Bank on May 25, 2022.
Through this foreign currency account, $82.225 million has been paid in four instalments for 2022. Sonali Bank has been advised to pay JSC Atomstroyexport $103.73 million, which includes $97.405 million for the four quarters of 2023 and $6.325 million for the first quarter of 2024. However, this payment has not yet been made.
Meanwhile, Sonali Bank is facing a severe dollar shortage and is not receiving the necessary dollars from the central bank. A senior official at Sonali Bank stated that this is increasing the bank's debt to foreign banks and harming its reputation in international transactions.
The official also mentioned that the ongoing dollar crisis is making it difficult for Sonali Bank to process letters of credit (LC), especially for government imports. As of June 11, Sonali Bank's outstanding import liabilities to various international banks amounted to $755 million.
Deputy Managing Director of Sonali Bank Subhash Chandra Das wrote a letter to AKM Kamruzzaman, Director of the Forex Reserve and Treasury Management Department at Bangladesh Bank, on June 11, requesting urgent assistance in supplying the necessary dollars to settle the outstanding 72 import LCs.
