THE government is set to adopt a medium-term debt strategy aiming to borrow as much as 60 percent of its total borrowing from costly external sources to meet its financial deficits. The strategy, spanning three years up to 2017, is being framed at the insistence of the World Bank and the International Monetary Fund as the agencies are of the views that current 45 percent share of foreign borrowing in the country’s loan portfolio should be enhanced to 60 percent to meet the increased investment need of the economy, Finance Ministry officials said, as per a report of a local daily. The strategy, which awaits approval from Finance Minister AMA Muhith, drew criticism from leading economists, who warned of its obvious impacts on the people and economy as a direct consequence of the move.The strategy paper forecasts that the portion of concessional loans to the foreign loan portfolio of the country would come down from current 75 percent to 65 percent by 2017, and the share of commercial loans or semi-concessional loans would rise from current 6.1 percent to above 14 percent by the period. The paper estimates 60 percent of the total yearly borrowing would be made from foreign sources. Of the total, 73 percent from concessional loans would be made available from multilateral lending agencies such as the WB, ADB and the IMF in 2014, while 70 percent next year and 65 percent in 2017. Before borrowing from external sources the government needs to ensure that the capability to implement its projects remains fully utilized – important and necessary projects like the Padma Bridge, extension of Dhaka-Ctg highway and an increase number of power plants remain in the back burner -with no time frame set for their completion. Money borrowed must be used properly and timely — otherwise the costs of implementation will double – leaving our common citizens to shoulder the debts.But this is not necessary – we have enough in our foreign exchange reserves to implement projects without taking hard loans from outside banks, as a positive reserve indicates that we have claims on assets of other countries. Getting soft loans is different from hard loans – as the latter have vastly greater interest payments which would ultimately burden our balance of payments and decrease our reserves – reserves which our countrymen work very hard to maintain.Decreasing reserves due to greater payments would also affect our exchange rate unfavourably and the resulting depreciation of the taka would lead to import induced inflation which would also hit our economy hard as most of our raw materials and capital goods are imported from abroad. It is a lose-lose situation which helps no one.
