The government has issued counter-guarantees worth US$ 200 million against ITFC loans to finance fuel oil import, officials said.
The Islamic Trade Finance Corporation (ITFC) will provide state-owned Bangladesh Petroleum Corporation (BPC) with three separate loans -- US$ 50 million, $ 50 million and $ 100 million - to import the oil.
Energy and Mineral Resources Division had earlier sought the counter-guarantees.
The ITFC loans require guarantee by the central bank and counter-guarantee by the government, which bears the liability to pay the money back in case the borrower organisation fails.
"The counter-guarantees issued by the finance ministry will be considered as a sovereign guarantee," said an official at the finance division.
The tenure of the loan is six months and the total mark-up is 3.8 per cent annually.
"Borrowing from banks through opening letter of credits (LCs) is time- consuming. As a result, the BPC generally takes loans from the ITFC to import crude oil," a high official at the BPC told the FE.
It is mandatory for the corporation to report to the ministry on its portfolio on suppliers' credits or any other short-term foreign loan.
The corporation will have to inform the ministry regularly about its credits if taken from local banks or financial institutions, according to an office order of the finance ministry.
The BPC has been making profits through trading the petroleum products -- furnace, diesel and kerosene -- since September 2014 until October, 2017 thanks to a slump in oil prices in the international market.
It registered a profit of Tk 73.34 billion in the first 10 months of the last fiscal year until April 2017, following a profit of Tk 90.4 billion in FY2015-16 and Tk 4.13 billion in FY2014-15.
Before then, it had incurred a loss of Tk 23.32 billion in FY2013-14 and Tk 48.32 billion in FY2012-13. In FY2011-12, the loss was Tk 113.71 billion, which was Tk 88.40 billion in FY2010-11. The BPC incurred losses every year since FY2001- 02 to FY2013-14.
The BPC has fixed a target to import over 5.0 million tonnes of petroleum products including diesel, jet fuel, furnace and octane for the current year.
The country would require more or less 7.27 million tonnes of different petroleum products in this calendar year, according to the BPC.
