Dhaka: After securing a stabilization package from the International Monetary Fund this week, Bangladesh has asked Saudi Arabia for an expanded line of credit on oil supplies, which experts say will help get its economy back on track.
Bangladesh Foreign Minister AK Abdul Momen met Riyadh’s Ambassador Essa Al-Duhailan in Dhaka earlier this week. The Ministry of External Affairs said after the meeting that Momen had asked Bangladesh to consider supplying crude and refined oil “on a deferred payment basis” to help meet its energy needs.
The request came soon after the IMF approved a $4.7 billion loan for Bangladesh.
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The request follows the IMF approval of a $4.7 billion stabilization package for the South Asian nation.
“Bangladesh is now passing through a period of constrained foreign exchange reserves and is facing difficulty in terms of opening LCs (letters of credit) and also in terms of paying for our imports,” Professor Mustafizur Rahman, distinguished fellow at the Center for Policy Policy, Dhaka In Dialogue, told Arab News on Friday.
“If we can get Saudi oil on deferred payment basis, it will reduce Bangladesh’s foreign exchange reserves and help Bangladesh in terms of buying other essential imports that require immediate payment.”
The IMF’s Extended Credit Facility and Extended Fund Facility package approved for Bangladesh on January 30 is likely to boost the country’s outlook among its creditors including Saudi Arabia and demonstrate its ability to pay back.
Unlike other regional countries, such as crisis-hit Sri Lanka and Pakistan, Bangladesh did not seek funds for a bailout loan. The approved arrangements are a stabilization package to finance structural reforms, ensure stability of the balance of payments and a stable and sustainable economic condition.
“The $4.7 billion IMF grant will help provide a positive signal to our development partners that the fundamentals of the Bangladeshi economy remain strong and Bangladesh is ready for reforms,” Rahman said.
“From that point of view, it would also be helpful to project to Saudi Arabia that while we are seeking deferred payments, Bangladeshi economy will be able to maintain good foreign reserves and when the time comes for talks, we will be able to make payments.” Will be able.”
Besides easing pressure from its dollar reserves, the extended line of credit on oil supplies will also help Bangladesh with energy security. The South Asian nation, which relies on imported liquefied natural gas, has been grappling with an energy crisis in recent months.
Since mid-July, the government has been resorting to daily power cuts amid high global prices driven by Russia’s war in Ukraine. Industries that do not get enough power to run their operations are forced to remain idle for several hours a day. In early October, about 80 percent of Bangladesh’s 168 million people were left without power after the grid failed due to a lack of fuel for more than a third of the country’s gas-fired units.
Saudi Arabia supplies more than half of Bangladesh’s crude imports.
“We are bringing oil, which is our regular, normal import, because our transportation sector is completely dependent on this oil, and also partly on our production,” Prof. Dean of Chemical and Materials Engineering at Bangladesh University of Engineering . Mohammad Tamim said and technical.
Importing energy and ensuring its uninterrupted supply is key to helping afloat and stabilize the Bangladeshi economy, while other reforms requested by the IMF are implemented to fix structural problems.
Tamim said, “There is a lot of pressure in terms of importing energy products, so it is very important that we keep supplying oil so that there is no disruption to economic activity.”
“The deferred payment will surely help Bangladesh to tide over the dollar crunch now.”