Govt, WB sign four deals to secure $350m loans

The Bangladesh government and the World Bank's (WB) soft-lending arm International Development Association (IDA) recently signed four agreements with relevant stakeholders to secure loans of $350 million.
State-run Petrobangla had inked project agreement and facility agreement with the IDA and three foreign banks, while the IDA signed guarantee agreement and indemnity agreement with the lenders' agent - Germany's Deutsche Bank - and the Finance Division under the Ministry of Finance, Petrobangla Director for Finance AKM Mizanur Rahman told The Financial Express on Tuesday.
He said the deals would make Bangladesh's Liquefied Natural Gas (LNG) import payments easier from 2026, with the World Bank's loan guarantee of $350 million to facilitate the imports.
In June, the World Bank's Board of Executive Directors approved the Energy Sector Security Enhancement Project involving $350 million to help Bangladesh import LNG, he said.
The project aims to improve Bangladesh's gas supply security by facilitating access to affordable financing for LNG imports.
It will use the IDA guarantee to mobilise up to $2.1 billion in private capital over the next seven years to support LNG imports, according to Rahman.
Petrobangla also inked deals with eight local and foreign commercial banks to facilitate the imports of LNG, backed by the repayment guarantee from the World Bank, as Bangladesh seeks to secure its future energy supply and ease pressure on foreign exchange reserves.
Following a competitive tender, Petrobangla selected three foreign banks - Germany's Deutsche Bank, Development Bank of Singapore, and Standard Chartered - and five local ones - Prime, Eastern, Dutch-Bangla, City, and BRAC - to provide financial support for LNG imports starting in 2026.
The selected banks would form a consortium to provide Petrobangla with a stand-by letter of credit (SBLC) involving $250 million, valid for up to 12 months, in favour of long-term LNG suppliers under the existing sales and purchase agreements (SPAs), said Rahman.
They will also offer another SBLC involving $50 million, valid for up to 90 days, for spot LNG suppliers under master sales and purchase agreements (MSPAs).
In addition, the banks would provide a $50 million credit line in the form of short-term loans, with up to a 12-month tenor, to help Petrobangla meet payment obligations for specific LNG cargoes under the SPAs and MSPAs, he said.
The IDA will guarantee Petrobangla's repayment obligations to the banks for loans and SBLC draws, covering up to $350 million in principal and accrued interests.
However, the guarantee would not cover penalties, default interest, or similar charges, Rahman added.
The Bangladesh government has extended a sovereign and indemnity guarantee to the World Bank to support Petrobangla's costly LNG imports, ensuring payment if the state-run company fails to repay its loans on time.
A senior official of the Finance Division said the finance ministry provided the counter-guarantee or indemnity to the multilateral donor agency to reimburse funds, if needed.
The World Bank's repayment guarantee is thus backed firmly by the Ministry of Finance's sovereign guarantee.
This loan facility marks the first time the World Bank has extended assistance to Bangladesh through a guarantee facility specifically for LNG imports.
The multilateral lender typically provides development project loans and budgetary support to the country.
The IDA guarantee is expected to enhance Petrobangla's credit profile, enabling it to secure LNG supplies more effectively amid foreign currency constraints.
The World Bank has noted that LNG now accounts for over a quarter of Bangladesh's total gas consumption, with imports costing around $4.5 billion annually.
Approximately 42 per cent of the country's gas is consumed by the power sector, making LNG supply disruptions a major risk to electricity generation and overall economic activity, it says.

Azizjst@yahoo.com