Saudi Arabia boosts Bangladesh’s energy security with $1.4 billion financing deal
- The deal aims to boost energy security and alleviate pressure on Bangladesh’s dollar reserves.
- The financing will help ensure uninterrupted supplies as Bangladesh imports most of its oil needs.
- Energy expert Ijaz Hossain believes the funding will be a relief for Bangladesh’s energy supply issue.
On March 25, the International Islamic Trade Finance Corp., a division of the Islamic Development Bank, finalized a financing deal with the Bangladeshi government to provide $1.4 billion to the Bangladesh Petroleum Corp. The agreement, aimed at boosting the South Asian economy’s energy security and alleviating pressure on its dollar reserves, was recently signed.
The ITFC stated, as quoted by the Saudi Press Agency, that the financing was aimed at developing Bangladesh’s energy infrastructure and “will ensure energy security for one of the fastest-growing economies in South Asia.”
“Under this agreement,” said Bangladesh Petroleum Corp. operations director, Kazi Muhammad Mozammel Huq, “Bangladesh will receive financing support from next July to June (2025).”
“We’ll mostly import crude oil with the financing of ITFC. In addition, a little portion of refined oil will be imported.”
The loan will assist the state-owned entity, which is responsible for importing and marketing fuel oil, in meeting its obligations to suppliers. The two main suppliers are Saudi Aramco and the UAE’s Adnoc.
Huq stated, “The suppliers will receive payment on time,” adding that since the financing is in US dollars, it will help alleviate pressure on Bangladesh’s foreign exchange reserves.
With the country facing a dollar crunch, the financing will help the government ensure uninterrupted supplies as Bangladesh imports most of its oil needs.
“This financing agreement will be a big help for our import of oil and gas,” Ijaz Hossain, an energy expert and professor at the Bangladesh University of Engineering and Technology, said.
“The energy supply issue is very critical. So, if the government receives a separate fund for purchasing energy, definitely it’s a matter of big relief, especially as we can’t buy oil and gas randomly as the market fluctuates regularly.”
Earlier this year, a survey conducted by the Dhaka-based Center for Policy Dialogue revealed that more than 66 percent of businesses identified energy supply shortages as their primary concern, a situation that frequently resulted in the suspension of production. Energy supply has been one of the major challenges for conducting business in Bangladesh.
“Considering the current state of our economy, this fund will offer us great support,” Hossain added.
He pointed out that Bangladesh could soon expand its cooperation with Saudi Arabia in the renewable energy sector.
“There are opportunities for us to strengthen collaboration with Saudi energy giants like ACWA Power and others for producing renewable energy. The government may help here with the support of necessary land acquisition. Because this sort of project will bring here direct foreign investments. These projects should move at a faster pace.”
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