BPC's huge debt, Bangladesh in danger of crisis

[Black_cats]

BPC's huge debt, Bangladesh in danger of crisis​

Harun Ur Rashid Swapan Dhaka
3 hours ago3 hours ago

Bangladesh Petroleum Corporation (BPC) is unable to pay dues to foreign oil suppliers due to dollar crunch. If the situation does not improve, some companies may stop supplying fuel to Bangladesh.

The US-based S&P Global has reported that foreign oil suppliers now owe about $300 million to BPC, the government-owned oil importer of Bangladesh. Due to the dollar crisis, they are struggling to pay this debt A few companies may stop supplying fuel to Bangladesh if they do not receive their dues BPC director (operations and planning) Khalid Ahmed said, "Some suppliers have written to them saying they will stop supply if they do not pay the dues soon," but he did not name the companies.

However, it is known that 6 companies are currently supplying fuel oil to BPC Two of these firms have expressed reluctance to supply fuel due to non-payment of dues Due to the dollar crisis, BPC was unable to pay a total of about $282 million to Singapore-based Vital Asia and Chinese firm Unipec.

As of May 16, the amount owed to BPC by fuel oil suppliers is $297.49 million Almost all of it is owed to those two institutions

Over the past few months, BPC has been paying a third to half of the total dues to some institutions But they could not pay any dues to some institutions BPC is facing this situation due to dwindling reserves and dollar crisis

"BPC has never faced this situation before," said Khalid Ahmed "We used to always pay our dues on time."

Until last February, BPC used to pay the price within 8-10 days of loading the fuel oil on the ship Although the maximum repayment period is 30 days But since March, he is not able to pay the full amount BPC pays for its imported fuel oil in dollars but sells it in Bangladeshi taka in the local market If they don't get dollars from the bank, they don't have the dollars to pay the import price

BPC has spoken to Bangladesh Bank about this But even that has not solved the dollar crisis However, Bangladesh Bank spokesperson and executive director Mesbaul Haque told Deutsche Welle, "I am not fully aware of this." Today (Friday) is a holiday Maybe I can see the documents on the opening day of the office But overall there is a dollar crisis Reserves have increased slightly.

BPC imports about 6.5 million metric tons of various fuels annually under long-term contracts or through tenders.

BPC has to invite tenders twice a year to import fuel oil January to June and July to December Prices are fixed through negotiation with designated suppliers The BPC fears that suppliers may raise prices if dues are not paid quickly BPC has to open 16 to 17 LCs worth about $560-696 million per month to import refined and crude oil.

Meanwhile, the owners of Berskari Power Plant are also not getting enough dollars from the central bank to import fuel oil, said Faisal Khan, president of Bangladesh Independent Power Producers Association. Bangladesh's crude oil import decreased by 12.5 percent in April compared to March

Executive Director of Policy Research Institute and Economist Dr. Ahsan H Mansoor said, "We know that some companies have said they will not supply oil." BPC is also unable to open LCOs to bring in fresh oil It is a crisis The dollar crisis has been going on for a long time so we should have had a plan in advance Our export earnings are not increasing But beyond this, many more steps could have been taken to deal with the crisis Maybe this fuel oil crisis can be overcome Assistance may come from Saudi Arabia and Qatar But due to dollar shortage, coal cannot be imported Oil-fired power plants are closed Coals are also closing down So what about the electricity situation?''

Meanwhile, Minister of State for Power, Energy and Mineral Resources Nasrul Hamid Bipu said that after one month from now, the price of fuel oil and electricity will be adjusted in the country's market in accordance with the international market price. And not the Energy Regulatory Commission, the government will set this price in line with the global market He told reporters at his residence on Friday that this decision was taken to get out of the subsidy

The amount of reserves in Bangladesh is now 30.36 billion dollars, said Mesbaul Haque, the spokesperson of Bangladesh Bank This slight improvement in the situation comes after receiving $507 million in budget support from the World Bank Earlier the reserve was 29.78 billion dollars On the other hand, there has been further devaluation of the rupee with the dollar Imports and interbank dollar prices rose On opening of import LCs, the dollar has increased by about one rupee on an average In this sector, the dollar is being sold at the rate of 108 to 109 taka The growth rate is about one percent At the same time, the interbank dollar price also increased by an average of one rupee A maximum of 108 rupees is being sold per dollar The cost of importing goods will increase as the dollar price increases in interbank and imports

Dr. Ahsan H Mansoor said, "The government is now thinking about elections." They are thinking about elections But specific economic planning is needed to deal with these crises The whole world is dealing with it We have to deal with it and move on What we see is floating Not seeing any anchoring."

