Govt to take $300m hard loans from bank to import fuel

Amid acute liquidity crisis due to under-pricing of imported petroleum products, the government yesterday approved Bangladesh Petroleum Corporation's (BPC) proposal to take $300 million hard term loan from Standard Chartered Bank.
On the other hand, the government is taking $220 million loan from the International Monetary Fund (IMF) as emergency assistance to reduce pressures on balance of payment. A proposal regarding this loan will be placed at the IMF Board meeting tomorrow in Washington.
Finance Adviser Mirza Azizul Islam, after a meeting of the hard term loan committee chaired by him yesterday, told newsmen that the BPC would take the loan under the London Interbank Offered Rate (LIBOR) in addition 1.79 percent interest. It will repay the loan within nine months.
On the emergency loan to Bangladesh, the adviser said the IMF is providing it without any conditions, and it is a soft loan.
Apart from the proposal for loan from Standard Chartered Bank, a proposal for loan from the BNP Paribas (Banque Nationale de Paris), a French bank, was also placed at the committee meeting yesterday. The meeting did not approve this proposal since it was disadvantaged compared to the other proposal, the finance adviser said.
"We have decided to ask the BNP Paribas to continue the negotiation for a lower interest rate."
Sources said the BNP Paribas proposed to provide $250 million loan under the LIBOR in addition to 1.84 percent interest.
Standard Chartered Bank offered $250 million loan to the BPC, Mirza Aziz said. And the committee decided to take up to $300 million if conditions are the same.
The adviser said cash flow of the BPC has been affected seriously due to high prices of petroleum products in international market. Price of oil per barrel was $62 to $63 in April last year when fuel prices in domestic market were adjusted for the last time. Price of oil per barrel is now $110 to $112, he mentioned.
The budget for this fiscal year had allocated Tk 6,000 crore as subsidies but different ministries increased their demands, and the allocation now stands at Tk 15,600 crore.
According to BPC's quarterly performance report, its losses in the first half of this fiscal year stood at Tk 1,942 crore. Despite a recent allocation of Tk 800 crore, the BPC is still facing a deficit of Tk 1,600 crore.
Sources in the finance division said usually $2.1 billion is required in a fiscal year to import petroleum products. But in the current fiscal year, the requirement would reach at least $3.2 billion because of high fuel prices in the global market.
The BPC now incurs Tk 24 loss per litre of diesel and Tk 23 loss per litre of kerosene since it sells these at government-fixed prices, which are lower than the international market rate.
"Estimated losses on diesel and kerosene will be around Tk 8,600 crore in the current fiscal year," a BPC official said.
In January, the energy division had requested the finance ministry to arrange a loan of $900 million.
The loan request came following the BPC's failed effort to get $500 million from Bangladesh Bank (BB). The central bank refused to provide the amount saying the BPC already got $300 million loan this fiscal year, and any new loan would create pressure on the foreign exchange reserve.