$7 b foreign loans for developing SoEs

Zarif Mahmud: In addition to implementing various development projects, state-owned enterprises regularly taking loans from foreign governments and donors to meet various expenses. The amount of these short- and long-term loans at the end of 2021-22 financial year (July-June) was slightly more than $6.9 billion ($690 crore).
At the end of the last financial year, it has increased to about $7 billion (7 billion). The continued devaluation of the taka against the dollar has made these foreign loans a major financial burden for companies. The cost of the loan installments and interest payments in taka is increasing for the companies. Expenditure is increasing in many other related areas including import of goods and machinery from abroad. The taka has depreciated by 29 percent against the dollar since January 2022. As a result of the devaluation of the currency, the financial costs of the organizations have increased a lot. The financial statements of companies listed in the capital market have also brought up the issue of large financial losses due to devaluation of money.
There are 48 state owned organizations in the country. According to the data of Bangladesh Economic Survey-2023, according to the provisional accounts of the fiscal year 2022-23, the state-owned enterprises have incurred a total loss of Tk 13,741.51 crore. Those concerned say that currency devaluation has contributed to a large part of this.
According to the data of Bangladesh Bank, the total foreign debt of the companies at the end of June 2023 stood at about $7 billion. Among them, short-term debt is $61.61 billion and long-term debt is $6.39 billion. Earlier, at the end of June 2022, the amount of foreign debt of state-owned enterprises was $6.90 billion. Among them, short-term debt was $57 billion and long-term debt was $6.33 billion.
The taka began to weaken against the dollar early last year. At that time (January 2022), the country’s exchange rate per dollar was Tk 86. And the last price of yesterday’s market was Tk 111 per dollar. Accordingly, the taka has depreciated by more than 29 percent against the dollar during this period. This has increased the financial risk of foreign borrowers. The loan amount increased by Tk 100,000 crore. Along with this, the cost of loan installments and interest payments also increased. This additional cost is on the one hand narrowing the profits of profitable companies, on the other hand increasing the financial wounds of loss-making companies.
Bangladesh Power Development Board (BPDB) has the largest debt among state-owned enterprises. At the end of June 2022, the amount of long-term debt of the organization was Tk 67,183.94 crores. Out of this foreign debt is Tk 12,444 crores. In addition, the foreign debt repayable within one year was Tk 1,685.72 crore. In that financial year, the amount of loss due to devaluation of taka was Tk 611.59 crore.
At this time, the company’s net loss after tax was Tk 3,232.74 crore. As BPDB’s financial report for 2022-23 financial year has not been published, the extent of exchange rate losses of the organization is not yet known. However, in the last financial year, the amount of loss due to devaluation of money of the organization has increased more than the previous financial year.
Director (Public Relations) of BPDB Shamim Hasan said, “Since we have foreign debt, there will naturally be an impact due to the devaluation of the taka.” This is a global reality. We are trying to mitigate this crisis. In this regard, government and Bangladesh Bank support is also being taken. What will happen in the coming days can’t be said for sure. So, keeping in mind the difficult situation, we are trying to determine our policies accordingly.
The amount of debt of Bangladesh Shipping Corporation (BSC) at the end of June 2023 stood at Tk 1,566 crores. The company has taken loans from Japan and China to buy ships. Out of this, the amount of Japanese debt is Tk 53.6 million. And the amount of Chinese debt is Tk 1,500.53 crore. Due to the devaluation of the taka, the financial cost of BSC has increased by Tk 15 crore in the financial year 2022-23 only for repayment of Chinese debt.
At the end of June 2022, the amount of long-term debt of Bangladesh Chemical Industries Corporation (BCIC) was Tk 19,330.65 crore. Out of this, the amount of foreign debt was Tk 16,170.33 crore, whereas in the previous financial year the foreign debt was Tk 6,832 crore. The company’s financial report did not disclose any information on exchange rate losses.
