BB to reduce dollar sales from forex reserves

Staff Reporter :
The Bangladesh Bank is planning for reducing dollar sales from the country’s foreign currency reserves with a view to meeting the loan conditions set by the International Monetary Fund (IMF).

Following this, an initiative has been taken to make import payment, especially for fuel oil, increasing foreign loans, according to Finance Ministry sources.

As per the IMF loan conditions, the country’s net foreign exchange reserves should be $24.46 billion till the end of June this year. But the actual reserves stood at $ 23.67 billion till the date, according to the central bank.

Under the circumstances, the central bank feels that the reserves may slide further, if it injects dollars into the local market from the reserves. The erosion of reserves may create obstacle to getting the second installment of IMF loan to be disbursed in November. Considering the situation, the government has taken an initiative to borrow additional $900 million from the International Islamic Trade Finance Corporation (ITFC) to import fuel oil to keep energy supply normal in the country.

An inter-ministerial meeting is scheduled to be held on Monday to finalise the issue of seeking additional loans. The Economic Relations Department (ERD) Secretary Sharifa Khan will preside the meeting and if it is approved, the ERD will send a proposal letter seeking an additional loan to ITFC, the ministry sources said.

Of the additional loan of $900 million, $400 million may be spent on the import of crude fuel oil by Bangladesh Petroleum Corporation (BPC). The remaining $500 million will be spent on importing liquefied natural gas (LNG) by the Bangladesh Oil, Gas and Mineral Resources Corporation (Petrobangla).

The ITFC, a subsidiary of Islamic Development Bank (IDB), signed an agreement with Bangladesh on July 9 to provide a loan of $1.4 billion for the import of fuel oil. With this money, the BPC will be able to import crude oil from July this year to next June.

Bangladesh imports oil by taking regular loans from the ITFC. As a member of IDB, Bangladesh has the ownership of the bank. The BPC is taking loans from the lending firm at around 3 per cent interest rate.

BPC Director (Finance) Kazi Muhammad Mozammel Haque said, “There is not much dollar crisis at present. We are now able to pay the necessary liabilities. But, we have sent a loan proposal from the ITFC to the Ministry of Finance and Power, Energy and Mineral Resources to avoid further crisis in the future.”

“If the loan is available, it will help maintain normal supply in the country by importing fuel oil,” he added.

Due to the greenback shortage, the government and private banks were not able to supply dollars as per demand. As a result, the BPC could not pay several bills of fuel oil import on time and the import bills worth over $300 million were outstanding till last May and there were also fears of stopping supply of fuel due to the arrears.

The dollar crisis, started from February last year, was being tackled with the budgetary supports from some development partners, including borrowing from the IMF.