The power crisis in Bangladesh is worsening, forcing homes and factories to remain in darkness for hours at a time. In response, China has offered to offer fuel supplies if necessary.
According to reports, the government of the South Asian nation, which claimed to have achieved 100% electricity coverage in March, has failed to meet its minimum electricity requirements.During the crisis, the government stopped importing liquefied natural gas from the spot market because of soaring prices, as well as shutting down oil-fired power plants to preserve foreign exchange reserves as imports decreased.
Since mid-July, the country has been rationing electricity. But the forex coffers are still shrinking and the lack of energy is hitting industry hard, denting workers’ incomes amid high inflation and making it impossible for some companies to do business. In late October, Chinese Ambassador Li Jiming told reporters that Beijing is willing to step up if conditions deteriorate.
“If there is an emergency situation, I think, as always, China will not sit idle and watch,” he said. “We will also take some actions.”
Le said he had been asked by Bangladeshi governmental bodies to explore the possibility of an emergency supply of fuel oil. He said he had passed on the messages to Chinese institutions, adding, “I think both sides are working on it.”
The prospect of turning to China comes at a time when some of Bangladesh’s troubled South Asian neighbors are increasingly reliant on Beijing as well. Pakistani Prime Minister Shehbaz Sharif is visiting China this week, aiming to finalize the revival of Belt and Road infrastructure projects and secure more financial support for his own cash-strapped country. Crisis-hit Sri Lanka is trying to get Beijing to agree to restructure its debts as it races to unlock funding from the International Monetary Fund.
On the high volume of private sector loans Bangladesh has taken from China, Ahmed said none of the borrowers have failed to make repayment so far. “Those who take loans should analyze first and pay in time,” he said.
The latest data from the central bank shows gross forex reserves are down to around $35 billion, from $48 billion last year. That only tells part of the story, however. A team from the IMF is visiting Bangladesh to discuss reforms and a possible loan, and last week, Dhaka agreed to calculate net reserves under the IMF’s stricter criteria, which would leave them at slightly over $27 billion, since some of the money is tied up in various funds and loans.
A team from the IMF is visiting Bangladesh to discuss reforms and a possible loan, and last week, Dhaka agreed to calculate net reserves under the IMF’s stricter criteria, which would leave them at slightly over US$27 billion, since some of the money is tied up in various funds and loans.
Last month, the government’s energy adviser said there was no money to import more fuel oil for electricity generation. “It’s all about foreign exchange,” he said.
Businesses say they are not getting electricity for hours a day, sometimes as many as 12, though outage times vary widely.
This is threatening the garment industry, for one, which many citizens rely on for their livelihoods.
Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, said that in the city of Narayanganj it was “now a matter of time” before industrial units are forced to shut down.
He explained that most workers in the knitwear industry get paid based on “piece rates”, meaning they are paid for what they produce. Since the power crisis has cut into production, many are not earning enough to cope with inflation that has been over 9%.
“It’s a big crisis,” Hatem said. He also said there was a shortage of the gas needed to run steam boilers for dying fabrics.
At a business conference in Dhaka on Oct 23, companies reported 22 garment factory closures in the past month and warned another 27 were about to follow due to the lack of power and gas.
Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association, warned on Sunday that apparel exports may drop 20% in the next two months due to the energy problems plus reduced demand in Europe. “We urge the government for uninterrupted supply of gas and power in the factories,” he said at a news conference.
Data available from Petrobangla, the state-run oil, gas and mineral resources company, shows that 929 million cubic feet of gas (26 million cubic meters) can be supplied per day – less than half the demand.
Small businesses are hurting, too. “Running a shop in frequent power cuts means less earnings,” said Shah Jalal, a storekeeper in the southeastern Chandpur district. He said his village experiences three to four blackouts a day, roughly an hour each.
China, which has access to cheap energy from Russia, is not the only one offering to step in. Bangladesh’s own business magnates say they would be willing to do more.
Anwar-ul Alam Chowdhury, president of the Bangladesh Chamber of Industries, told Nikkei Asia that spending an additional US$200 million per month on LNG imports from the spot market would help cut the gas shortage in the industrial sector.
He said industrialists are ready to bear the extra costs to get the required gas. “The government can negotiate the higher gas price with industries if it fails to provide an additional subsidy,” he said.