The government has issued a US$200 million counter-guarantee to the central bank for financing oil imports by Bangladesh Petroleum Corporation (BPC), officials said.
A senior finance official said the fund would be sourced from the International Islamic Trade Finance Corporation (ITFC), which asked for a guarantee from the central bank and a counter- guarantee from the government.
"We have issued three state-guarantees of U$ 50 million U$50 and U$100 million in favour of the Bangladesh Bank (BB) to facilitate BPC's oil import and operations last week," Mohd. Rashedul Amin, Deputy Secretary of the finance ministry, told the FE.
The Finance Division under the ministry of finance has issued the guarantees Thursday last.
The division has approved the conditional guarantees against the ITFC loan, a high official of the finance division, who knows the development.
Earlier, the Energy and Mineral Resources Division had sought counter-guarantee for the ITFC loan from the division.
Under the conditions, the BPC, which secured Tk 30 billion in loan from the government, has to provide the amount to the exchequer by August, 2016.
Besides, liquidity position and outstanding loan that it will take under counter-guarantees will have to inform to the division within seven days of each month, according the proposal.
The counter-guarantee issued by the finance ministry will be considered a 'sovereign guarantee', the official said, explaining the government took the responsibility for repaying the amount itself to the ITFC if the petroleum corporation failed to pay back the borrowed money. The tenure of the loan is six months and total mark-up of the loan is 4.20 per cent annually, according to the Division.
In 2015, a total of U$1,000 million ($1.0 billion) was approved by the standing committee on non-concessional loan from the ITFC.
"Lending from third banks to open letter of credits (LCS) is time-consuming. As a result, the BPC, generally, takes loan from ITFC in importing crude oil," a General Manager of BPC told the FE.
It is mandatory for the corporation to report to the ministry on its portfolio on supplier's credits or any other short-term foreign loan.
The corporation will have to inform the ministry regularly about its credits if taken from local banks or financial institutions, says an office order of the finance ministry.
The corporation imported around 5.50 million tonnes of crude oil and refined oil products in 2015 combined.
Earlier, the state entity had incurred losses in buying fuel oils from the international market at higher rates and marketing to domestic consumers at cut prices.
Presently, it makes profit after oil price fell on the international market.
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