BB turns down MGI bid for $80m IFC loan to expand shipping fleet

Bangladesh Bank (BB) has declined a proposal that would have allowed Meghna Group of Industries (MGI) to obtain an $80 million loan from the International Finance Corporation (IFC) for acquiring four new ships, citing concerns over risks linked to foreign currency borrowing.

Central bank officials reportedly told the media foreign loans are subject to close scrutiny because repayment obligations are denominated in foreign currency.

According to BB, if a borrower fails to meet those obligations, the resulting pressure could ultimately affect the country's financial system.

Arief Hossain Khan, executive director and spokesperson for Bangladesh Bank, said the central bank generally encourages foreign direct investment and equity participation but remains cautious about external debt.

He noted that businesses serving mainly the domestic market may not generate sufficient foreign exchange earnings to repay overseas loans, making such financing proposals riskier.

The loan proposal was submitted through Modhumoti Bank, which sought a no-objection certificate (NOC) from the central bank on behalf of MGI.

The approval was required because the company concerned operates under the Bangladesh Economic Zones Authority (BEZA), under whose framework foreign borrowing requires BB clearance.

A senior central bank official reportedly said the application was rejected after evaluating the repayment risks associated with the proposed borrowing.

Responding to the decision, MGI Chairman and Managing Director Mostafa Kamal told the media the conglomerate had already secured IFC approval after complying with all conditions required by the international lender.

He said the planned financing was intended to support the purchase of four vessels and added that the group has adequate foreign currency earnings to meet repayment obligations. However, the company did not receive the NOC needed to proceed with the loan.

MGI has been engaged in international shipping operations since 2010. The group currently operates 145 vessels, including 110 owned ships.

The central bank's decision comes shortly after authorities approved a separate IFC-backed financing arrangement involving Popular Pharmaceuticals.

The BIDA scrutiny committee on foreign loans and suppliers' credit approved a $30 million facility for the company at its 188th meeting on 29 April.