Bangladesh Faces Fuel Crisis – Dollar Shortage Issue

Prateek Mattoo
May 29, 2023
465

Bangladesh may cease receiving petroleum supplies from some sources as the state-owned BPC official informed S&P Global Commodity Insights on May 17 that the country’s primary oil importer is struggling to discharge overdue dues due to significant currency depreciation. According to BPC’s director for operations and planning Khalid Ahmed, most of the oil suppliers have written to clear the pending dues, and some have even threatened to stop supplying oil to Bangladesh if the dues were not cleared “immediately.”

Why In the News?

Bangladesh Is Struggling To Pay For Imported Fuel Because Of A Dollar Shortage, Letters Reviewed By Reuters Show, With The State Petroleum Company Owing More Than $300 Million As It Faces An “Alarming Decrease In Fuel Reserves”
It Owes More Than $300 Million To 6 Overseas Companies, Some Of Which Have Either Sent Fewer Cargoes Than Scheduled Or Threatened To Halt Supplies, According To One Of The 2 Letters From The Bangladesh Petroleum Corp (BPC).

Will It Affect Bangladesh’s Garments Industry?

The Country Is Already Grappling With Power Cuts That Have Hurt Its Exports-oriented Garments Industry.
Separately, The Body Responsible For Generating Electricity And Distribution Also Warned It Had To Delay Payments Due To The Currency Crunch.

Bangladesh Faces Fuel Crisis – Dollar Shortage Issue 2

Settlement In Rupees

BPC, Which Controls The Import And Marketing Of Fuel In The Country, Has Asked The Government To Permit Domestic Commercial Banks To Settle Money Owed To India In Rupees.
BPC Asked The Government To Allow Nationalised Commercial Banks To Settle Payments To Indian Companies In Rupees. SBI Had Asked Exporters To Avoid Settling Deals With Bangladesh In Dollars And Other Major Currencies As Its Reserves Fell, Favouring Instead The Taka And Rupee Currencies
BPC, Which Controls The Import And Marketing Of Fuel In The Country, Has Asked The Government To Permit Domestic Commercial Banks To Settle Money Owed To India In Rupees.
That Followed A Warning In A Letter In April Which Said: “If It Is Not Possible To Import Fuel According To The Import Schedule Prepared For May, Supply May Be Disrupted Throughout The Country With An Alarming Decrease In Fuel Reserves.

Dollar Reserves Shrunk To 30.18 $ Billion

Bangladesh’s Dollar Reserves Have Shrunk More Than A 3^rd Since Russia’s Invasion Of Ukraine In February Last Year To Stand At A 7-year Low Of $30.18 Billion.
The Country Of Nearly 170 Million People Has Already Had To Secure A Loan Of $4.7 Billion From The IMF.

Bangladesh Faces Fuel Crisis – Dollar Shortage Issue

Oil Creditors In Bangladesh

BPC Imports 500,000 Tonnes Of Refined Oil And 100,000 Tonnes Of Crude Oil Every Month.
Creditors Included Unipec, The Trading Arm Of China’s State-owned Sinopec, Vitol, ENOC, Indian Oil Corp Ltd (IOC), PetroChina And Indonesia’s BSP, BPC’s April Letter Said.
BPC Will Have To Pay $41.1 Million This Year For Diesel To India’s Numaligarh Refinery, Majority Owned By Oil India, While IOC Is Owed $147.2 Million For Diesel And Jet Fuel, The May Letter Showed.

Is Bangladesh Still A Fastest Growing Economy?

For years, Bangladesh’s $416-billion Economy Has Been One Of The World’s Fastest Growing But Is Facing Many Challenges Now.
In A Sign Of Further Pain For The Government, State-owned Bangladesh Power Development Board (BPDB), Responsible For Generating Electricity And Distribution Has Delayed The Payment Of More Than $1.5 Billion.

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