TO say that the government is not in a fiasco will be less than honest and far less than accurate. While a solution to it seems to be not yet in sight, the wailing of those in authority continues. This fiasco, as already widely known, has arisen with its lingering problem in marshalling funds in foreign exchange to enable the state-run Bangladesh Petroleum Corporation (BPC) to import fuel oil from Kuwait. Doubtless, the BPC-- which has been in the business of nurturing a formative economy at the delicate stage of crossing from childhood to early adolescence and selling petroleum products at prices below the procurement costs is a pauper organisation. But its creditworthiness is not questionable. Being a state-run corporation rendering an essential service, it has some similarity with the tail of a lion. The tail cannot be dead while the lion is alive. While Bangladesh is still creditworthy, how can a corporation owned by it be not creditworthy?
While the National Bank of Kuwait (NBK) has indirectly raised the question of creditworthiness of the BPC, Energy Adviser Mahmudur Rahman has reportedly planned to fly to that country again in the next week. He will undertake the planned visit to resolve the persisting uncertainty about procurement of fuel oil from the Arab country on a deferred payment basis, as was reportedly agreed upon during the recent visit to Dhaka of the Amir of Kuwait. The NBK is said to have expressed its unwillingness to accept letters of credit (LCs)-- to be opened with our state-owned nationalised commercial banks (NCBs) -- for import of Kuwaiti oil worth $750 million unless the LCS are guaranteed by Standard Chartered or Citibank NA or American Express. How far the energy adviser will succeed in having his counterpart or the Kuwaiti government intervened to alter the stand of the NBK remains to be seen. The outcome of his effort will depend more on the response of the Kuwaiti side.
Literally, the government of Bangladesh is banking on an uncertainty to resolve an uncertainty about the critical matter of oil import at a time when the base of the global political barometer is exposed to intensifying heat in the area close to the source of oil and its supply line. In the event of an outbreak of war involving Iran over its nuclear issue, which is not unlikely, Syria may not remain neutral. The Iraqi Shia Muslims may also turn their back to the Americans inducing the Sunni Iraqis-- now fighting one another in a civil war -- to forget their past differences and close ranks. None can say, how many Arab countries will remain stable at that time. In that case, will the Arabian Sea be safe for navigation? What then will happen to our oil supply?
The head of the Iranian revolutionary guards-General Yahya Rahim Safavi, is already reported to have advised his forces to be prepared to 'get even with Israel and the United States'. He is said to have mentioned that the supreme leader and commander-in-chief of Iran -- Ayatollah Ali Khamenei, will announce the time for it. If the dreaded war happens to break out making the Arabian Sea dangerous for navigation, should Bangladesh plunge into darkness with all its industries closed after its existing stock of fuel oil runs out?
India -- which is now witnessing a skyrocketing economic growth, sold out all its gold reserve around 1990 to overcome an acute shortage of foreign currency. She did not then move heaven and earth to procure foreign currency from external sources. She put confidence in her own capability. Why are we not trying to resolve our problem with our own resources? Bangladesh now has a foreign exchange reserve of over $ 3.0 billion. If it cannot do anything with that reserve at this delicate time, what could be the meaning of having it? Understood that Bangladesh cannot drastically deplete this reserve-which is barely enough for three months' import, as per its earlier agreement with the International Monetary Fund (IMF). But should the country be in the position of not spending its own dollar, despite having an otherwise comfortable level of reserve. May be, this delicate position has fuelled the suspicion of the NBK about the creditworthiness of the BPC and the NCBs that are to open LCs on BPC's behalf in spite of the fact that all these are state-owned entities.
The shortage of fund for import of oil has been caused and accentuated by the aggravating tension in the Middle East. The Asian Development Bank (ADB) has estimated that the BPC - rather, the government lost a little over $ 1.0 billion on account of subsidy on oil in the immediate past fiscal year. Had the bank also calculated the loss suffered in each of the previous four fiscal years on account of the subsidy, only then the figures would have enabled one to quantify the additional loss suffered by this country in the fiscal year due to the progressive build-up of tension in the Middle East-- driving up the world market prices of oil. It could have also enabled one to calculate the total of such additional losses, suffered over the years, a figure that would tell us about the contributions of the adverse Middle East situation to BPC's present bankruptcy.
It is most likely that the government's agreement with the IMF not to deplete the foreign currency reserve below $3.0 billion or whatever is enough for meeting three months' import expenditure was worked out prior to even the slightest indication that the tension would build up in the Middle East to send the oil prices to newer heights to penalise poor countries like Bangladesh. Since this tense situation is not our making, can't the government now ask the IMF for relaxing the particular term of the agreement on the condition that the Bangladesh Bank (BB) may extend one-time loan of $750 million at its usual rate of interest to the pertinent NCBs for financing fuel oil import? The loan may repayable along with interest within the period a similar loan from a foreign bank would have to be repaid. It will spare Bangladesh from the additional burden of having to pay to a foreign bank a significant amount in foreign exchange as the interest on any loan received from it for financing the proposed oil import.
One may recall that the world's number one economic super-power -- the United States, which accounts for more than 25 per cent of global trade, fell back from its international pledge to exchange dollar for gold on August 14, 1971, after assessing that dollar holding outside by foreigners was far larger than its total gold holding. Why should not the government ask for the relaxation of the terms of its agreement with the IMF in view of the prevailing extraordinary situation and the predicament in opening LCs for the unavoidable import of fuel oil? The mode of repayment of the proposed loan to the BB by the NCBs may be mutually agreed upon with the IMF. The IMF may ask: How will the BPC - which sells imported oil in the domestic market at prices below the procurement costs, pay back the loan to the pertinent NCBs to enable them to repay the BB?
There is a general suspicion that the economy is passing through a man-made crisis. There may be even a latent balance of payment problem. Experts in the Ministry of Finance and the BB should find out why the NCBs are facing such a critical shortage of foreign exchange. A thorough search may equip the government with sufficient arguments to ban or further restrict import of unnecessary and luxury items temporarily under the balance of payment provision, as there is in the relevant agreement of the World Trade Organisation (WTO).
Such measures will lead to saving of foreign currencies in the NCBs for paying back the loan in foreign exchange, proposed to be given to them by the BB. But the funds for repaying the BPC's loan from the related NCBs for the purpose will have to be partly made available by the government on considering the issue of subsidy, which cannot be withdrawn overnight due to a host of factors. The government will have to cut avoidable spendings drastically for some time to make the necessary funds available. It seems that the scope of maneuvering the economy to manage all activities without affecting any has been already exhausted by the high oil prices and the sympathetic increase in international prices of some other essential commodities - many of which this country has to import. The sooner it is recognised, the better will be for the country.