At the end of June 2022, the foreign debt of Bangladesh Petroleum Corporation (BPC) was Tk 5,261.95 crore. Due to exchange rate, the company incurred a loss of Tk 395.31 crore in the financial year 2021-22. Whereas the company did not have to pay any loss for this in the previous financial year. In the financial year 2021-22, the net loss after tax of BPC was Tk 2,705.64 crore. Whereas in the previous financial year, the company had a net profit of Tk 992.61 crore after tax.
Bangladesh Rural Electrification Board (BREB) had a long-term foreign debt of Tk 11,197.19 crore at the end of June 2022. The company has taken this loan against various projects. The company’s financial report does not provide information on the amount of profit or loss due to exchange rates.
Attempts to contact BREB chairman Mohammad Salim Uddin to inquire about the effect of taka devaluation on foreign loans did not get a response.
At the end of June 30, 2022, the long-term foreign debt of the state-owned organization Civil Aviation Authority (BABICHAK) was Tk 6,88.647. In the previous financial year, the amount of long-term foreign debt in the organization was Tk 4,454.49 crores. CAAB has not released the financial statements for the financial year 2022-23 yet.
Air Vice Marshal M Mofidur Rahman, chairman of the organization, commented that the increase in the dollar exchange rate is not creating any pressure on the foreign debt of CAAB. He said, CAAB is a profitable organization of the government. In addition to taka as revenue, the income is also directly in dollars. As a result, there is always a balance between CAAB’s operating and development expenses and foreign debt. A rise in the dollar exchange rate will not create any pressure onCAAB’s foreign debt.
However, CAAB Chairman said that various ongoing projects will have an impact on foreign purchases. He said that it is difficult to open various types of LCs due to the increase in dollar prices. CAABhas some foreign purchases in every project. As the dollar exchange rate increases, we have to speed up these foreign purchases. However, Bangladesh Bank and the government are providing cooperation in foreign purchases of important projects like Cox’s Bazar runway, radar purchase. There are difficulties in other projects.
A large part of the foreign debt of state-owned enterprises has been taken for road and communication infrastructure. So far, Bangladesh Bridge Authority (BBA) has published the latest financial statements for the financial year 2020-21 on its website. As of June 30, 2021, the company’s foreign debt was Tk 796.42 crore. Among them, Asian Development Bank (ADB) has Tk 356.80 crore and World Bank (IDA) Tk 373.75 crore.
At present, several projects are underway in the organization. Most of the projects are being implemented with foreign loans. Among them, the Bangabandhu Sheikh Mujibur Rahman Tunnel built under the Karnaphuli River in Chittagong was inaugurated on October 28. The construction of the tunnel has cost Tk 10,374 crores. Of this, Exim Bank of China is lending Tk 5,913 crore. The term of this loan is 20 years.
Another important project under implementation by the bridge authority is the Dhaka-Ashulia Elevated Expressway. This flyover is being constructed from Savar EPZ to Hazrat Shahjalal International Airport via Ashulia-Bypail-Abdullahpur. Exim Bank of China is financing the construction of Dhaka-Ashulia Elevated Expressway using J2G method. According to the loan agreement signed on October 26 last year, the Chinese government is lending Bangladesh $112.69 million or about Tk 9,472 million for the construction of a 24-kilometer-long elevated expressway. The loan under the Preferential Buyers Credit (PBC) is to be repaid within 20 years at 2 percent interest with a grace period of five years.
As of June 30, 2022, the foreign debt of the state-owned transport organization Bangladesh Road Transport Corporation (BRTC) was Tk 1,260.43 crore. BRTC has taken loans to countries like Nordic Development Fund (NDF), Economic Development Cooperation Fund (EDCF), India, Italy, UK, Sweden to buy buses and trucks.
If you want to know about the whole matter, the Minister of State for Planning Shamsul Alam said, “There was a need for a foreign loan, so it was taken.” The institutions that have taken the loan are making profit and will repay the loan from there. If necessary, the loan will be rescheduled, there is no problem.