IsDB offers Bangladesh $4.9b for fuel purchase, projects

The Islamic Development Bank (IsDB) Group has extended a significant offer of 4.9 billion US dollar in loans to Bangladesh, spanning a three-year period beginning in 2024. The allocated funds are intended for energy acquisition, developmental initiatives, and fortifying the private sector.

This latest financial proposition complements the previously agreed-upon $2.1 billion loan from the International Islamic Trade Finance Corporation (ITFC) for the years 2024-25, specifically addressing Bangladesh's energy import requirements. The loan agreement was formalized on February 7 in Dhaka.
Out of the total loan amount, $3.2 billion is earmarked for the procurement of oil and gas, facilitated through the ITFC, taking into consideration Bangladesh's persistent dollar crisis and the ongoing challenges in settling import bills.
An additional $1.3 billion is designated for Bangladesh's developmental projects, with the interest rates aligning with prevailing market rates.
In addition to these financial arrangements, there is a proposed $400 million loan through the Islamic Corporation for the Development of the Private Sector (ICD), the Jeddah-based group's arm focused on advancing the private sector, as revealed by officials from the Economic Relations Division (ERD).
Concurrently, the IsDB Group has introduced a provision for insurance facilities totaling $2.5 billion for Bangladesh through the Islamic Corporation for the Insurance of Investment and Export Credit, the group's insurance arm, as reported by ERD officials. The Corporation's mission is to facilitate trade and investment between member countries and the world through Shariah-compliant risk mitigation tools.
Muhammad Nassis bin Sulaiman, the regional manager (residential head) of the IsDB Regional Hub in Dhaka, presented these proposals during a meeting with ERD Secretary Md Shahriar Quader Siddiqui on February 15.
Zahid Hussain, former lead economist at the World Bank's Dhaka office, commented that while the IsDB is offering long-term loans, the terms and conditions suggest that the loans will resemble commercial ones, with various charges associated with Mid-swap. He noted that this type of borrowing could be considered to augment foreign sources during the current dollar crisis.
Hussain further emphasized that ITFC loans for the procurement of oil and gas could be pursued to ensure the country's energy security. Bangladesh has been securing loans from the ITFC for oil purchases since 2008, and since 2024-25, the government has extended its borrowing from the multilateral lender for gas procurement as well.