FHM Humayan Kabir

The Islamic Development Bank (IDB) is likely to provide credits up to US$ 11 billion to the Bangladesh Petroleum Corporation (BPC) in four years up to 2016 for purchase of petroleum oil, officials said Wednesday.

Economic Relations Division (ERD) officials said the Jeddah-based lender had given assurances about giving $8.0 billion to $11 billion in the form of short-term credit to the state-owned corporation under its proposed Member Country Partnership Strategy (MCPS).

"We have held discussions with the IDB during preparation of the MCPS. Under the four-year strategy, the lender has given assurances about providing $8.0 to $11 billion in loans in four years," said the ERD additional secretary.

The Jeddah-based lender said it already signed a $2.0 billion annual financing deal with the government of Bangladesh and the BPC in the middle of this month for import of crude oil and refined petroleum products in 2013.

He said since the oil import bill had bulged enormously over the last few years, the IDB pledged an annual lending of $2.0 billion to $2.5 billion for purchasing petroleum from the oil exporting Islamic nations.

The proposed MCPS is likely to be finalised shortly. In the MCPS the Jeddah-based lender has worked out its investment plan in Bangladesh for the period of 2013-2016.

The state-owned BPC said they would require nearly $5.0 billion in the current fiscal year (FY) to import crude and refined oil for supply in the domestic market.

Bangladesh's oil import bill surged to nearly $4.5 billion in the last fiscal, 2011-12 that ended in June last, posting a rise of nearly 45 per cent year on year, the central bank statistics showed.

In the previous FY, 2010-11, the petroleum import bill was worth $3.18 billion, the central bank said.

In the last fiscal, Bangladesh imported nearly 5.2 million tonnes of petroleum oil to meet the fast-growing demand in the areas of irrigation, communications and power generation against 4.48 million tonnes imported in the previous fiscal, a BPC official said.

The power sector joined the list of oil-guzzling sectors as the government set up dozens of oil-fired electricity generation plants during the last couple of years, he said.

According to the BPC, about 17 per cent of the fuel oil imported in the last fiscal was spent for power generation. Energy use for the purposes of communications and irrigation accounted for 35 per cent and 42 per cent respectively of the total imports in the last fiscal year.

The IDB's hard-term lending window -- the Islamic Trade Finance Corporation (ITFC) -- provided nearly $2.0 billion worth of loans to import crude and refined oil in the last fiscal.

Earlier this month, the IDB signed a $2.0 billion annual financing deal with the Bangladesh government and the BPC for import of crude oil and refined petroleum products in 2013.

A Bangladesh delegation, led by Energy Division secretary M Mesbahuddin, signed the loan deal with the Jeddah-based IDB for importing the fuel.

Kuwait, Saudi Arabia and the United Arab Emirates are the major sources of oil imports by Bangladesh, along with other suppliers like Malaysia, the Philippines and Vietnam.