Dhaka: Bangladesh has requested extended credit on oil supplies from Saudi Arabia after receiving a stabilisation package from the IMF this week, a move that experts say will help Bangladesh's economy further recover.
Essa Al-Duhailan, the ambassador from Riyadh to Dhaka, and Bangladesh's foreign minister A.K. Abdul Momen met earlier this week. Momen asked the Kingdom to think about providing crude and refined oil "on a deferred payment basis" to help Bangladesh meet its energy needs, the foreign ministry stated after the meeting.
The IMF had just granted Bangladesh a $4.7 billion loan when the request was made.
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According to Prof. Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue in Dhaka, Bangladesh is currently experiencing a period of limited foreign exchange reserves and is having difficulty opening LCs (letters of credit) as well as paying for our imports.
"If we can get Saudi oil on a deferred payment basis, it will help Bangladesh buy other necessary imports that require instantaneous payment and ease up Bangladesh's foreign exchange reserves."
The extended credit and fund facilities that the IMF approved for Bangladesh on January 30 are likely to improve the country's standing with its creditors, including Saudi Arabia, and show that it has the financial wherewithal to repay.
Bangladesh did not request a bailout loan from the fund, in contrast to other nations in the region like the crisis-hit Sri Lanka and Pakistan. An economic position that is stable and sustainable as well as funding for structural reform are all guaranteed by the approved arrangements.
The IMF's $4.7 billion loan will help send a message to our development partners that Bangladesh's economic fundamentals are still solid and that Bangladesh is prepared to implement reforms, according to Rahman.
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From that angle, it will also be useful to demonstrate to Saudi Arabia that, despite the fact that we are asking for a deferred payment, the Bangladeshi economy will be able to maintain healthy foreign reserves and that, when the agreed-upon time comes, we will be able to make the payment.
The extended credit on oil supplies would aid Bangladesh in securing its energy supply while also relieving pressure on its dollar reserves. The country of South Asia, which depends on imported liquefied natural gas, has recently been dealing with an energy crisis.
The government has been implementing daily power outages since the middle of July due to the high global prices brought on by Russia's war in Ukraine. Industries that don't get enough electricity to run their operations have to shut down for several hours each day. Early in October, a grid failure brought on by a lack of fuel for more than a third of the nation's gas-powered units left about 80% of Bangladesh's 168 million residents without electricity.
More than half of Bangladesh's crude imports come from Saudi Arabia.
Our transportation sector is entirely dependent on this oil, as is a portion of our production, so we are importing it, according to Prof. Mohammad Tamim, dean of chemical and material engineering at Bangladesh University of Engineering and Technology.
Energy imports and uninterrupted energy supply are essential for Bangladesh's economy to remain afloat and stabilise while other IMF-requested reforms are put into place to address structural issues.
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It's crucial that we keep supplying oil because there is a lot of pressure on imports of energy products to prevent a halt in business, according to Tamim.
"Deferred payment will undoubtedly assist Bangladesh in overcoming the current dollar shortage."