WB guarantor consulting banks, BADC on modus operandi

With the go-ahead from the government and the central bank, World Bank Group's credit-guarantee platform will now open discussions with Bangladesh's banks and state agencies involved with import of essentials, officials said.

The Multilateral Investment Guarantee Agency (MIGA) is a financial institution of the World Bank which offers political-risk insurance and credit-enhancement guarantees.

Sources said a team of MIGA officials last month visited Bangladesh discussing the proposed guarantees supporting trade-financing facilities.

The team had discussions with officials of the Finance Division, Bangladesh Bank and various other agencies concerned on the MIGA support to the government through trade- finance instruments.

These instruments have been identified as a crucial tool to facilitate imports of essential commodities, including food, fertilisers, and medicines.

According to officials concerned, during the meetings, the mission focused on determining the "most suitable" arrangements for such supports.

MIGA officials have said the trade-financing loan arrangement will allow the central bank to provide direct operational support without creating assets on its balance sheet.

Sources say during the meetings with the MIGA officials, both the central bank and the finance division officials expressed their agreement with this financing approach.

Also, the central bank governor agreed to inform the International Monetary Fund (IMF) about the guarantees arrangement and also agreed to take forward the MIGA trade- finance support.

Sources say the MIGA mission also held separate meetings with the ministry of agriculture (MoA) discussing the trade-finance support, specifically for fertiliser import.

Bangladesh presently gets guarantees and loan support from the Islamic Trade Finance Corporation (ITFC), the Asian Development Bank and the World Bank, among others, to import petroleum, liquefied natural gas (LNG), fertilisers and foods.

And the MIGA support is now coming as a new avenue for Bangladesh for trade financing.

MIGA officials recently informed the ministry of finance and other government agencies concerned that they would now "reinitiate internal process and discussions with potential commercial lenders on the trade-finance facility".

Also, the MIGA and agriculture team of the World Bank Group will engage with the Bangladesh Agricultural Development Corporation "on discussion for potential trade- finance facility for the import of fertilisers".

Early this year, the global guarantees agency also submitted financing proposal to facilitate the energy import from overseas market.

It wanted to extend financing facility for importing liquefied natural gas or LNG worth up to US$350 million annually. It also offered that the facility will be enhanced over the next seven years.

The proposed $350 million worth of credits for the first year will be a "revolving LC facility" for securing Petrobangla's long-term working capital aimed at smooth import of LNG Bangladesh increasingly getting dependent upon amid domestic gas-supply shortages.

However, energy ministry officials had sought financial support worth $500 million from the MIGA on concessional terms, according to sources concerned.

Officials say they also requested relaxed lending terms and conditions as it is a bit costlier than the other trade-financing loans Bangladesh at present getting from different other lenders.

As per MIGA's proposal, some local and foreign banks will arrange the loan for opening LCs for LNG import. The MIGA will be the guarantor on the loans from the commercial banks on behalf of the importer--the state-run Petrobangla.

syful-islam@outlook.com