Bangladesh has taken a fresh move to rebuild ties with the Islamic Development Bank (IsDB) as it sought a substantial US$3.0 billion credit from the middle-eastern donor to finance the imports of fuel, LNG and fertiliser in 2025, officials said on Saturday.
The government has recently sought the loan from the IsDB's commercial window ITFC for the next year, they said.
The Economic Relations Division (ERD) requested the ITFC (International Islamic Trade Finance) team, which visited Bangladesh last week, for extending the financial support in addition to its continuing lending in the next calendar year, ERD officials said.
"We have sought nearly an additional $1.0 billion for the next fiscal than the ITFC's $2.1 billion committed annual portfolio to Bangladesh in the year 2024. The lender has assured us of considering the additional financing," said a senior ERD official.
He said: "The last meeting with the ITFC team was the initial one for securing the fund commitment. If they agree, we will go for negotiations soon to confirm the next year's credit requirement."
Over the last few years, the support from the IsDB declined as the previous Sheikh Hasina's government maintained weak relations with the donors from the Islamic nations including the middle-eastern development, another ERD official said.
Securing the proposed loan will be a good gesture of rebuilding the fragile trust between the IsDB and Bangladesh, he added.
Under an agreement in February this year, the Jeddah-based IsDB's ITFC provided $2.1 billion worth of funds for purchasing fuel oil and LNG from the overseas market during this calendar year 2024.
Now the government is looking to get funds from the IsDB for purchasing fertiliser as Bangladesh needs a significant amount of the agricultural inputs for increasing its crop production.
In the last year (2023), the ITFC provided $1.40 billion worth of loan for importing the fuel.
Under the credit agreement, the ITFC will finance state-owned Bangladesh Petroleum Corporation (BPC) to import petroleum fuels and state-owned Petrobangla to import liquefied natural gas (LNG).
According to the government's plan, some $1.6 billion out of the $2.1 billion credit will be utilised to import petroleum fuel oils, while the remaining $500 million for LNG.
Bangladesh is one of the top borrowers of the Gulf lender, ITFC, in the energy sector. According to the ITFC, it bankrolled Bangladesh with the highest amount of $1.16 billion in 2022.
Bangladesh mostly depends on the imports of fuel oil, LNG and fertilizer, spending the highest amount for fuel oil imports.
The country annually spends around $5.0 billion for importing refined and crude oil from the gulf and other oil supplying countries.
The ITFC has so far approved trade finance proposals totaling nearly $16.50 billion for Bangladesh since its inception in 2008.
The private sector, including banks, takes trade finance from the middle-eastern lender.
The repayment period for the $2.1 billion loan has been set for one year, with an interest rate to be calculated using the Secured Overnight Financing Rate (SOFR) plus 2.0 per cent spread. This 2.0 per cent includes a 1.80 per cent interest rate and a 0.20 per cent administrative charge.
This administrative charge must be paid before releasing the loan. On October 10, the SOFR was at 5.34 per cent, which fluctuates daily.
Government officials said the country's energy import bills, including petroleum and LNG, stood at around $10 billion in the FY2023, with a similar amount expected for the last fiscal year ending in June 2024.
Local experts forecast that if Bangladesh continues relying on imports in this way, the energy bill could double by the year 2030.
In the last FY2023, Bangladesh's oil company - Bangladesh Petroleum Corporation (BPC) - imported 1.307 million metric tonnes (MT) of crude oil spending US$836.744 million, government statistics showed.
It also imports 4.388 million MT of Jet A-1, SKO, Mogas and HSD; while 0.6608 million MT of furnace oil at a total Tk 461.704 billion cost from different overseas suppliers for catering to the demands for the local market, the BPC data showed.
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