IsDB okays $300m loan for Petrobangla to import oil

Islamic Development Bank (IsDB) has decided to provide $300 million to Petrobangla for importing fuel to ensure smooth supply fuel in the country.

Petrobangla Chairman Md Shamsur Rahman on Monday sent a letter to the Finance Secretary Abdur Rouf Talukder to take necessary measures regarding draft intimation notice of Islamic Trade Finance Corporation (ITFC), Jeddah-based trade financing arm of Islamic Development Bank.

An official of finance division not to be named said as the demand for fuel oil declined, so the government cuts on demand for loan from ITFC for import.

Petrobangla will take only $309 million loan instead of $800 million from ITFC, official said.

According to the Bangladesh Petroleum Corporation (BPC) the demand for fuel in Bangladesh has dropped from 18,000 tonnes per day to 6,000 tonnes due to the nationwide shutdown since March 26,

A 67 percent decline in demand is not surprising as demand for oil around the world has dropped by 20 percent. But later the demand for consumption of fuel oil is not normal. 

Currently most of the aviation and inland transports across the globe is closed, with motorists staying off the roads due to the coronavirus pandemic.

Petrobangla chairman’s letter said to ease pressure of foreign currency in the country,

The government has signed a $1,000 million loan deal with the ITFC to import fuel this year. 

The government will initially take $800 million loan which was approved by the standing committee of non-concessional loan on 4 November 2019 with an interest rate of 4.05 percent, letter said.

The letter further said the ITFC usually charges 4.5 percent interest on loans for a six-month tenure. However, from next year the organisation will lower the interest to 4.05 percent.

Bangladesh has been taking loans from the Saudi Arabia-based ITFC for a long time to import fossil fuel.

Meanwhile, the Bangladesh Petroleum Corporation has placed a requirement for $1,200 million to supply fuel and the requirement amounts to $2-3 billion annually.

Bangladesh has an annual demand for 60 lakh tonnes of fuel. Eastern Refinery Ltd, the only oil refinery in the country, refines 15 lakh tonnes of oil a year. The Bangladesh Petroleum Corporation imports the remaining 45 lakh tonnes, which cost an extra Tk 6 per litre.

A project that was undertaken to increase capacity of the Eastern Refinery, which now refine 30 lakh tonnes is at present, is in a limbo due to lack of funds. 

ask/wi