Bangladesh has scope to take more foreign loans: Stakeholders

Bangladesh's public debt-to-GDP (gross domestic product) ratio is well below the danger threshold, according to the International Monetary Fund. 

At a seminar organised by the Economic Relations Division (ERD), speakers also said it is possible to accelerate development by increasing the amount of loans from abroad as the debt repayment pressure is at a bearable level.

Due to lack of proper survey, poor design, inefficiency in negotiations with donor agencies and slow implementation of projects, however, this possibility was fading as a huge amount of promised aid was stuck in the pipeline, speakers said.

Speaking at the seminar on foreign debt management to ensure good governance under the Knowledge-for-Development Management project funded by the United Nations Development Organization (UNDP) held at the NEC Conference Center in the capital on Sunday, chief guest Planning Minister MA Mannan said foreign debt was playing a central role in development.

He, however, advised caution on excessive borrowing.

Mannn also said there is no alternative to foreign loans, adding  Prime Minister Sheikh Hasina was very careful while approving foreign loan projects.

Highlighting the need to take foreign loans until the country attains development, State Minister of the planning ministry Shamsul Alam said the foreign debt was 13% of GDP and there was scope to double it. 

He said foreign loans are available at lower interest rates than domestic ones.Sounding caution on such loans, however, Alam pointed out that foreign loans are available at 0.70% to 1.5% interest, while domestic ones would range to 7%.

Regarding the proper management of debt, the state minister said that there was a lot of criticism of foreign debt. 

Sri Lanka was one of the most developed countries in South Asia, but a number of mistakes led them to their current predicament.

South Korea has also come a long way with debt. But some countries like Pakistan could not do anything due to mismanagement, he said.

Secretary of the Cabinet Division Khandkar Anwarul Islam claimed any corruption in foreign loans stemmed from the weakness and inefficiency of the ERD.

Expressing his anger at the loan agreement process of ERD, he said the ERD entered into loan agreements without complying with the law.

ERD's Foreign Aid Budget and Accounts wing chief and Additional Secretary Md Mostafizur Rahman said although the IMF's research shows Bangladesh has the opportunity to borrow up to 40% of its GDP, the debt rate was less than 13%.

On the other hand, there is an opportunity to borrow up to 180% of the sum of export income and expatriate income, but the rate in Bangladesh was less than 86%.

He also said although the annual debt service liability of up to 15% of the total revenue was considered a safe limit, Bangladesh's foreign debt service burden was at 4.71% of the GDP.

The Physical Infrastructure Division of the Planning Commission said that due to the weakness in the design of foreign aid projects, various complications were seen at the implementation stage. 

Many projects were imposed by donor agencies, while at times project proposals were sent through third parties without feasibility checks.

It was also said that donor agencies tried to wield undue influence to get projects approved, with the dependence on foreign consultants considered too high.

The cabinet secretary also asked to know about the process of foreign debt remittance.

Anwarul Islam said irregularities of Tk70-80 crores in the project were created from here. As a result, lenders also work as contractors. This results in increased costs in projects, irregularities and time in procurement.

He also said that ERD's loan agreements were contradictory. Many times a contract was signed at 12:30am. He said if someone files a case objecting to this, the parties concerned may be in trouble.

ERD Secretary Sharifa Khan, Planning Secretary Mamun Al Rasheed, IMED Secretary Abu Hena Morshed Zaman and officials of the Ministry of Planning and ERD were present during the seminar.