DHAKA: After securing a stabilization package from the International Monetary Fund this week, Bangladesh has asked Saudi Arabia for extended credit on oil supplies, in a move that experts say would further help its economy get back on track.
Bangladesh Foreign Minister A.K. Abdul Momen met Riyadh’s Ambassador to Dhaka, Essa Al-Duhailan, earlier this week. The foreign ministry said after the meeting that Momen had asked the Kingdom to consider supplying crude and refined oil “on a deferred payment basis” to help Bangladesh meet its energy needs.
The request came shortly after the IMF approved a $4.7 billion loan for Bangladesh.
Request follows IMF approval of $4.7bn stabilization package for South Asian nation.
“Bangladesh is now passing through a period of constrained foreign exchange reserves and is having difficulty in terms of opening LCs (letters of credit) and also in terms of paying for our imports,” Prof. Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue in Dhaka, told Arab News on Friday.
“If we can get Saudi oil on a deferred payment basis, it will ease up Bangladesh’s foreign exchange reserves and help Bangladesh in terms of purchasing other necessary imports which require instantaneous payment.”
The IMF’s Extended Credit Facility and Extended Fund Facility package approved for Bangladesh on Jan. 30 are likely to boost the country’s outlook among its creditors, including Saudi Arabia, and demonstrate its capacity to pay back.
Unlike other regional countries, such as crisis-hit Sri Lanka and Pakistan, Bangladesh did not ask the fund for a bailout loan. The approved arrangements are a stabilization package to fund structural reform, ensure balance-of-payment stability, and a stable and sustainable economic position.
“The IMF granting of $4.7 billion will be helpful in providing positive signals to our development partners that the fundamentals of the Bangladeshi economy remain strong, and that Bangladesh is also ready to take up reforms,” Rahman said.
“From that perspective, it will also be helpful in projecting to Saudi Arabia that while we are asking for deferred payment, the Bangladeshi economy will be able to sustain good foreign reserves and when the negotiated time comes, we will be able to pay.”
Besides taking the pressure off its dollar reserves, the extended credit on oil supplies would also help Bangladesh with energy security. The South Asian nation, which is dependent on imported liquefied natural gas, has been struggling with an energy crisis in recent months.
Since mid-July, the government has been resorting to daily power cuts amid high global prices driven up by Russia’s war in Ukraine. Industries that do not receive sufficient power to run their operations have been forced to remain idle for several hours a day. In early October, about 80 percent of Bangladesh’s 168 million people were left without electricity after a grid failure caused by fuel shortages to over a third of the country’s gas-powered units.
Saudi Arabia supplies more than half of Bangladesh’s crude imports.
“We are bringing in oil, which is our regular, normal import, because our transport sector is fully dependent on this oil, and also partially our production,” said Prof. Mohammad Tamim, dean of chemical and material engineering at Bangladesh University of Engineering and Technology.
Importing energy and ensuring its uninterrupted supply are crucial to keeping the Bangladeshi economy afloat and helping it stabilize while other reforms requested by the IMF are implemented to fix structural problems.
“There is a lot of pressure in terms of importing energy products, so it’s very important that we keep supplying oil so that there is no disruption in economic activity,” Tamim said.
“Deferred payment will definitely help Bangladesh in tackling the dollar crunch now.”