বিপিসির বিশাল দেনা, সংকটের আশঙ্কায় বাংলাদেশ – DW – 19.05.2023

বাংলাদেশ পেট্রোলিয়াম কর্পোরেশন (বিপিসি) ডলার সংকটের কারণে বিদেশের জ্বালানি তেল সরবরাহকারীদের পাওনা শোধ করতে পারছে না৷ পরিস্থিতির উন্নতি না হলে কয়েকটি প্রতিষ্ঠান বাংলাদেশে জ্বালানি তেল সরবরাহ বন্ধ করে দিতে পারে৷

www.dw.com

 

[nang2]

Strange. Why would Unipec demand dollar payment?

 

[SoulSpokesman]

This is quite odd as BD's forex position is not that bad to warrant such. Might be some other reason. Alternatively it may be a conspiracy to undermine SHWs reputation.

Regards

 

[IndianLite]

This is quite odd as BD's forex position is not that bad to warrant such. Might be some other reason. Alternatively it may be a conspiracy to undermine SHWs reputation.

Regards

Report says, “The US-based S&P Global has reported that foreign oil suppliers now owe about $300 million to BPC”.

Wohoo

BPC directors should book trips to Vegas before the government spends it.

 

[Destranator]

The US-based S&P Global has reported that foreign oil suppliers now owe about $300 million to BPC,

Very generous of BPC to lend people money in the midst of a crisis.

 

[bluesky]

This is quite odd as BD's forex position is not that bad to warrant such. Might be some other reason. Alternatively it may be a conspiracy to undermine SHWs reputation.

Regards

300 million dollar to SH Wazed ke lie kuch bhi nahin hain. Apna pota-puti ke liye khelona kharidne pe wo Aurat aor bhi jiyada dollar kharch karte hain.

 

[Chute]

This is quite odd as BD's forex position is not that bad to warrant such. Might be some other reason. Alternatively it may be a conspiracy to undermine SHWs reputation.

Regards

Not that bad? IMF literally forced reclassification of the forex measurement to 25 billion or so from 35 or whatever it was prior to it....whichever amounts were gross vs net.

There are varying degrees of liquidity commitment for the base 25 billion amount that will be the amount BD reports from june? onwards. It is concerning it has achieved pressure even on energy base imports.

i.e There are some shenanigans going on that is far cry from what was reported and then farted about here continuously by some members.

Its not surprising at all to me that ukbengali has seemingly and conveniently left the forum after promising forex will soon reach 50 and 60 billion USD by now.

There is a stupid typo in this article too it seems:

has reported that foreign oil suppliers now owe about $300 million to BPC, the government-owned oil importer of Bangladesh. Due to the dollar crisis, they are struggling to pay this debt A few companies may stop supplying fuel to Bangladesh if they do not receive their dues BPC director (operations and planning) Khalid Ahmed said, "Some suppliers have written to them saying they will stop supply if they do not pay the dues soon," but he did not name the companies.

I think its other way around that BPC owes this much USD to foreign suppliers...and cant pay it due to forex crunch.

Strange. Why would Unipec demand dollar payment?

Why would China take Taka unless its negotiated as part of currency swap at high level? China runs a huge trade surplus with BD...

i.e hypothetical Taka-Yuan trade would be one side accumulation basically (Taka accumulating in China).

Such a thing would be a big favour China does for BD since China essentially would have to hold this money as an investment itself given low liquidity and demand of Taka compared to USD in world forex....and China's own very low demand for imports from BD (compared to BD demand for Chinese imports).

I mean China itself is talking a lot about trying to make Yuan an alternative (even while retaining its capital account controls) given predominance of USD liquidity....and its going to have very limited results in the end given China's capital controls (unlike US which has convertible capital account) and the massive problems that are fast approaching China internally that will keep this capital control status quo.

So what chance BD has in improving Taka liquidity for other countries?

USD trade is really only thing that make sense for Unipec or anyone else.

If its very large energy producer like Russia (facing sanctions from large consumers of energy), then China has more options there for accepting Rouble-Yuan trade. But its very different scenario to BD imprint on world economy situation.

 

[SoulSpokesman]

@Chute bhai

I agree 25<35 but still USD 25 billion is not bad in absolute amounts. Showbaaz will be thrilled to have that much.

Regards

 

[pikkuboss]

@Chute bhai

I agree 25<35 but still USD 25 billion is not bad in absolute amounts. Showbaaz will be thrilled to have that much.

