Foreign lender to raise credit limit for BPC to $2.5b

Responding to a request from the government, Islamic Trade Finance Corporation (ITFC) has decided to raise the credit limit for Bangladesh Petroleum Corporation (BPC) to $2.5 billion from this year.
Normally the limit for Bangladesh is about $1.5 billion from the ITFC, the trade-financing window of Islamic Development Bank (IDB).
The BPC has told the central bank that it will require foreign currency of $6.78 billion for fuel import in 2012, while the requirement was $4.48 billion last year.
Before 2011, Bangladesh used to pay $2 billion to $2.5 billion in fuel import bills annually.
Additional fuel has to be imported to meet the demand by the quick rental power plants that run on diesel.
The BPC will have to import 70.38 lakh tonnes of fuel this year, according to a projection by the government organisation, which imported around 48 lakh tonnes of fuel last fiscal year.
A Bangladesh Bank official said, initially the government requested the ITFC to increase the credit limit to $2 billion.
But the state-owned banks are facing a dearth of foreign currency now and a huge amount of their dues was pending with the BPC. So, the government requested the ITFC to raise the ceiling by another $500 million, said the BB official.
A finance ministry official said the BPC will soon sign a final agreement with the ITFC in this regard.
Besides the ITFC, the BPC has taken loans of $200 million from international market through foreign banks for fuel import.
The petroleum corporation has also deferred payments of fuel import bills of different countries including Malaysia by six-eight months.
The state banks have again started opening letters of credit for the BPC after a let-up in the last one month.
The BB official said, in the last few days three state banks have opened LCs worth around $210 million for import of fuel.
Some other LCs are in the pipeline, he added.
An official of state-run Janata Bank said the BPC owes three banks more than Tk 10,000 crore on account of fuel import.
In this context, the International Monetary Fund has advised the central bank not to give any dollar support to the nationalised banks for fuel import. It said the nationalised banks will have to buy dollar from the market to open LCs for fuel import.
The finance ministry official said the Finance Division has already started working to pay some of the dues of the BPC.
The official said there have been a number of anomalies in the BPC's projection, accounting system and expenditure statement.
He said BPC conducts transactions of several thousand crores of taka every year, but they do not have any professional chartered accountant.
Against this background, a committee was formed last month with Additional Finance Secretary Syed Manjurul Islam as its head to review the BPC's demands and projections from time to time, the central bank official said.
The committee will submit a report to the government every 15 days.