REJAUL KARIM BYRON and MAHMUDUL HASAN

For the first time, the World Bank, which traditionally provides development project loans and budgetary support, has extended its assistance through a guarantee facility to support Bangladesh in purchasing liquefied natural gas (LNG), aiming to ease pressure on the country’s foreign exchange reserves.

The World Bank approved a $350 million guarantee for state-owned oil and gas company Petrobangla yesterday. The initiative is intended to enhance gas supply security by enabling access to more cost-effective financing.

This project, titled “Energy Sector Security Enhancement,” will utilise an International Development Association (IDA) guarantee to mobilise up to $2.1 billion in private capital over seven years for new LNG imports, according to a World Bank document.

The backing of an IDA guarantee will improve Petrobangla’s creditworthiness to secure LNG supplies, said the World Bank in a statement.

According to the World Bank, imported LNG accounts for over one-fourth of total gas consumption in Bangladesh. LNG imports cost Bangladesh $4.5 billion annually (including import duties and regasification costs).

“The project will help Bangladesh enhance gas supply security in a cost-efficient manner, contributing to reliable and affordable electricity for industries and domestic users,” said Olayinka Bisiriyu Edebiri, a World Bank senior energy specialist.

Zahid Hussain, former lead economist at the World Bank’s Dhaka office, said, “It will reduce the financing cost by 1 percent due to the IDA guarantee.”

“So, I think it’s the right decision as Bangladesh can save $1 in every $100 spent on LNG purchases,” he told The Daily Star.

According to the World Bank document, Bangladesh can obtain a number of financial and economic benefits, such as an estimated $7.5 million in direct financial savings due to the lower financing cost.