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

People wait in queue to buy food at subsidised price fixed by the government in Dhaka on November 17, 2022. (Photo courtesy: AFP)
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Updated 22 May 2023
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Bangladesh struggles to pay for fuel imports as dollar crisis worsens — letters

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

DHAKA: 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 US 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 tons of refined oil and 100,000 tons 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, 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 nationalized 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, favoring 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.


Pentagon foresees ‘more limited’ role in deterring North Korea

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Pentagon foresees ‘more limited’ role in deterring North Korea

  • South Korea hosts about 28,500 US troops in combined defense against North Korea’s military threat
  • In recent years, US officials have signaled a desire to make US forces in South Korea more flexible
The Pentagon foresees a “more limited” role in deterring North Korea, with South Korea taking primary responsibility for the task, according to a policy document released on Friday, a move that could lead to a reduction of US forces on the Korean Peninsula.
South Korea hosts about 28,500 US troops in combined defense against North Korea’s military threat and Seoul has raised its defense budget by 7.5 percent for this year.
“South Korea is capable of taking primary responsibility for deterring North Korea with critical but more limited US support,” the Pentagon said in the 25-page National Defense Strategy document that guides its policies.
“This shift in the balance of responsibility is consistent with America’s interest in updating US force posture on the Korean Peninsula.”
In recent years, US officials have signaled a desire to make US forces in South Korea more flexible, to potentially operate outside the Korean Peninsula in response to a broader range of threats, such as in defending Taiwan and checking China’s growing military reach.
South Korea has resisted the idea of shifting ‌the role of US ‌troops, but has worked to grow its defense capabilities in the past 20 years, with ‌the ⁠goal of being ‌able to take on the wartime command of combined US and South Korean forces. South Korea has 450,000 troops.
The Pentagon’s top policy official, Elbridge Colby, is due to travel to Asia next week and is expected to visit South Korea, a US official said.
The wide-ranging document, which each new administration publishes, said the Pentagon’s priority was defending the homeland. In the Indo-Pacific region, the document said, the Pentagon was focused on ensuring that China could not dominate the United States or US allies.
“This does not require regime change or some other existential struggle. Rather, a decent peace, on terms favorable to Americans but that China can also accept and live under, is possible,” the document said, without mentioning Taiwan by name.
China claims ⁠democratically governed Taiwan as its own territory and has not ruled out the use of force to take control of the island. Taiwan rejects Beijing’s sovereignty claims and says only ‌the people of Taiwan can decide their future.
The Pentagon document is based on ‍US President Donald Trump’s National Security Strategy, published last year, which said ‍the United States will reassert its dominance in the Western Hemisphere, build military strength in the Indo-Pacific, and possibly reassess its ‍relationship with Europe.
Iran seeks to rebuild military
President Trump said on Thursday the United States has an “armada” heading toward Iran but that he hoped he would not have to use it, as he renewed warnings to Tehran against killing protesters or restarting its nuclear program.
The deployments to the Middle East expand the options available to Trump, both to better defend US forces in the region at a moment of high tension and to take any additional military action after striking Iranian nuclear sites in June.
The Pentagon document said that while Iran had suffered setbacks in recent months, it was aiming to rebuild its military, with Tehran leaving open the possibility that it ⁠could “try again to obtain a nuclear weapon.”
Even with US troops heading to the region, the document said Israel was a “model ally” and could be further empowered to defend itself. The United States has had a sometimes strained relationship with Israel over its war in Gaza.
US to remain engaged in Europe
Trump’s National Security Strategy from last year drew an outcry from Europeans after it said that Europe faced “civilizational erasure” and may one day lose its status as a reliable US ally.
The Trump administration is putting pressure on Kyiv to reach a peace deal in the war triggered by Russia’s full-scale invasion in February 2022, with Moscow demanding Kyiv cede its entire eastern industrial area of Donbas before it stops fighting.
The Pentagon’s strategy document was more measured on European allies, saying that while the United States would remain engaged in Europe it would prioritize defending the United States and deterring China.
It said that Russia would remain a “persistent but manageable” threat for NATO’s eastern members, and that the Pentagon would provide Trump with options to “guarantee US military and commercial access to key terrain” in different parts of the world, including in Greenland.
Trump said earlier ‌this week he had secured total and permanent US access to Greenland in a deal with NATO, whose head said allies would have to step up their commitment to Arctic security to ward off threats from Russia and China.