Govt may approve costly $3.1bn loan as forex reserves shrink

The government is likely to approve a costly $3.1 billion non-concessional loan to mostly support fuel imports and ease the pressure on foreign reserves and the balance of payment.

The finance ministry will hold a meeting of the standing committee on non-concessional Loans (SCNCL) in this regard with Finance Minister AHM Mustafa Kamal in the chair.

According to the finance ministry, a total of nine projects including one for fuel import will receive the loan totalling $3.14 billion.

“The ministry of power and energy allowed us to procure $1.4 billion loan from the International Islamic Trade Finance Corporation (ITFC) to import fuels in 2022,” BPC chairman ABM Azad said on Wednesday.

He said BPC also procured $850 million non-concessional loan from the Jedda-based lender, adding that the loan will reduce pressure on forex reserves.

He added that BPC is under huge pressure to pay import bills. “We have provided Tk 70 billion in subsidies between February and June.

He, however, said the BPC opened 15-16 LCs each month to import fuel. “We have also borrowed $850 million from ITFC to meet local demand for fuel in 2021.

The SCNCL may also mobilize 93.1 million Euro from the Commerzbank Aktiengesellschaft of Germany consortium to implement a 150MW oil-fired power plant in Sreepur.

On the other hand, the government may borrow $117 million from the OPEC Fund for International Development (OFID) and IDB under the Covid-19 active response and expenditure support programme and the strategic preparedness and response programme to covid-19 pandemic (SPRP).

The government will also procure 200MG passenger coaches under tender financing under the non-concessional loan.

The government has already procured a $25 million loan to purchase food grains.        

Finance Minister AHM Mustafa Kamal has already sent a formal request to the IMF for a $4.5 billion loan.

The country’s import bills have already stood at $81.5 billion, up 39 per cent from a year earlier, according to data from Bangladesh Bank.

Foreign exchange reserves came down to $39.7 billion last week, enough to cover 5.4 months' import bills.