Bangladesh’s power sector in deep crisis as govt delays payments: Report
Bangladesh's power sector has run into a major crisis as the country’s independent power producers (IPPs) are facing a cash crunch due to increasing delays in payments by the government, according to a new report.
New Delhi: Bangladesh’s power sector has run into a major crisis as the country’s independent power producers (IPPs) are facing a cash crunch due to increasing delays in payments by the government, according to a new report.
The Bangladesh Power Development Board (BPDB) reportedly owes approximately Tk 25,000 crore to IPPs. As a result, the power producers are running out of working capital to purchase fuel, service debt, maintain equipment and pay thousands of employees, which is essential to keep the power plants running, according to an article in the Dhaka-based Business Standard newspaper.
“Unless liquidity is restored through a coordinated settlement, delayed payments could trigger a chain reaction across the power sector, banking system and wider economy, undermining energy security and investor confidence,” the article states.
It highlights that the failure by the government to clear the payments has pushed IPPs to the brink of insolvency. This would also bring the country’s banking sector under severe pressure as they have financed a substantial portion of the electricity infrastructure. If multiple IPPs become non-performing borrowers simultaneously, banks will experience a sharp deterioration in asset quality, reducing their ability to finance businesses across the economy.
Third, electricity generation itself would inevitably suffer. Plants that cannot purchase fuel, undertake maintenance or meet debt obligations cannot continue operating indefinitely. The result could be widespread load shedding and, in the worst case, prolonged blackouts, says the report.
The article further states that Bangladesh’s international credibility would also take a hit as global commercial banks, multilateral institutions and export credit agencies finance infrastructure on the expectation that government contractual commitments will be honoured. If that confidence weakens, future financing for power, LNG, ports, transport and other strategic infrastructure will become significantly more expensive or disappear altogether.
The articles suggests that the government, BPDB, IPPs, local banks and international lenders should urgently come together to develop a comprehensive settlement framework.
“Structured repayment schedules, government backed payment instruments, refinancing arrangements or securitisation of arrears could all be considered. The objective should be straightforward: restore liquidity while recognising the Government’s fiscal constraints,” the report observes.
