The Financial Express

BPC set to borrow $1.0b from IDB to purchase oil

Govt may approve the loan proposal today

FHM Humayan Kabir | Published: November 07, 2018 09:43:01 | Updated: November 07, 2018 17:00:11

Picture used for representational purpose - Photo source: PTI Picture used for representational purpose - Photo source: PTI

Bangladesh Petroleum Corporation (BPC) is going to take out US$1.0 billion hard-loan from Islamic Development Bank (IDB) to purchase oil.

The government is likely to approve the loan proposal today (Wednesday), officials said.

The standing committee on non-concessional loans, headed by Finance Minister AMA Muhith, may approve the proposal for the high-interest loan to be taken from Islamic Trade Financing Cooperation (ITFC), the commercial wing of IDB, they added.

The interest rate for the six-month period ITFC's $1.0 billion loan will be 4.5 per cent (mark-up), 0.7 percentage points higher than the last loan taken from the same lender.

Previously, BPC borrowed money from ITFC at 3.8 per cent rate in order to import oil. It also lowered borrowing from ITFC over last few years for the higher rate of interest.

"We will place the loan proposal before the standing committee tomorrow (Wednesday). We are hopeful of getting approval for the loan," said an Economic Relations Division (ERD) official on Tuesday.

The foreign loans which grant element is more than 35 per cent are treated as hard-term loan.

Before taking hard-term loan by any of the government agencies, they have to take approval from the standing-committee on non-concessional loans.

A BPC official said they will require funds for importing petroleum in the next calendar year 2019 amid an uptrend in oil prices in the international market.

"We will borrow $1.0 billion worth of funds from ITFC so that we can pay oil import bill from any of the suppliers in the Middle-East or any other suppliers," he said.

When asked, an ERD additional secretary said: "We had tried to bring down the interest rate. But IDB informed us that since they will mobilise the money from the open market, the interest rate will be a little bit higher than the last ones."

Insiders said the oil price slump in the international market over the last few years has made the state-owned BPC profitable.

In the last four fiscal years, BPC made profit of around Tk 260 billion by selling fuel oil at home at a higher price than that of the international market.

According to the official data, BPC earned Tk 258.16 billion from FY 2014-15 to April of FY 2017-18.

BPC has started making profits when the price of petroleum oil in the international market started to go downward in 2015, which lasted for two years.

BPC has made successive profit without lowering the price at that time.

Last year, the international market price soared exceeding the domestic market price in the mid November-December.

Now, BPC counts loss from sales of diesel, kerosene, and furnace oil, the state-owned corporation claimed.

But they are making profit from sales of octane, petrol, and jet fuel, it added.

Bangladesh needs nearly 7.0 million tonnes of different petroleum products including crude and refined, BPC said.


Share if you like