Regards

Bangladesh's external debt is $100 Billion and forex reserve is $25 Billion.

India's external debt is $613 Billion and forex reserve is $600 Billion.

You can do the maths now.

 

[renhai]

Not that bad? IMF literally forced reclassification of the forex measurement to 25 billion or so from 35 or whatever it was prior to it....whichever amounts were gross vs net.

There are varying degrees of liquidity commitment for the base 25 billion amount that will be the amount BD reports from june? onwards. It is concerning it has achieved pressure even on energy base imports.

i.e There are some shenanigans going on that is far cry from what was reported and then farted about here continuously by some members.

Its not surprising at all to me that ukbengali has seemingly and conveniently left the forum after promising forex will soon reach 50 and 60 billion USD by now.

There is a stupid typo in this article too it seems:

has reported that foreign oil suppliers now owe about $300 million to BPC, the government-owned oil importer of Bangladesh. Due to the dollar crisis, they are struggling to pay this debt A few companies may stop supplying fuel to Bangladesh if they do not receive their dues BPC director (operations and planning) Khalid Ahmed said, "Some suppliers have written to them saying they will stop supply if they do not pay the dues soon," but he did not name the companies.

I think its other way around that BPC owes this much USD to foreign suppliers...and cant pay it due to forex crunch.




Why would China take Taka unless its negotiated as part of currency swap at high level? China runs a huge trade surplus with BD...

i.e hypothetical Taka-Yuan trade would be one side accumulation basically (Taka accumulating in China).

Such a thing would be a big favour China does for BD since China essentially would have to hold this money as an investment itself given low liquidity and demand of Taka compared to USD in world forex....and China's own very low demand for imports from BD (compared to BD demand for Chinese imports).

I mean China itself is talking a lot about trying to make Yuan an alternative (even while retaining its capital account controls) given predominance of USD liquidity....and its going to have very limited results in the end given China's capital controls (unlike US which has convertible capital account) and the massive problems that are fast approaching China internally that will keep this capital control status quo.

So what chance BD has in improving Taka liquidity for other countries?

USD trade is really only thing that make sense for Unipec or anyone else.

If its very large energy producer like Russia (facing sanctions from large consumers of energy), then China has more options there for accepting Rouble-Yuan trade. But its very different scenario to BD imprint on world economy situation.

But how to deal with the US debt crisis? Considering that China is currently selling US bonds on a large scale. Will the United States print more dollars and force the world to purchase them?

 

[Chute]

@Chute bhai

I agree 25<35 but still USD 25 billion is not bad in absolute amounts. Showbaaz will be thrilled to have that much.

Regards

Pakistan economic problem is of whole different magnitude of terrible....so I see no point to bring them up...or what their decrepit economy would be "thrilled" to have.

Point is BD has import cover of 25 / 90 ~ 30% of a year.

That is really bad ratio and that is the very reason it is popping up now for petroleum dues even.

Compare to India (which itself is bad socioeconomic ratio too relative to its potential) which has 600/900 roughly which is 2/3rds ratio for a year.

BD has a very badly developed capital account side.

Last I checked Non resident BD saving account + bond schemes amounted to total of far below 1 billion USD.

Whereas India has somewhere in 130 billion USD range for its FCNR/NRI bonds and deposits. Large portions of the rest are other bonds too (i.e long term investment). They leverage off each other to have some level of virtuous cycle base here that has benefitted India to some degree.

BD misses out on this by not doing economic reforms to incentivise its own expat population in Western countries to trust and invest in such bonds in big way. Its bonds are after all given non-investment grade by the major rating agencies.

So it is much more current account (remittance from Gulf etc) driven....to stay afloat in forex scene....combining with BD own inflation scene that expats notably want to plug for their family networks first (i.e short term concerns predominate over long term investment).

This is a structural problem for the economy that will not change given extremely corrupt BAL administration (past its propaganda antics and its propaganda merchants in this forum - one which has notably left it seems).

i.e the composition of the forex level that exists has suboptimal basis to begin with....they have short term maturities with fairly high interest payable in same USD (because of the reluctance to genuinely reform BD economy), so how far can they really be dipped into?

Apparently not that far at all given vital importance of petroleum, yet we see this with BPC already.

 

[Chute]

But how to deal with the US debt crisis? Considering that China is currently selling US bonds on a large scale. Will the United States print more dollars and force the world to purchase them?

US will offer the interest rate that will offload the debt to the degree it needs. i.e keep kicking the can. When and how they get stuck with the bill (and what it will have to do at that point with its severe govt budget reform) is up to US administration in the end.

