Islamic Trade Finance to provide $2.45b loan for oil, gas, fertiliser imports in FY26

The Islamic Trade Finance Corporation, a member of the Islamic Development Bank Group, will provide a $2.45 billion loan to Bangladesh in the 2025-26 fiscal year for importing petroleum, liquefied natural gas (LNG), and fertilisers.

Of the total loan, $1.65 billion will go to the Bangladesh Petroleum Corporation (BPC) for fuel imports, and $600 million to Petrobangla for LNG imports, according to sources at the Economic Relations Division.

Besides, for the first time, the Bangladesh Agriculture Development Corporation will receive $200 million for fertiliser imports, with an option to request an additional $300 million if needed. 

The loan agreement was finalised on 14 December during a meeting in Jeddah, Saudi Arabia, between the Islamic Trade Finance and a Bangladeshi delegation led by ERD Secretary Shahriar Kader Siddiky.

In FY24, the Islamic Trade Finance approved a $2.1 billion loan for Bangladesh to support the import of petroleum fuels and LNG. Of this, $1.6 billion was for the BPC, and $500 million for Petrobangla. The loan carried 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 the ITFC had provided to support Bangladesh's energy needs.

Since 1977, the Islamic Development Bank (IsDB) has been providing financial assistance to Bangladesh. Starting in 1997, the lender began offering loans to the Bangladesh Petroleum Corporation for importing fuel oil.

In 2008, this support was streamlined through the International Islamic Trade Finance Corporation (ITFC), the lender's trade financing subsidiary.

Since FY08, the ITFC alone contributed $18.25 billion to bolster Bangladesh's energy security. From FY97, the combined financial assistance from IsDB and ITFC to Bangladesh totals approximately $22.58 billion.

ITFC's first loan for fertiliser

According to ERD officials, this is the first time the ITFC is offering a loan for fertiliser imports.

For the $2.25 billion energy financing, the tenure will be up to six months from the date of disbursement, while for fertiliser imports, it will be up to 12 months. 

Negotiations at the Jeddah meeting resulted in revised terms for interest rates. For fertiliser financing, the markup will be SOFR + 1.75% annually, while energy financing will carry SOFR + 1.75%, said the officials.

Bangladesh provides annual subsidies for fertiliser imports. Without these subsidies, it would not be feasible to repay ITFC's financing facility every six months under terms similar to those for BPC.

Considering this, ITFC has agreed to extend the repayment tenure for fertiliser loans to one year, according to the officials.

Meanwhile, in a meeting held in November regarding fertiliser imports at ERD, a decision was made to borrow $1 billion. However, the demand was later revised down to $500 million, and a loan proposal for this amount was presented to ITFC at a meeting in Jeddah.

Of the $500 million, ITFC has committed to providing $200 million, with the possibility of securing an additional $300 million if needed.

Fertiliser imports are primarily handled through Bangladesh Agriculture Development Corporation, Bangladesh Chemical Industries Corporation, and the private sector. Bangladesh is expected to import fertilisers from Saudi Arabia, Morocco, and Tunisia.