Debt repayment surges in Q1  

Experts blame high short-term borrowings  

Shakhawat Hossain   | Published: 00:00, Nov 20,2019

 
 

The external debt repayment in the first quarter of the current fiscal year surged because of large short-term borrowings for the mega projects such as Rooppur Nuclear Power Plant, Metro Rail and Matarbari Thermal Power Plant.

Economic Relations Division officials told New Age that $494 million was spent in the July-September period on repaying debt, about $100 million higher than $398 million spent in the same period of the last fiscal year for the same purpose.

The debt repayment figure for this quarter suggests that the country would have to repay higher than projected amount for the amortized loans in the current fiscal year ending next June, said the officials.

In the current budget, $ 11,475 million has been kept aside for paying back principal amounts of the foreign debt while $500 million for payment of interest.

Experts have already expressed concern that the country’s debt repayment would significantly increase in the coming days with the maturity of the short-term borrowings made over the past decade to finance ‘politically motivated projects’.    

Former caretaker government adviser Mirza Azizul Islam said that the projects with short-term borrowings carried a number of risks.

High project costs and quick maturity of loans are among them, he said. 

According to the finance ministry’s medium-term macroeconomic outlook released in June, country’s external credit will more than double in 2022 – just in a span of five years – following high growth of suppliers credit and short-term borrowings to finance big infrastructure projects.

The high growth of such loans taken mostly on ‘political consideration’ with high interest rates against short maturity periods will take the overall stock of external  debt to Tk 5,08,940 crore in 2021-22 from Tk 2,34,670 crore in 2016-17.

More than Tk 96,000 crore was taken as suppliers credit from Russia for the country’s first-ever nuclear power plant at Rooppur in Pabna, which is scheduled to be completed in 2024.

Besides, the implementation of the Padma Bridge Rail Link project, being executed with Tk 34,988.86 crore Chinese suppliers credit, is yet to start in full swing. 

The government has been implementing the Dhaka Elevated Expressway or the Metro Rail project at a cost of Tk 21,985 crore and the Matarbari coal-fired power plant at a cost of Tk 40,000 crore, both projects financed by Japan.

Policy Research Institute executive director Ahsan H Mansur said that the prices of goods purchased under suppliers credits were said to be several times the market rates.

Country’s future generations might face debt distress because of receiving too much of suppliers credit, he added.

In May, the Bangladesh Bank in its ‘Financial Stability Report 2018’ warned about the rising short-term external debt, which stood at 4.5 per cent of the nation’s gross domestic product in the 2017-18 fiscal year in place of only 1.3 per cent in 2011-12.

The report also highlighted that the long-term borrowing had been declining until 2016-17, followed by a marginal increase in 2017-18 to stand at 15.5 per cent of the GDP.

 ERD officials said that they had prepared the current outlook on the country’s external debt ahead of the first meeting of the Coordination Council on the macro economy in the current fiscal year.

The meeting to be chaired by finance minister AHM Mustafa Kamal is likely to be held on Sunday.   

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