Lenders, exporters turn difficult

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M Azizur Rahman
The country is now facing difficulty in mobilising funds to import fuel from the falling international oil market, as the conventional lenders are pushing hard to raise interest rates or showing apathy to lending, officials said Thursday.
The Jeddah-based Islamic Development Bank (IDB), the main fund provider for fuel import, has already increased the mark-up rate against the loan it provides to the state-owned Bangladesh Petroleum Corporation (BPC).
The IDB in late November announced its new mark-up rate -- the LIBOR (London Interbank Offered Rate) plus 2.25 per cent -- instead of the previous LIBOR plus 1.75 per cent for the latest tranche of its loan amounting to US$ 350 million.
For the next Hijri year of 1430 starting from January, 2009 the IDB has proposed a mark-up rate at LIBOR plus 2.50 per cent.
"Currently the BPC is borrowing from the IDB at LIBOR plus 1.75 per cent," BPC Chairman Anwarul Karim told the FE Sunday.
The LIBOR rate is now hovering around 4.5 per cent.
The rate was 5.44 per cent in January 2007, which came down to 4.22 per cent in January 2008 before going down to only 2.48 per cent in April, 2008 due to the global economic recession.
Earlier in October 2008, the IDB had proposed to set a fixed mark-up rate of 5.5 per cent shifting from its LIBOR-based rate.
The LIBOR rate was on decline during that time.
The energy ministry was, however, indifferent to the IDB proposal and this prompted the bank to backtrack.
The IDB provided $ 1.38 billion for the BPC in the past Hijri calendar year that ended in January 2008.
The BPC borrowed around $1.0 billion until now in the ongoing 1429 Hijri year from the IDB.
Besides, the Bangladesh Bank that provided US$ 300 million to import fuel refused to provide credit to BPC this year, said the BPC chairman.
The BPC is yet to get a positive response from the Standard Charted Bank that provided loan worth $250 million earlier.
The negotiation with the European Bank -- BNP Paribas -- to arrange credit was not fruitful.
The Kuwait Petroleum Corporation (KPC), the major source of fuel import by BPC, is still sticking to its increased rate of premium for future supply.
The BPC until now was importing nearly 2.0 million tonnes of refined oil, almost 70 per cent of total demand for petroleum products, annually.
The KPC last year raised the premiums of diesel to $6.6 per barrel from $5.4, kerosene and jet fuel to $7.0 from $5.65 and petroleum with high octane to $8.1 from the previous $7.7 per barrel.
The hike in premium was the largest by the KPC in a year.
Earlier, it used to increase or decrease premiums by 5 to 50 cents per barrel, the BPC officials said.
The KPC also has imposed stringent conditions on opening letter of credit (L/C) against fuel import from the company.
The company has refused eight ship ments of fuel from April 2008 to December 2008, due to what it said improper L/C.
The KPC is now favouring L/C opening by foreign banks though it used to allow L/Cs of local banks before, the BPC officials alleged.
The BPC, however, is searching for new sources to import fuel from at reduced credit rates or premium rates compared to the conventional sources.
"We have recently had negotiation with Malaysian state-owned Petronus Trading Corporation SDNBSD (Petco) to import a significant quantity of fuel at a lower premium rate," the BPC chairman said.
The premium rate is lower than the current $ 6.25 per barrel for gasoline and $ 6.65 for kerosene, he said declining to mention the actual rate.
The BPC also initiated fuel import from the Maldives at the premium rate of $5.19 a barrel for diesel, $5.60 for jet fuel and $7.50 for octane.
The Corporation is also searching for new sources in the United Arab Emirates (UAE) for fuel import, the BPC official said.
Currently the country's total demand for refined and crude oil is around 3.65 million tonnes annually.