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Dr Debapriya Bhattacharya on suppliers’ credit and development

The government’s dependence on hard term suppliers’ credit increased in recent years. The reason, he said, was that the government was not getting all the credit needed for growing development activities on soft terms.

Published in New Age on Thursday, 5 November 2015.

Power Plants
Borrowing on hard terms increases sharply

Shakhawat Hossain

The government’s borrowings on hard terms, mostly  supplier’s credit, sharply increased in recent years for setting up power plants.

Officials expressed fears that the dependence on supplier’s credit for setting up power plants would soon increase the government’s debt burden.

In recent years, state run Power Development Board borrowed $1.5 billion on high  rate for setting up three dozen power plants as it did not get soft term credit from multilateral sources.

Officials of the debt management wing of the finance ministry said another $ five billion in suppliers’ credit was in the pipeline for setting up several power pants by the PDB.

Officials at a debt wing meeting last month expressed fears that the PDB, which does not follow the guidelines for the hard term loan management, might not be able repay the loans.

They also expressed fears that eventually the government, being the guarantor, would have to repay the hard term loans.

The proposed construction of Rooppur Nuclear Power Plant  at an estimated cost of $13.5 billion, with supplier’s  credit from Russia would further increase the burden of hard term credit on the government.

From 1972 to July 2014,  Bangladesh borrowed $62.39 billion, mostly soft term loans, from multilateral as well as bilateral sources.

But in recent times the country’s borrowings on hard terms, mostly suppliers credit, exceeded the borrowings on soft terms.

Debapriaya Bhattacharya of Centre for Policy Dialogue said that the government’s dependence on hard term suppliers’ credit increased in recent years.

The reason, he said, was that the government was not getting all the credit needed for growing development activities on soft terms.

The incumbent government   struck a series of deals with a number of countries to get suppliers’ credit.

The government imported military hardware from Russia worth $ one billion under supplier’s credit.

It borrowed $ 450 million from Russia under hard terms for the feasibility studies of the  Rooppur Power Plant.

The government took $ 800 million in supplier’s credit from India for infrastructural development and import of buses.

For the ongoing purchase of Boeing aircraft, the government would receive a total supplier’s credit of $1 US.

The increased hard term borrowings for development projects would create no problems, said finance minister AMA Muhith.

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