Govt-backed loans for state enterprises rise to Tk 60,653cr

Taxpayer-guaranteed loans for Biman Bangladesh Airlines more than doubled to Tk 10,279 crore as the state-run carrier took credits to buy new Boeing aircraft.

The guaranteed amount stood at Tk 4,937 crore last fiscal year.

The carrier received guarantees from the government for the loans from JP Morgan, US Exim Bank, Sonali Bank and HSBC.

The latest credit guarantee includes Tk 2,654 crore that Biman took from state-run Sonali Bank in December last year to buy Boeing 787-9 aircraft and spare engines.

It took another Tk 977 crore for the purchase of the third Boeing 787-8 in July last year, according to a document of the finance ministry. 

The airline borrowed Tk 1,000 crore in working capital loans from state-run Sonali Bank under the stimulus packages unveiled by the government to tackle the impact of the coronavirus pandemic.

In total, the publicly-guaranteed loans at Biman account for a sixth of the credit backed by the taxpayers in the current fiscal year.

The government's guarantee and counter guarantee for the loans at state-owned enterprises (SoEs) stood at Tk 60,653 crore as of May, which is 2.16 per cent of the projected GDP of fiscal year 2019-20 and would account for 10.68 per cent of the government expenditure in 2020-21, according to the mid-term macroeconomic policy statement.

The total amount is about 5 per cent higher than Tk 57,825 crore in the last fiscal year.

The government has to provide the guarantee to the SoEs to help them borrow funds to run and expand operations as they can't secure loans on their own because of their weak financial conditions, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

The government gives guarantees and counter guarantees for loans taken by the SoEs in the priority sectors such as power, energy and agriculture. If the SoEs fail to honour repayment, the government bears the responsibility. 

Of the indirect debt, 58.61 per cent are in the power and energy sector, 16.98 per cent at Biman and 6.07 per cent in the agriculture sector.

The power sector accounts for 55.63 per cent, or Tk 33,741 crore of the total taxpayer-guaranteed debt. It was Tk 33,777 crore in FY19.

The guarantee covered Tk 2,458 crore secured by Ashuganj Power Station for a 450-megawatt power project and another Tk 1,188 crore for a 225MW power project.

Bangladesh Power Development Board (BPDB) borrowed Tk 1,596 crore from Japan Bank for International Cooperation for Bibiyana-3 gas-based power plant and Tk 1,587 crore under a syndication for 300MW power project in Shahjibazar.

Northwest Power Generation Company Ltd took two loans, respectively Tk 1,358 crore and Tk 1,487 crore for the second and third units of the 225MW combined cycle power plant in Sirajganj.

Bangladesh-India Friendship Power Company borrowed Tk 3,902 crore from Exim Bank of India for the coal-based power plant in Rampal.

Bangladesh-China Power Company Ltd secured Tk 12,447 crore from Exim Bank of China for the Payra 1,320MW thermal power plant.

The guarantee for the power sector may go up in the next fiscal year as a number of projects are being implemented.

The government has also provided guarantee for loans handed out by Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank of Tk 3,680 crore, up from Tk 3,143 crore a year ago.

The guarantee in the energy sector was given as state-run Bangladesh Petroleum Corporation imported crude and refined oil worth Tk 1,198 crore, down from Tk 3,381 crore in FY19. 

The total guarantee also included Tk 1,168 crore for the Bangabandhu satellite project.

The government has formulated a policy to monitor the indirect debt so that they don't turn into direct debts for the country, the finance ministry's policy statement said.

It is hoped that the sovereign guarantee and counter guarantee guidelines would help the government keep the indirect debt at a tolerable level.

Public debt in Bangladesh was $105 billion in FY2019, around 34.9 per cent of GDP, and the external public and publicly guaranteed (PPG) debt ratio was 14.5 per cent of GDP.

Both are low, said the Asian Development Bank recently.

The additional external debt of $2.9 billion, as the government projected to tackle the impact of the coronavirus pandemic, will increase both the external PPG debt-GDP ratio and public debt-GDP ratio by 0.9 per cent in FY2020.

"Bangladesh remains at low risk of debt distress," the ADB said.

Because of the coronavirus pandemic, Bangladesh's public debt-to-GDP ratio, which has thus far been in a healthy position, is set to exceed the responsible threshold of 40 per cent. 

In the coming years, Bangladesh's public debt-to-GDP ratio would swell to about 41 per cent owing to increased borrowing to safeguard both lives and livelihoods, the International Monetary Fund said recently.

"Even so, debt should remain sustainable," said Ragnar Gudmundsson, resident representative for Bangladesh of the IMF, on the crisis lender's website, recently.