Fin min issued guarantee worth $ 3.5b last year
The finance ministry issued sovereign guarantee worth $3.5 billion against non-concessional loans for about a dozen and a half large infrastructure projects and state purchases until December 2013, senior ministry officials said. Another large amount of $2.5 billion in state guarantees is expected to be issued this year as the International Monetary Fund under the ongoing extended credit facility programme has approved an increase in the threshold on non-concessional loans from $4.5 billion to $6 billion, they said.
The visiting team of the extended credit facility of the multilateral lending agency made the upward revision on the costly borrowing target at the insistence of the finance ministry.
‘Sovereign guarantees worth $3.5 billion were issued as of December 31, 2013,’ a senior finance official told New Age on Wednesday.
‘Although we are under tremendous pressure from different government agencies to issue fresh guarantees against projects costing not less than $4 billion, we will stick to limiting such guarantees to not more than $ 2.5billion by 2014 in compliance of the IMF’s indicative targets,’ he said.
The projects including the ones against which guarantees have been issued are Ashuganj 225MW and 450MW plants, Ashuganj power station efficiency improvement project, Bhola 225MW combined cycle power plant project, construction of Shikalbaha 225MW dual-fuel combined cycle, construction of Labukhali Bridge over the River Paira, delivery payment against procurement of two Boeing aircraft, pre-delivery payment for two new-generation Boeing aircraft, pre-construction feasibility technical assistance project for the Rooppur nuclear power plant and the defence deal on military goods purchase.
The lending agencies to provide the high-cost funds include Standard Chartered Bank, HSBC Corporate Trustee Company (UK), Russian government and Islamic Development Bank, sources involved in the process said.
The interest rate from the agencies hovers between 4.5 per cent and 6 per cent, sources said.
Experts sounded a warning that the government should be cautious and less aggressive in borrowing high-interest foreign loans to avert any debt burden on the already buffeted economy.
Finance ministry officials said that about 95 per cent of the foreign loans were non-concessional while the outstanding external loan was about $23.75 billion as of September 2013.
‘We are cautious about issuing guarantees against foreign hard loans for large project implementation but sometimes we are not in a position to withstand pressure from quarters in and outside the government,’ another official said.
He said that finance officials had put in efforts to convince the ECF mission that enhanced non-concessional loans would not hurt the economy as the projects to be implemented under non-concessional loans will have contributions to the gross domestic products.
-With New Age input