Govt signs $1bn financing deal with IsDB

Bangla Press Desk:The Islamic Development Bank (IsDB) on Thursday confirmed $1.0 billion in loans to enhance Bangladesh's oil-refining capacity three times, officials say.

The loan agreement was signed between the Economic Relations Division (ERD) and IsDB in the capital on Thursday.

ERD Additional Secretary Dr Mohammad Mizanur Rahman and Director General, Country Programs, IsDB, Anasse Aissami inked the deal on behalf of the Bangladesh government and the Jeddah-based lender, respectively.

Bangladesh's Prime Minister Tarique Rahman and IsDB visiting President Dr Muhammad Al Jasser witnessed the signing ceremony.

Eastern Refinery Ltd (ERL) Managing Director Md Sharif Hasant said, "The process of appointing a consultancy firm for the project is proceeding rapidly. We aim to accelerate the project so that the trial run of the second unit can be completed by 2030."

Energy Division officials say the Modernisation and Expansion of Eastern Refinery Ltd in Bangladesh project will enhance ERL's current refining capacity from 1.5 million tonnes to 4.5 million tonnes per year.

This will contribute to further strengthening the country's energy security, producing environment-friendly (Euro-5 standard) petroleum oil, and reducing dependence on imported refined fuel oil, they say.

Besides, this will allow the country to meet roughly 45-50 per cent of its domestic petroleum product demand.

Construction will begin by December 2026, and the project is targeted for completion by November 2030.

According to ERD, the 20-year loan features a five-year grace period and is split into two phases - $520.6 million for the first phase alongside a $600,000 grant, and $483 million for the second one.

It carries an interest rate of a six-month SOFR plus a 1.6 per cent spread, ERD officials say.

The expansion is projected to save Bangladesh $9-11 per barrel compared to importing pre-refined fuel, translating into an estimated annual savings of $237 million, Energy Division officials say.

It will also enable the processing of a wider variety of crude oils, including Russian crude, and produce eco-friendly Euro 5-standard fuel, they add.

IsDB is one of the trusted multilateral development partners of Bangladesh and has provided continuous support for the socioeconomic development of Bangladesh since its inception, in the form of grants, project loans, trade financing, private sector financing, export credit guarantees, etc.

Its President Dr Muhammad Sulaiman Al Jasser called on Prime Minister Tarique Rahman and expressed his deep commitment to supporting Bangladesh's development priorities.

Tarique emphasised that IsDB should explore opportunities for low-cost financing for its members, stating that Bangladesh would extend all possible cooperation to further deepen the Bangladesh-IsDB partnership.