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Fall of BDT against USD prevents BPC from importing fuel  

A severe crisis looms

Published : Thursday, 14 July, 2022 at 12:00 AM  Count : 739

Currency depreciation, high import costs of petroleum and liquefied natural gas (LNG) in the global market has prevented Bangladesh Petroleum Corporation (BPC) from opening letters of credit (LCs) for fuel import.
"Fuel import in the future may be at risk," earlier, BPC warned, saying that if the LCs are not opened at the right time, a fuel crisis may hit the country which will lead to the severe power and energy crisis in the country.
BPC claimed that the volume of refined oil import increased by 24 per cent in FY22 with cost escalating by 142 per cent.
To manage the situation, BPC has sought around US$2 billion in foreign currency loan from the International Islamic Trade Finance Corporation (ITFC), which is more than double the $850 million taken last fiscal, not only that Finance Ministry sought $4 billion budget support fund from IFC (International Monetary Fund) and set to start the negotiation today (Thursday) with its IFC mission in Dhaka.
The exchange rate of the dollar was Tk 84.81 at the end of June last year, which surged to Tk 93.45 at the end of this June, the currency     depreciation has made us cripple to open LCs as it discourages the state-owned banks to open LCs against petroleum imports, BPC official said.
"Bangladesh experienced 9.2 per cent currency depreciation against the dollar during the last fiscal year when Malaysian currency lost value by 5.6 per cent, India's by 4.8 per cent, China's 3.5 per cent, and Indonesia's by 2 per cent," Bangladesh Bank data said.
According to the BPC it has to open 13 to 16 LCs worth around $560-700 million each month to import refined and crude oil. It used to pay the import bill through the state-owned Sonali, Agrani, and Janata Banks, and some private banks, including One Bank and Islami Bank but this time market has toppled the plan as far as fuel import is concerned.
"Under such circumstances we wrote to the Finance Ministry and the Energy & Mineral Resource Division with a plea to urge the Bangladesh Bank to make dollar available to state-owned and private banks to open LCs for fuel oil import and issue the necessary directives accordingly...I'm talking about the month of Maybut, we have been working to overcome the situation," BPC official said preferring anonymity.
 "The government is saying that due to 80 to 90 bcf of gas shortage, the country is facing gas and power crisis but the real reason is dollar, we know this issue but government was trying to hide the real issue from the people like the exact amount of currency depreciation against the dollar," CAB vice-president Prof Dr Shamshul Alam said.
The government took a loan of $ 25 million in 2007 under import payment financing from the Islamic Development Bank. In 2018, it planned to borrow $ 1 billion from the same bank for the same purpose. Taking such loans to address sudden and transitory situations would be the right option, he added.
The BPC spent $4.6 billion on importing 52 lakh tonnes of refined oil in the last fiscal year and the cost was less than $2 billion for importing 42 lakh tonnes in FY21.
BPC received a subsidy of Tk 30,086 crore between 2010 and 2015, and from 2016, it did not take any subsidy from the government as it was making profits.
At present, the country imports around 91 per cent to 92 per cent of its fuel demands while the rest is sourced from local gas fields in the form of condensate, a bio-product of gas.
The BPC spent $967 million on importing 14.67 lakh tonnes of crude oil in FY22, while the amount was $608 million for 15 lakh tonnes in FY21.

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