Borrowing from the International Islamic Trade Finance Corporation (ITFC) to import petroleum products has dropped to less than half over the past three years, although the country's fuel imports rose significantly.
Officials said the plummeting oil prices on the international market contributed largely to the decrease in the amount of loan.
State-run Bangladesh Petroleum Corporation (BPC), which borrowed US$2.6 billion in 2012 to foot the oil-import bill, negotiated with the ITFC last week for a loan of US$1.0 billion for 2015. It represents a fall by 61.53 per cent in the annual borrowing, a senior BPC official told the FE.
In 2013, the BPC had borrowed $2.2 billion from the ITFC to meet petroleum-import costs.
The loan amount for 2015 is, however, 16.66 per cent lower than that of 2014, when the BPC took US$1.2 billion from the ITFC--the lending arm of the Islamic Development Bank Group, he added.
The BPC negotiated the interest rate at 4.2 per cent for 2015, down by 0.3 percentage point from the previous year's 4.5 per cent.
The interest rate against the loan from the ITFC also fell 20.75 per cent to 4.2 per cent in 2015 from 5.3 per cent in 2012.
The state-run fuel import and marketing monopoly has planned to import around 5.81 million tonnes of petroleum products--crude and refined oil combined--in the current calendar year to meet a mounting demand on the local market.
The BPC had imported around 5.0 million tonnes of petroleum during 2012.
Officials said the lower prices of oil on the international market, coupled with a recommendation from the International Monetary Fund (IMF) for lowering the borrowing, prompted the government to negotiate for lower amount of oil credits.
Brent crude, the global oil benchmarks, hit the lowest since 2009 last month, and amounted to less than half their June levels, with Brent crude futures dropping by $2.06 a barrel to $48.90.
As per the IMF recommendation, the indicative target of BPC's external borrowing would have to be up to $775 million, said the official.
The IMF tagged the 'condition' with the release of its $982.5 million fund under the Extended Credit Facility (ECF) of the lender although several tranches have already been released.
The ITFC provides loan based on the Islamic calendar -- Hijri year. And under Islamic financing, interest is forbidden.
The BPC also has syndication loan with some multinational banks like HSBC, Standard Chartered and deferred-payment schemes in place to fund fuel imports.
It has also deferred-payment mechanism to import petroleum products from four oil suppliers.
azizjst@yahoo.com
