COUNTRY’S foreign debt repayment bill will surpass $ 2 billion in the coming fiscal year due to a surge in ‘hard term’ and ‘suppliers’ credits’ during the last few years. Quoting ERD officials, a report carried in an English daily on Thursday said that growing dependence on the non-concessional loans amid falling numbers of soft loans from the donors would increase loan repayments by 75 per cent in the new fiscal year (2014-15) over the outgoing fiscal year. Experts opined that the debt repayment would increase further in the years ahead because the government failed to utilize the soft loans committed by the donors for various reasons including corruption, tough loan conditions and the lack of utilisation capacity of the implementing agencies. As per the report, more than $13 billion of aid in the pipeline does illustrate the incapacity of the public sector agencies to use aid money. ERD has already forecast lowered availability of foreign loans by $ 420 million in the outgoing fiscal year because of slow utilisation of project aids. Besides, the government agencies have spent only 43 per cent of the development budget in the first nine months of the current fiscal. In most foreign funded projects, the government agencies simply failed to follow the execution time frame and thus use the foreign component of the fund even in part, not to speak of full.
The government has to pay less than 1 per cent interest for soft loans while the interest rate of non-concessional loans is more than 6 per cent per annum. Therefore, the policy makers should rethink about accumulation of higher external borrowing on tied terms, which triggers questions of transparency, utility and effectiveness. The government has already struck a series of suppliers’ credit deals in the last several years including $ 1 billion arms purchase from Russia and $ 450 million loan from the same source for a feasibility study of the proposed Rooppur nuclear power plant and $ 800 million loan from India. It has also continued to purchase aircraft from the US on suppliers’ credit. The government has also implemented at least half a dozen projects including the $ 306 million Ghorashal power plant on Chinese suppliers’ credit. Thus the accumulated foreign debt repayment installments (including payable interests thereupon) have swelled to around $ 2 billion this fiscal which is ultimately a growing burden on the economy as a whole.
It is therefore certain that the country’s balance of payments (BoPs) is facing a pressure due to swelling debt repayments bill and the shrinking availability of soft loans. The government must opt for easy term credits to keep the repayment bill at a tolerable level.
To attain this goal, a good deal of diplomatic policy maneuvering with better negotiating skills are needed to get better loan deals with the prospective donors. But unfortunately, both our political leadership and the politicized bureaucracy lack that to a marked degree.
