Bangladesh to get $1b first-ever ITFC loan for fertiliser imports

Bangladesh is set to receive $1 billion in financing from the Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank (IsDB), to support its fertiliser imports for the current fiscal year (FY25).

According to officials from the Economic Relations Division of Bangladesh, the funds will be allocated to ensure a steady supply of fertiliser, critical for sustaining the country's agricultural sector.

The interim government's request for the fund follows agriculture ministry concerns in September over a potential urea shortage ahead of the peak Boro season in December.

The projected urea demand till March 2025 is 18 lakh tonnes, with around 5 lakh tonnes currently in stock, according to Bangladesh Chemical Industries Corporation (BCIC) October data. Urea demand is primarily met through imports.

For decades, the ITFC has been providing loans to Bangladesh mainly for fuel (Petroleum, LNG) imports but this marks the first time Bangladesh is pursuing foreign loans for fertiliser imports. 

In addition to the $1b for fertiliser, Bangladesh sought another $1 billion from the lender to finance fuel oil and LNG imports for the upcoming 2025-26 fiscal year, according to Economic Relations Division (ERD) sources.

ERD officials told TBS that the ITFC has primarily agreed to extend the fertiliser loan, though it has yet to confirm if the loan will be disbursed this year.

"It would be beneficial for Bangladesh if the loan is disbursed within this year," said an ERD official, requesting anonymity. 

The loan request was made during a meeting last month, when an ITFC delegation, led by Chief Operating Officer Nazeem Noordali, visited Bangladesh. 

ERD Secretary Shahriar Kader Siddiky represented Bangladesh in the discussions, with representatives from Petrobangla, the Bangladesh Petroleum Corporation (BPC), the Energy and Mineral Resources Division, the Ministry of Agriculture, the Finance Division, and Bangladesh Bank also in attendance.

Officials told TBS that the Ministry of Agriculture, in coordination with the Finance Division, Bangladesh Bank, Ministry of Industries, and ERD, will draft a loan proposal for review by ITFC to explore funding possibilities for potential new engagements discussed in the meeting.

During a side meeting at the World Bank and IMF annual conference held on 21-26 October in Washington, Finance Adviser Salehuddin Ahmed and ITFC representatives discussed and secured a commitment of $2 billion in funding for fuel and fertiliser imports.

According to BCIC, Bangladesh requires 68 lakh tonnes of various fertilisers annually, including urea, TSP, and DAP.

Bangladesh has an annual urea demand of about 27-30 lakh tonnes, primarily fulfilled through imports. Although the target for local urea production is set at 10 lakh tonnes, it is unlikely to be met due to the inactivity of fertiliser factories caused by a gas shortage.

 Over $5b expected from IsDB in the next two years

The ITFC operates as an autonomous entity within the Islamic Development Bank (IsDB) Group and provides trade financing primarily to Organisation of Islamic Cooperation (OIC) member countries such as Bangladesh.

Between 2024 and 2026, the IsDB plans to provide a total of $5.15 billion in loans to Bangladesh, with $3.6 billion through the ITFC.

The ITFC has approved a $2.1 billion loan for Bangladesh in FY24 to support the import of petroleum fuels and LNG. Of this, $1.6 billion is for the Bangladesh Petroleum Corporation (BPC), and $500 million for Petrobangla. The loan carries a six-month SOFR plus a 1.80% interest rate and a 0.2% administrative fee.

It was the biggest loan following a $2.6 billion taken in 2012 for crude oil imports, which ITFC has provided to support Bangladesh's energy needs.

Since 1977, the IsDB has been providing loans to Bangladesh, with the Bangladesh Petroleum Corporation (BPC) receiving funding for fuel oil imports since 1997.

Since 2008, IsDB has continued to provide loans through its subsidiary, the International Islamic Trade Finance Corporation (ITFC). From 2008 to 2024, the ITFC has contributed $18.25 billion to Bangladesh's energy security. The loans from IsDB/ITFC between 1997 and 2023-24 totaled approximately $22.58 billion.

ERD officials noted that annual negotiations for loans from ITFC are held in Jeddah, Saudi Arabia, with representatives from ITFC and Bangladesh's key ministries, including the Bangladesh Petroleum Corporation and Bangladesh Bank. The funds are used for fuel oil imports after approval from the Standing Committee on Non-Concessional Loans.

The ITFC also extended $25 million to Bangladesh for food security financing during the pandemic.