Forex crisis forces power cos to seek govt dollar bailout

A heightened dollar crisis forces a growing number of companies to seek finance ministry's intervention to arrange the greenback and help avert default on loan repayment, officials said.

State-run power-producer B-R Powergen Ltd, the owner of 150-megawatt dual-fuel power plant at Kodda, Gazipur, comes last urging the ministry of finance to ask the central bank to supply US$7.9 million to its banker-- Dhaka Bank--for repayment of the 16th instalment of loan.

The public-sector power producer signed deal with the Industrial and Commercial Bank of China (ICBC) and the EXIM Bank of China for buyer's credit in syndicated loan worth $129 million.

The finance division had provided sovereign guarantee in favour of the banking duo--ICBC and Exim Bank--against the loan.

According to the sources, the company has already paid 15 instalments of the loan out of a total of 20 in US dollar, and in case of the 16th instalment, it will have to pay $7.9 million soon.

Unless the debt service can be done in time, the company will have to pay default interest in line with section 5.2 of the agreement signed with the Chinese lenders, the B-R Powergen Ltd authority informed the Power Division recently.

Pursuant to the company entreaty, Power Division Thursday requested the finance division to arrange dollar for timely repayment of the loan instalment.

A power division official told the FE that since the dollar crisis cropped up-affecting many sectors of the economy--they had received a number of such requests from state-owned power companies as their banks were unable to arrange requisite sums of US dollar for paying back loans.

Earlier last month, the Exim Bank of China had forewarned Bangladesh-China Power Co (Pvt) Ltd (BCPCL), a joint venture of North-West Power Generation Company Limited and China National Machinery Import and Export Corporation, of flagging as defaulter due to its inordinate delays in loan repayment.

The BCPCL management repaid at best two instalments of the loan "after crossing the due time", prompting the Chinese bank to issue cautionary message.

The company was supposed to pay $140.892 million as the 6th instalment of the loan of which it could pay $88.445 million until November 30. And $52.447 million remained unpaid until December 4th while the cut-off date was December 8th.

A deep depletion of Bangladesh's foreign-currency reserves, following war in Ukraine, caused the delay in repayment of many foreign loans, officials say.

The government, as such, was forced to go for a $4.7-billion credit from the International Monetary Fund (IMF) in a package deal that committed it to pursuing a number of reforms aimed at restoring macroeconomic stability.

Notwithstanding various austerity measures taken by the government, the forex reserves situation did not improve and the country repeatedly failed to meet the reserves target as set by the IMF.

Last Thursday, foreign-currency reserves of the country stood at $20.034 billion as per calculation in IMF's BPM6 arithmetic. However, the net reserves are much lower than the amount, according to officials concerned.

Dr Zahid Hussain, a former lead economist at the World Bank's Dhaka office, thinks that there wouldn't be a letup in the forex shortage unless the exchange rate is made fully market-driven.

"So, the problem of repayment of foreign loans will continue," he told the FE about the debt-service tantrums.

Mr Hussain says the upcoming 'crawling peg' system, to be pursued by the central bank, may not bring any solution unless the gap between informal and formal rates of the US dollar shortens.

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