Amin Ul Ahsan, chairman of BPC, responsible for oil and gas imports, distribution and marketing, attributed the rapid debt clearance to strategic changes that restored the agency’s image and strengthened its negotiating power with suppliers.

The Bangladesh Petroleum Corporation (BPC) has settled $578 million in unpaid foreign bills over the past three months, a target it had struggled to achieve in the previous two years.

For more than two years, the state agency’s average unpaid bills to suppliers hovered around $200 million, with ships sometimes forced to wait offshore at Chattogram port, unable to unload due to unpaid dues. , which resulted in increased rental and demurrage costs.

Amin Ul Ahsan, chairman of BPC, responsible for oil and gas imports, distribution and marketing, attributed the rapid debt clearance to strategic changes that restored the agency’s image and strengthened its negotiating power with suppliers.

“As of November 7, the BPC did not hold any outstanding external payments. One of the main reasons is our decision to open letters of credit (LC) through private banks, which have adequate foreign exchange reserves” , Amin told the Business Standard yesterday.

Over the past three months, BPC has worked with BRAC Bank, Prime Bank, The City Bank and Islami Bank to open LCs, thereby preventing further debt accumulation. Each LC of the company is typically worth around $25 million, with 17-18 LCs opened each month, amounting to over $400 million, a demand that state-owned banks alone could not meet.

This change allowed the BPC to reduce its dependence on state-owned banks like Sonali Bank, which during this transition period provided foreign currency to settle deferred payments on previously opened letters of credit that had been delayed due to foreign exchange shortages.

Due to these shortages, the previous Awami League government asked the Bangladesh Bank to provide dollars for the importation of essential goods, including fuel oil, food and chemical fertilizers.

According to central bank data, Bangladesh Bank provided $7.62 billion in FY22, $13.58 billion in FY23 and $12.79 billion in of FY24 to commercial banks. However, as the country’s foreign exchange reserves declined, the central bank was unable to meet the entire demand for dollars, leading to a gradual increase in the BPC’s debt to foreign suppliers. for fuel oil imports.

BPC Chairman Amin said dependence on Sonali Bank and other state-owned banks has been completely reduced. During this period, Sonali and other banks cleared BPC’s foreign currency debts on previously opened letters of credit, thanks to increased remittances.

He added that the energy advisor also asked the general managers of state banks to ensure the necessary foreign exchange for the BPC.

Amin added that foreign suppliers are now satisfied as BPC has improved its payment times and negotiating strength. The BPC is expected to sign a six-month oil supply contract in December without any weakness in the negotiations.

He said there was no additional cost for opening LCs in private banks. Dhaka Bank and Bank Asia have also expressed interest in opening LC, with these banks expected to start next week. Additionally, BPC plans to open LCs with Standard Chartered Bank in January.

BPC previously used only four state banks for letters of credit, but now uses nine, public and private. This expansion eased pressure on banks and made the process easier for BPC.

As the sole importer of fuel oil in the country, BPC buys fuel in foreign currencies and resells it in local currency. Aside from arrears, Bangladesh Biman is the only entity not paying dues on fuel sales. BPC opens foreign currency oil import LCs with local currency through banks.

Following the increase in demand for imports after the Covid-19 pandemic and the rise in global commodity prices due to the war between Russia and Ukraine, Bangladesh has been facing a foreign exchange crisis .

As export and remittance earnings have not been sufficient to cover import obligations, foreign exchange reserves have continued to decline and the exchange rate of foreign currencies has continued to increase.

To meet market demand, the Bangladesh Bank struggled to supply dollars from its reserves. Despite the availability of funds, various entities have been unable to access the dollars. As a result, BPC was unable to settle its debts to foreign suppliers on time, thereby becoming a debtor institution.

On October 20, Bangladesh Bank Governor Ahsan H Mansur said in an interview with UNB that the country’s foreign exchange reserves were gradually increasing and stabilizing.

He pointed out that under the previous government, reserves were decreasing by $1.3 billion per month, but now the trend is reversing positively.

“A significant amount has already been paid for fertilizers, electricity and Adani-Chevron dues. In the last two months alone, the central bank cleared $1.8 billion in arrears for fuel and other essential services, reducing the outstanding bill from $2.5 billion to $700. million,” added the governor.