Latent liability in the government’s guarantee against the buyer’s credit for six power sector development projects could turn into real liability, feared a finance ministry committee.
The committee said the public sector generation companies of the projects lacked capacity to properly utilise loans. It recommended taking a comprehensive initiative to enhance the companies’ capacity to manage loans before giving guarantee.
In a meeting recently, the Cash and Debt Management Technical Committee (CDMTC) expressed the fear. Bangladesh Power Development Board took the $1.5bn loans from foreign sources, according to meeting papers signed by Iqbal Abdullah Harun, the committee chairman.
Finance Division gave the guarantee against the foreign loan taken by PDB this year to implement the six projects. But the committee said the loans created huge pressures on the government exchequer.
However, State Minister for Finance and Planning MA Mannan said the guarantee was not given to those firms unable to repay loans.
“We have not given guarantee against foreign credit for those who won’t repay the money.” He added: “The country’s power sector needs foreign loans to ease power generation gap. So, we should give guarantee to the power project loans.”
Sources said PDB also planned to take a conditional loan of $7bn from foreign sources to start works of mega power projects, but the committee raised questions about the concerned companies’ loan utilisation capacity.
The meeting recommended making structural changes in taking loans for the power generation companies and setting up accounting software for those companies.
“Public power generation firms have taken loans from the foreign sources, but it is not clear how those funds will be utilised,” Mahbub Ahmed, senior finance secretary, told the Dhaka Tribune.
He said the companies’ utilisation capacity of foreign funds as well as fund management capacity should be enhanced so no question about the capacity could be raised.
Meanwhile, the government has doubled the allocation for power sector to implement projects under the Annual Development Programme of the current fiscal year 2015-16.
However, the sector’s performance in the last fiscal year fell far behind the target.
The government has allocated Tk1648.5 crore in the ADP for the FY2016 to execute some 66 projects in the power sector, against the last fiscal year’s allocation of Tk828.4 crore to implement 69 projects.
Under the FY2016 allocation, the finance division has targeted to collect the lion’s share of the fund, worth Tk918.5 crore, from the foreign lenders and donor agencies, and Tk730 crore from the government fund.