Crisis may go in 8-9 months after polls

Nasrul Hamid tells FE on external payments setback

M AZIZUR RAHMAN | Published: December 30, 2023 22:44:55

The setback in external payments against energy- import bills is expected to be over within 8-9 months
after the country's general election slated for January 7, State Minister Nasrul Hamid has said, taking a cue from the central bank's report on recent increased inflow of US dollar.
"I, personally, feel that the crisis will be over within 8-9 months," he told the FE, based on the Bangladesh Bank's assurance of gradually overcoming the short-supply problem of the greenback.
Mr Hamid, who has been serving the Ministry of Power, Energy and Mineral Resources (MoPEMR) for over the past 10 years in two terms, said that the MoPEMR was also searching for alternative options, especially from Multilateral Investment Guarantee Agency (MIGA) of the World Bank, to overcome the setback.
The country has a payment obligation worth around US$1.0 billion per month, especially against imports of petroleum products and liquefied natural gas (LNG), and gas purchases from the international oil companies (IOCs) operating in the country.
"Payments of around $500-600 million every month can be manageable, but we are now getting less," he said, expressing his frustration that the overdue payments are now soaring at a compound rate. "Although we're somehow managing it now, we'll have to increase the payments to the suppliers."
To make the fuel prices at par with the international market, the state minister said, Bangladesh has planned to implement an automated dynamic fuel-pricing mechanism from March next year.
Prices of refined petroleum products will be fixed once in every month under the plan, he said.
Currently, the prices are fixed by the government through executive orders whenever it is necessary and the prices were adjusted latest on August 30, 2022.
Mr Hamid also expressed his view in favour of building a new crude oil refinery by the government to reduce cost at least by 15-20 per cent. The Eastern Refinery Ltd., the 55-year-old lone refinery of Bangladesh Petroleum Corporation (BPC), needs to be demolished, he added.
Regarding payment delays, Mr Hamid said the main problem now lies with the dearth in US dollars, not local currency.
Several petroleum products suppliers have delayed the scheduled cargoes and some others stopped deliveries as the BPC, the state-run primary oil importer, could not clear the dues amid sharp currency devaluation, a senior BPC official said.
Amid suspension of the scheduled deliveries, Bangladesh was on the verge of A-1 jet fuel scarcity this week, he added.
State-run Padma Oil Company Ltd, a wholly owned subsidiary of the BPC responsible for A-1 jet fuel management, informed the BPC on December 24 that they had A-1 jet fuel stock of 9,021 metric tonnes to meet demand for only a week until December 29, said the official, preferring anonymity.
The BPC could, however, avert the scarcity of A-1 jet fuel by making urgent payment worth $10 million and ensuring supply of around 22,000 mt of the aviation fuel by PetroChina on December 29, which will be sufficient to meet demand for next 15 days, he added.
The official also warned that the stock situation of other refined petroleum products might fall short if the overdue payments are not cleared soon. Most of the oil suppliers have written to the BPC over and again to clear the dues, he added.
The BPC now owes around $246 million to different suppliers of refined fuel products as of December 28, said the official.
Of the dues, PT Bumi Siak Pusako (BSP) of Indonesia will get $75.70 million, Vitol Asia Pte Ltd. $75 million, PETCO Trading Labuan Company Limited (PTLCL) of Malaysia $29 million, Emirates National Oil Company (Singapore) Pte. Ltd. (ENOC) $14 million, and Unipec Singapore Pte Ltd. $8.0 million, said the BPC official.
Bangladesh's national oil and gas company Petrobangla too is having difficulties in paying dues to LNG suppliers and international oil and gas companies, Mr Hamid said at an interview with S&P Global Commodity Insights.
The state-run agency has not been able to make regular payments to its two long-term LNG suppliers -- Qatargas and OQ Trading, previously known as Oman Trading International -- for several deliveries, S&P Global reported earlier. Payments to spot LNG suppliers are also delayed.
Petrobangla currently owes around $200 million to LNG suppliers and around $250 million to US oil and gas giant Chevron against gas purchases.
The central bank's measures over the past several months yielded positive results in reviving the country's foreign exchange reserves to some extent and fulfilling the target of net international reserves, or NIR, worth US$ 17.0 billion set by the International Monetary Fund (IMF) for December 2023, a senior BB official said.
The BB purchased around US$1.0 billion from different commercial banks over the past six months since July 1 last, including around $700 million purchased in the past three days, to meet the IMF set target, he added.
The BB had failed to achieve the previous target set by the IMF of maintaining a minimum NIR of $24.46 billion by June 30.
Bangladesh received the first tranche of the IMF loan of $476.2 million on January 30, with six more installments left.
The IMF board approved the second installment worth $681 million on December 12, which is yet to be disbursed.
Apart from raising foreign currency reserves, the IMF also asked for increasing the tax-GDP (gross domestic product) ratio by adopting a formula-based price adjustment mechanism for petroleum products.
During the IMF mission's latest review over various aspects of compliance, Bangladesh has assured them of meeting other conditions after the country's general election slated for the next week, the BB official said.
The South Asian country has been facing an acute dollar crisis since the beginning of the Russia-Ukraine war in February 2022.
The country's foreign currency had soared a record $48.6 billion in August 2021 from where it started slipping.
Azizjst@yahoo.com