Staff Correspondent

The government is set to borrow $300 million from a British bank to finance oil imports by the troubled Bangladesh Petroleum Corporation, the finance adviser said Monday.

The government has also decided to borrow $220 million from the International Monetary Fund to meet the budget deficit, finance adviser AB Mirza Azizul Islam told reporters after a meeting of the hard-term loan committee at the finance ministry.

The BPC has been facing financial difficulty as crude oil prices have surged in recent months on the international market. "In an attempt to face the problem, the government has decided to borrow money from Standard Chartered and French bank BNP Paribas," Mirza Aziz said.

The $300 million loan from Standard Chartered has been approved, but the decision about BNP Paribas is yet to receive final approval. London-based Standard Chartered is offering its loans on hard terms to be paid back within nine months. The interest rate will be set at 1.79 points above the London Inter-Bank Offered Rate (LIBOR).

The LIBOR rate is charged by London banks and is then published and used as the benchmark for banks rates all over the world. Lenders typically add a point or two, which is their margin. Mirza Aziz said the Standard Chartered loans of this type usually range between $200-300 million.

Oil was sold on the international market at $60 to $63 a barrel in April last year when the local prices of oil were adjusted. "But now oil is sold between $110 and $112 a barrel which led the BPC to fall deeper into the crisis," the adviser said. The decision to borrow money on hard terms was meant to ease the BPC crisis, the adviser said.

Asked if fuel prices would be hiked, the adviser said: "No such decision has been taken. You will get to know if something like this happens." Speaking of the IMF loans, Mirza Aziz said subsidies in oil, fertiliser and food imports would rise to Tk 15,600 crore in the current fiscal year's revised budget.

The subsidies had been set at Tk 6,500 crore in the current fiscal year's original budget. The decision to take $220 million in loans from the IMF was made to correct the balance of payments, which measures the payments that flow between Bangladesh and all other countries.