China might be shedding some USD bonds to diversify and hedge the level it can manage and has charted itself for this decade....but it is also very much conjoined with the US situation at large, so there is only so much it can do given its own problems that are also surfacing.

 

[renhai]

US will offer the interest rate that will offload the debt to the degree it needs. i.e keep kicking the can. When and how they get stuck with the bill (and what it will have to do at that point with its severe govt budget reform) is up to US administration in the end.

China might be shedding some USD bonds to diversify and hedge the level it can manage and has charted itself for this decade....but it is also very much conjoined with the US situation at large, so there is only so much it can do given its own problems that are also surfacing.

If the United States forces Bangladesh to buy US bonds. Will Bangladesh buy it?

 

[Chute]

If the United States forces Bangladesh to buy US bonds. Will Bangladesh buy it?

I don't understand? How does US "force" anyone to buy US bonds? They offer an interest rate on a certain period length to hold them till maturity....then its up to the country/institution/individual if its worth it compared to other investment decisions on offer for their spare capacity (past consumption).

BD is in no position to buy (i.e essentially invest in) USD bonds in any meaningful way.

BD runs a large trade deficit with the world, so it has to keep its forex as relatively liquid as possible.

i.e BD situation is one where it wants the world to buy its bonds (in exchange for their USD or other world standard liquid forex)....rather than vice versa (which needs large spare capacity...and maybe we can have that conversation in 2050 onwards).

That situation wont change a long time as BD simply does not want to reform to bring in high levels of capital investment that say China did in 80s, 90s etc at its rough same stage in its development process.

i.e China is completely different scenario given its long term trade surplus and thus incentive to make higher return on what it holds (i.e essentially invest in US this way and keep that much USD outside of world circulation at same time to help lubricate its own economic model for as long as possible).

 

[Black_cats]

Bangladesh struggles to pay for fuel imports as dollar crisis worsens -letters​

Stock Markets

Published May 22, 2023 04:51AM ET

© Reuters. FILE PHOTO: People refuel their motorcycles at a gasoline station after fuel price surge up to fifty percent in Dhaka, Bangladesh, August 6, 2022. REUTERS/Mohammad Ponir Hossain

By Ruma Paul

DHAKA (Reuters) - 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".

All import and marketing of fuel in the country of nearly 170 million people is controlled by Bangladesh Petroleum Corp (BPC), which has asked the government to permit domestic commercial banks to settle dues with India in rupees.

The South Asian nation's dollar reserves have shrunk more than a third since Russia's invasion of Ukraine in February last year to stand at a seven-year low of $30.18 billion by May 17.

Heavily reliant on energy imports, Bangladesh is grappling with power cuts resulting from a fuel shortage that have badly hurt its exports-oriented garments industry.

"Due to a shortage of foreign currency/dollars in the domestic market and the central bank not meeting demand for U.S. dollars, commercial banks are unable to pay for imports on time," BPC told the power ministry in a May 9 letter reviewed by Reuters.

That followed a warning in a letter in April that 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."

The ministry, BPC and the central bank did not immediately respond to telephone calls to seek comment.

BPC imports 500,000 tonnes of refined oil and 100,000 tonnes of crude oil every month.

The April letter said several fuel suppliers had either sent fewer cargoes than scheduled or threatened to halt supplies.
Creditors included Unipec, the trading arm of China's state-owned Sinopec (OTC:SHIIY), Vitol, ENOC, Indian Oil Corp Ltd (IOC), PetroChina and Indonesia's BSP, it said.

"Several companies are threatening to stop supplies while others are sending fewer cargoes than planned," said a BPC source who sought anonymity to speak on a sensitive issue.

BPC will have to pay $41.1 million this year for diesel to India's Numaligarh Refinery Ltd, majority owned by Oil India Ltd, while IOC is owed $147.2 million for diesel and jet fuel, the May letter showed.

BPC asked the government to allow Bangladesh's nationalised commercial banks to settle dues with Indian companies in rupees.

In September, Reuters reported that State Bank of India 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.

For years, Bangladesh's $416-billion economy has been one of the world's fastest growing, but rising prices of energy and food because of the war have inflated its import bill and the current account deficit.

In January, the International Monetary Fund approved loans of $4.7 billion for Bangladesh. Others in South Asia, such as Sri Lanka and Pakistan, have also sought or received IMF funds this year.

Bangladesh struggling to pay for fuel due to dollar shortage, letters show By Reuters

Bangladesh struggling to pay for fuel due to dollar shortage, letters show

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