Government seeks loans to import LNG amid dollar crisis
The interim government is continuing the same approach as its predecessor, relying on loans to pay for imports instead of focusing on sustainable energy solutions, analysts said
Bangladesh’s liquefied natural gas (LNG) imports are facing disruptions due to a persistent dollar shortage. To address this, the government is seeking a USD 350 million loan, equivalent to Tk 42.70 billion, with the support of the World Bank for LNG purchases in the next fiscal (2025-26).
A formal invitation for expressions of interest from banks willing to provide the loan is expected soon.
According to sources at the Energy and Mineral Resources Division and Bangladesh Oil, Gas, and Mineral Resources Corporation (Petrobangla), the loan process has already begun with technical assistance from the World Bank, which will act as a guarantor.
The Energy Division is currently in talks with interested banks regarding their loan proposals.
Domestic gas production has been steadily declining, prompting the government to increase LNG imports. However, the ongoing dollar crisis has made it difficult to settle import bills.
The US company Chevron, Bangladesh’s largest gas producer, is owed over USD 150 million, while outstanding LNG payments have surpassed USD 200 million.
As arrears continue to mount, foreign suppliers are becoming reluctant to deliver LNG shipments. Petrobangla officials believe securing loan assistance could help ease the situation.
To meet demand, we must increase imports, which is why we are securing loans with the World Bank’s assistance. Since banks will compete to offer the best terms, the interest rate will remain reasonableEnergy and Mineral Resources Division Secretary Mohammad Saiful Islam
Bangladesh previously produced 2.7 billion cubic feet of gas per day, but since 2018, output has been falling.
The previous Awami League government opted to meet the growing energy demand through LNG imports rather than prioritising new gas exploration and domestic production.
By last year, daily production had dropped to 2-2.1 billion cubic feet and has now fallen below 1.9 billion cubic feet, with 950 million cubic feet of LNG currently being supplied.
Rupantarita Prakritik Gas Company Limited (RPGCL) oversees LNG imports on behalf of Petrobangla. Bangladesh currently imports LNG under long-term agreements with Qatar’s RasGas and Oman Trading International. The first shipment from Qatar arrived in April 2018, followed by Oman in 2019.
From the fiscal year 2018-19 to 2023-24, LNG imports have cost the country Tk 1.66 trillion. Rising LNG prices have further strained the energy sector, leading the government to take short-term loans from the International Islamic Trade Finance Corporation (ITFC) at various times to cover purchase costs.
The financial strain caused by the dollar crisis extends beyond LNG imports. Electricity bills are also going unpaid, while the government has raised its LNG import target.
This approach creates a vicious cycle - LNG dependence has already escalated debt, making future borrowing more difficult. Credit ratings have declined, and repayment capacity is weakeningKhandaker Golam Moazzem, Research Director at the CPD
The power and energy sector requires an estimated USD 5 billion over the remaining four months of the current fiscal year. This funding requirement has already been communicated to the Finance Ministry. As arrears pile up, the government is now seeking loans from multinational banks to keep the energy supply stable.
Energy Division sources indicate that USD 200 million is being secured for LNG purchases under long-term contracts, while USD 50 million is allocated for spot market procurement.
These funds, totaling USD 250 million, will be disbursed in phases through letters of credit. An additional USD 100 million is being borrowed to settle outstanding arrears.
The World Bank will act as a guarantor, charging a commission, while multinational banks will impose interest. The Energy Division will select the lender offering the most favourable commission and interest rates.
Energy and Mineral Resources Division Secretary Mohammad Saiful Islam told Prothom Alo that mounting arrears have discouraged reputable suppliers from providing LNG.
“To meet demand, we must increase imports, which is why we are securing loans with the World Bank’s assistance. Since banks will compete to offer the best terms, the interest rate will remain reasonable,” he said.
He also noted that the government is negotiating extended long-term contracts to lower LNG procurement costs, with discussions ongoing with Brunei and Saudi Aramco.
Experts argue that prioritising LNG imports over domestic gas exploration has put Bangladesh’s energy sector at risk. They warned that while borrowing may provide short-term relief, it fails to address the root problem and will only create further financial strain.
The interim government is continuing the same approach as its predecessor, relying on loans to pay for imports instead of focusing on sustainable energy solutions, analysts said.
Khandaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD), warned that repaying liabilities with interest-bearing loans will only deepen financial burdens.
“This approach creates a vicious cycle - LNG dependence has already escalated debt, making future borrowing more difficult. Credit ratings have declined, and repayment capacity is weakening,” he told Prothom Alo.
Moazzem urged the government to develop a five-year financial strategy to reduce LNG imports.
* This report appeared in the print and online edition of Prothom Alo and has been rewritten for the English edition by Farjana Liakat