Bangladesh is close to securing a crucial additional US$350-million World Bank loan guarantee to safeguard its LNG supplies against extreme global market volatility as declining domestic gas production deepens the country's energy crisis, officials said on Monday.
The additional guarantee, expected to be finalised in October, would double the World Bank's existing commitment and help state-run Petrobangla secure billions of dollars in commercial financing for LNG imports.
The financing from the International Development Association (IDA), the World Bank's concessional lending arm, is expected to facilitate the opening of letters of credit (LCs) for importing liquefied natural gas (LNG) from the global market during the 2027 calendar year, said AKM Mizanur Rahman, a director of Petrobangla.
"Formal confirmation of the loan and the completion of other agreements expected in October 2026 will allow the government to open vital Standby Letters of Credit (SBLCs) by November 2026 to guarantee LNG imports," he added.
The incoming US$350 million package would serve as a critical addition to the initial US$350 million guarantee approved under the World Bank's Energy Sector Security Enhancement Project (ESSEP).
By doubling the IDA commitment, the mechanism would provide significant financial relief to an already strained economy.
The IDA guarantee functions as a credit enhancement tool, allowing Petrobangla to mobilise up to US$2.1 billion in private commercial financing over a seven-year period.
SBLCs and short-term credit lines will be routed through a pre-selected group of eight commercial banks, including international lenders such as Deutsche Bank and Standard Chartered, alongside major domestic commercial banks.
According to Petrobangla, negotiations over the additional financing have been under way for the past several years. The loan negotiation committee will comprise representatives of the Bangladesh government, the IDA and financial institutions in Singapore.
Following the successful conclusion of negotiations, Petrobangla will have to sign a project agreement with the IDA and a facility agreement with lenders in Singapore, while the Finance Division under the Ministry of Finance will have to sign an indemnity agreement with the IDA, Petrobangla officials said.
Another senior Petrobangla official said the state-run energy corporation would have to issue SBLCs before 30 November 2026 in favour of LNG suppliers under long-term contracts.
The multilateral backing would remove the requirement for hefty upfront cash margins and reduce borrowing premiums compared with traditional alternative financing, Petrobangla officials said.
Bangladesh is currently caught in a severe macroeconomic squeeze, as declining domestic gas reserves have forced the country to become increasingly reliant on imported LNG.
Meanwhile, global conflicts and regional geopolitical flashpoints continue to disrupt international supply chains.
A prolonged conflict in the Middle East could materially affect fuel and fertiliser supplies, with the poorest households likely to be hit hardest.
A senior Economic Relations Division (ERD) official said the IDA guarantee had created room for Bangladesh in the international market to procure LNG at competitive prices.
The second tranche of the US$350 million loan guarantee for LNG imports by the IDA is expected to be confirmed by October this year, he added.
The original ESSEP, worth US$350 million, was approved by the World Bank Board on 18 June 2025. It became effective in early 2026 and is scheduled to run until 31 December 2031.
Under the existing facility, Petrobangla has selected eight local and foreign commercial banks to facilitate LNG imports, backed by a World Bank repayment guarantee.
Following a competitive tender, Petrobangla last year selected three foreign banks and five local banks to provide financial support for LNG imports beginning in 2026.
Amid the rapid depletion of domestic gas reserves, Bangladesh is expected to need 30 million tonnes of LNG a year by 2041 to meet surging demand, according to Petrobangla's official data.
