Sunday, June 25, 2017 | ePaper

Bigger loan trap from high cost projects

  • Print
MEDIA report on Thursday said that high cost non-concessional loans and suppliers' credit under which procurement remains tied to a single source at manifold interest would get a new momentum under the fiscal 2017-18. The sudden spur in foreign credit will allow the government to take loan of over $7.1 billion next year; which will be $3 billion higher than the outgoing fiscal. It appears that the government is going to high cost loans to meet expenditure against mega projects as it failed to convince multi-lateral lenders to give loans. Many projects have been already overrun by cost escalations due to time overrun in implementation of project. Corruption of policy makers, project officials and contractors has also made those projects sick. 

But what is clear is that the government's growing to switch to non-concessional loans and suppliers' debt would only increase the per capita debt burden of the people and on the future debt servicing liability for the nation. For any government the huge chunk of the budget for debt servicing will only eat up the country's growth potentials to a large extend that can't be part of any good fiscal policy of a sensible government. Reports said annual debt servicing liability would be $ 3 billion once those loans become effective while the interest rate will also be 5 percent higher and repayment period will be shorter. Many fear that the country is stepping into a debt trap and our policy makers must be aware of it.
 
What is noticeable is that the country is facing the backlash of uncomfortable investment climate as both local and foreign investment is not enough forthcoming fearing risk of political uncertainty. This is a time capital flight is running high as most people want to protect their illegal money moving out abroad. But the government is switching at the same time to high cost loan to overcome investment shortfall that may come from money in normal situation from people moving out the money abroad. 

What is most intriguing is that import bills on industrial machinery have increased by 48.10 percent over the past 10 months of the outgoing fiscal 2016-17 although such booming activities are not noticeable in the ground. That means most of the money has gone out of the country through over invoicing. There is ambiguity at all levels and lack of transparency and accountability shows that our financial system is totally unprotected. Money heist from Bangladesh Bank allowed the Governor to go escort free. Powerful people escaped from facing prosecution for grabbing several thousands crore taka from state- owned banks.

The Finance Minister is planning to use the high cost non-concessional loans and supplier's credit for projects like Rooppur Nuclear Power Plant and Padma Bridge Rail-link, Karnaphuli Tunnel under the river and such other projects. But many fear that the high cost factors may make those projects unsustainable.  

More News For this Category

Eid Mubarak

THE nation is set to celebrate EID-UL-FITR on Monday subject to sighting of the moon of Shawal. It is also known as the 'Feast of Breaking the Fast' through

Patients discharged to ensure doctors` holidays

PUBLIC hospitals in the capital discharged many of their patients in last couple of days as many of the doctors and nurses would be on leave on the occasion

Readers` Forum

No Asian representative :The 10th edition of the Confederation Cup is underway in Russia with eight nations from six continents, the reigning world champions and the hosts. But in

East Asia changing fast

Jomo Kwame Sundaram  :International recognition of East Asia's rapid economic growth, structural change and industrialization grew from the 1980s. In Western media and academia, this was seen as a

We need to nurture biodiversity

Denis Pennel :Today's labour markets are characterised by biodiversity. Compared to the 1960s male and white breadwinner model, the working population has never been so diverse: women account for

Cities are key players in the clean energy transition

Abdeluheb Choho :The clean energy package is an essential framework under which the EU implements its Paris Agreement obligations. In light of the US administration's decision to backtrack on

Safety on highway must be high on card

AS the Eid-ul-Fitr is knocking the door, home-bound passengers are taking long journey on highways and using Railways and Waterways to reach families overnight. There is acrimonious scene all

Crucial Brexit talks start as May soften stance

THE formal talks on Brexit have finally kicked off in Brussels from Monday as designated representatives from both sides made the debut of the formal separation talks. British Prime

Readers’ Forum

A win not so noticed!  :England won the 21st edition of the FIFA U-20 World Cup, the biennial international men's youth football championship contested by the under-20 national teams

Green opportunity in ship breaking

Margrete Auken and Martin Siecker :The need to dispose of offshore platforms opens up the prospect of creating thousands of jobs, stimulating technical innovation and contributing to Europe's green