Bangladesh is set to receive $1 billion in financing from the Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank, to support its fertilizer imports for the current fiscal year (FY25).

According to officials from the Directorate of Economic Relations, the funds will be allocated to ensure a constant supply of fertilizers, essential for supporting the country’s agricultural sector.

The caretaker government’s request for the fund follows concerns from the agriculture ministry in September about a possible shortage of urea ahead of the peak Boro season in December.

Estimated demand for urea by March 2025 is 18 lakh tonnes, with around 5 lakh tonnes currently in stock, according to Bangladesh Chemical Industries Corporation (BCIC) October data. Urea demand is met mainly through imports.

For decades, ITFC has been lending to Bangladesh mainly for fuel imports (oil, LNG), but this is the first time that Bangladesh is seeking foreign loans for fertilizer imports.

In addition to $1 billion for fertilizers, Bangladesh has sought another $1 billion from the lender to finance fuel oil and LNG imports for the next fiscal year 2025-26, according to Economic Relations Division (ERD) sources.

ERD officials told TBS that ITFC has primarily agreed to extend the fertilizer loan, although it has yet to confirm whether the loan will be disbursed this year.

“It would be beneficial for Bangladesh if the loan is disbursed within this year,” said an ERD official, requesting anonymity.

The loan request was made during a meeting last month when an ITFC delegation, led by Chief Operating Officer Nazeem Noordali, visited Bangladesh.

ERD Secretary Shahriar Kader Siddiky represented Bangladesh in the talks, with representatives from Petrobangla, Bangladesh Petroleum Corporation (BPC), Energy and Mineral Resources Division, Ministry of Agriculture, Finance Division and Bangladesh Bank.

Officials told TBS that the Ministry of Agriculture, in coordination with the Finance Division, Bangladesh Bank, Ministry of Industries and ERD, will prepare a loan proposal for review by the ITFC to explore financing possibilities for potential new commitments discussed at the meeting.

During a side meeting at the annual conference of the World Bank and the IMF held from October 21-26 in Washington, Financial Adviser Salehuddin Ahmed and ITFC representatives discussed and secured a commitment of $2 billion in financing for fuel imports and fertilizers.

According to BCIC, Bangladesh requires 68 thousand tons of various fertilizers including urea, TSP and DAP annually.

Bangladesh has an annual urea demand of about 27-30 lakh tonnes, met mainly through imports. Although the target for local urea production is set at 10 lakh tonnes, it is unlikely to be met due to idling of fertilizer plants due to gas shortage.

More than $5 billion is expected from ISDB over the next two years

ITFC operates as an autonomous entity within the Islamic Development Bank (ISDB) Group and provides trade finance mainly to member countries of the Organization of Islamic Cooperation (OIC) such as Bangladesh.

Between 2024 and 2026, BSI plans to provide a total of USD 5.15 billion in loans to Bangladesh, with USD 3.6 billion through ITFC.

ITFC has approved a $2.1 billion loan to Bangladesh in FY24 to support import of petroleum fuels and LNG. Of this, $1.6 billion is for Bangladesh Petroleum Corporation (BPC) and $500 million for Petrobangla. The loan carries a six-month SOFR plus an interest rate of 1.80% and an administration fee of 0.2%.

It was the largest loan since a $2.6 billion loan taken out in 2012 for crude oil imports, which ITFC extended to support Bangladesh’s energy needs.

The IDB has been lending to Bangladesh since 1977, with the Bangladesh Petroleum Corporation (BPC) receiving financing for fuel oil imports since 1997.

Since 2008, the IDB has continued to provide loans through its subsidiary, the International Islamic Trade Finance Corporation (ITFC). From 2008 to 2024, ITFC has contributed USD 18.25 billion to Bangladesh’s energy security. Borrowings from ISDB/ITFC between 1997 and 2023-24 totaled approximately $22.58 billion.

ERD officials noted that annual negotiations for ITFC loans are held in Jeddah, Saudi Arabia, with representatives of ITFC and key Bangladeshi ministries, including Bangladesh Petroleum Corporation and Bangladesh Bank. The funds are used for fuel oil imports after the approval of the Standing Committee on Non-Concessional Loans.

ITFC also extended $25 million to Bangladesh to fund food security during the pandemic.