According to letters reviewed by Reuters, Bangladesh is currently facing dollar crisis in paying for imported fuel due to a shortage of dollars. The state petroleum company, Bangladesh Petroleum Corp (BPC), is indebted with over $300 million, and the country is witnessing a concerning decline in fuel reserves.
Bangladesh Petroleum Corp controls all fuel import and marketing activities in the country, which is home to nearly 170 million people. BPC has appealed to the government to authorize domestic commercial banks to settle outstanding dues with India in rupees.
Since Russia’s invasion of Ukraine in February of the previous year, Bangladesh’s dollar reserves have decreased by more than a third, reaching a seven-year low of $30.18 billion by May 17. This decline in reserves, coupled with the nation’s heavy reliance on energy imports, has resulted in power cuts due to fuel shortages, severely impacting the country’s export-oriented garments industry.
In a letter dated May 9, BPC informed the power ministry that commercial banks were unable to make timely payments for imports due to a scarcity of foreign currency and the central bank’s inability to meet the demand for US dollars. The letter warned of a potential disruption in fuel supply throughout the country and a significant decrease in fuel reserves if fuel imports were not carried out according to the May schedule.
Telephone calls to the ministry, BPC, and the central bank seeking comment were not immediately answered.
BPC imports 500,000 tonnes of refined oil and 100,000 tonnes of crude oil every month. A letter in April stated that several fuel suppliers had either sent fewer shipments than scheduled or threatened to suspend supplies. The creditors mentioned included Unipec, the trading arm of China’s state-owned Sinopec, Vitol, ENOC, Indian Oil Corp Ltd (IOC), PetroChina, and Indonesia’s BSP.
An anonymous BPC source revealed that multiple companies were contemplating halting supplies, while others were delivering fewer shipments than planned, creating a precarious situation.
According to the May letter, BPC owes $41.1 million to India’s Numaligarh Refinery Ltd for diesel and $147.2 million to Indian Oil Corp Ltd (IOC) for diesel and jet fuel.
BPC has requested that Bangladesh’s nationalized commercial banks be permitted to settle dues with Indian companies in rupees.
In a report published in September, Reuters highlighted that the State Bank of India had urged exporters to avoid settling transactions with Bangladesh in dollars or other major currencies due to the decline in reserves. Instead, the bank favored the taka and rupee currencies.
Despite being one of the world’s fastest-growing economies for years with a GDP of $416 billion, Bangladesh has experienced rising energy and food prices due to the war, leading to an increase in its import bill and current account deficit.
In January, the International Monetary Fund approved loans totaling $4.7 billion for Bangladesh under the dollar crisis situation. Other countries in South Asia, such as Sri Lanka and Pakistan, have also sought or received IMF assistance this year.