SoEs run deep in debt for government indifference

Fiscal management faces mismatch, public liabilities enlarge pending enterprise reform


Jasim Uddin Haroon | Published: September 20, 2017 11:27:58 | Updated: October 25, 2017 05:03:58


State-owned enterprises (SoEs) run deep in debt, as of latest calculations, as repayment rates stand much lower than borrowings for government's indifference towards their reform.

 

People familiar with the developments gave such an observation and expressed the fear that the SoEs' rising debt posed a potential risk for the country's fiscal management.

 

They told the FE that government's failure to recover the SoEs' loans would only exacerbate public liabilities. Besides, such low recovery would lower credit availability for others.

 

The finance division in its latest accounting, up to June 30 last year, showed that total dues with the SoEs stood at Tk 869.91 billion. The amount is up by Tk 70.72 billion or nearly 9.0 per cent from that of the previous fiscal year (FY), 2015.

 

The sources said the repayment in the year under review was just around Tk 15 billion or less than 2.0 per cent of the dues.

 

However, the biggest borrower from government exchequer was Power Development Board with Tk 435.43 billion with interest up to June last year.

 

In an analysis the DSL wing of the finance division shows dues with the power board have been ballooning as its power-generation cost is high compared to its selling rates.

 

The other big borrowers are Petrobangla, Bangladesh Chemical Industries Corporation (BCIC) and Bangladesh Petroleum Corporation (BPC).

 

However, the Bangladesh Power Development Board had distributed its assets by splitting many companies involving grid management to power distribution.

 

Interestingly, though, the BPDB often adjusts its dues with government offices instead of cash receipts.
An official at the finance division said SoEs' liabilities were rising -- at a time when most of the SoEs are incurring losses instead of attaining profitability.

 

He feels reform in the SoE sector is critical to checking the rise in contingent liabilities.

 

But the government is not interested to take any reform step before the next general election, a policymaker of the government told the FE.

 

He said there are many SoEs which never paid a single instalment though often very nominal interest is charged.

 

"I can cite an example of Bangladesh Road Transport Corporation which never paid a single instalment," said the official, who wished not to be quoted by name.

 

The government provides loans to over 117 SoEs by borrowing mostly from international development organisations. If the SoEs fail to repay, the burden comes on to the government's shoulders.

 

The loans are usually long-term, ranging up to 25-33 years, with 5-8 years of grace period. The median of the rates of interest is 5.0 per cent.

 

 But there are many institutions where the rates of interest are 2.0-3.0 per cent.

 

To feed the state enterprises the government borrows money from foreign development partners, including the Asian Development Bank (ADB).

 

The government provides the funds to different SoEs and autonomous bodies under certain terms and conditions for performing development activity or implementing projects.

 

Besides, the government also extends local-currency loans to the SoEs and autonomous bodies under some agreements.

 

The foreign credits are normally disbursed to the government according to set terms and conditions and the money is re-lent to the SoEs or autonomous bodies.

 

Any loan returnable by any SoE or autonomous body with or without interest to the government is called debt-servicing liability.

 

The DSL wing under the finance division maintains the records along with accounts of these loans and liabilities.

 

jasimharoon@yahoo.com

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