Power Sector Debts Strain BD’s Foreign Loan Repayment Capacity

Controversies surrounding the Adani power deal have resurfaced, but less attention has been given to the SS Power plant, owned by a private Bangladeshi group, despite its high costs. In FY 2023-24, SS Power's capacity was only utilized at 21%, yet it incurred a Tk 3,288 crore capacity charge. Ramphal Power Plant, with 24% utilization, faced a Tk 2,237 crore charge. Other plants like Barishal Electric (30%), Payra (65%), and Adani’s (61%) also reported high capacity charges, with Adani costing Tk 5,392 crore. Overall, five coal-based plants incurred Tk 15,686 crore in capacity charges.

The government of Bangladesh has stopped borrowing from the central bank, instead repaying previous loans, resulting in a reduction of Tk 18,250 crore in government debt to Bangladesh Bank during July-August of the current fiscal year. However, the government borrowed Tk 28,952 crore from commercial banks in the same period, bringing the net debt from the banking sector to Tk 10,702 crore. This shift is part of Bangladesh Bank's effort to control inflation by avoiding money printing for government loans.

An IMF delegation is set to visit Bangladesh from September 24 to 30 to assess the country's financial needs as it seeks a new $3 billion loan. The team will evaluate economic developments and potential financing needs, working closely with the interim government to advance reforms. The IMF has an ongoing $4.7 billion loan programme for Bangladesh, approved last year, as the country faces dwindling foreign currency rese

Customs-related irregularities have been uncovered in Bangladesh's power imports from India's Adani Group, with officials bending legal procedures to evade significant taxes.  Since April 2022, Bangladesh has imported power from Adani's 1,600MW coal-fired plant in Jharkhand without obtaining necessary tax-exemption orders. No bill of entry has been submitted to customs for these imports, raising concerns. An independent body has been formed to scrutinize the power deal following allegations of inflated tariffs. 

Bangladesh is facing daily load shedding of 2,000-3,000 megawatts due to a significant gap between electricity demand and production. Despite this shortage, six furnace-oil power plants with a combined capacity of 600 MW remain idle as the government has not yet decided on their continued operation under a "no-electricity, no-payment" mechanism. Experts suggest that restarting these plants could alleviate a third of the load shedding without requiring new investment.

The Government of Bangladesh (GoB) is currently in discussions with Beijing to negotiate more favorable terms for Chinese loans. The aim is to reduce the interest rate to 1% and extend the repayment period to 30 years. 

At present, loans from China are provided at interest rates ranging from 2-3%, with a repayment period of 20 years. The Economic Relations Division (ERD) of the Ministry of Finance sent a formal letter requesting these adjustments, following a recent address by the Chief Adviser. This move is part of broader efforts to alleviate the growing pressure on the country's depleting foreign exchange reserves.