A growing backlog of payment obligations in the power sector is becoming a major issue that could hinder its growth. The government’s power purchase agreements (PPAs) with private sector companies are primarily denominated in foreign currency, particularly the US dollar. The state-owned Bangladesh Power Development Board (BPDB) pays private power producers in local currency for the electricity it purchases.
Under the existing arrangement, private power producers can convert payments into US dollars for various obligations. However, due to a dollar crisis, both the BPDB and private power producers have faced difficulties obtaining US dollars from banks and the Bangladesh Bank. The total owed to Independent Power Producers (IPPs) is $3.5 billion as of September 2023, leading to delays and partial payments. Energy experts warn that this backlog could create significant problems in the power sector, potentially affecting the overall economy and increasing inflation.
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