Govt to classify SoEs on their eligibility for loan or subsidy

Dhaka,  Wed,  20 September 2017
Published : 23 Aug 2017, 01:13:25
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Govt to classify SoEs on their eligibility for loan or subsidy

Swelling of DSLs into billions prompts the bifurcation move
Jasim Uddin Haroon


The government will categorise its enterprises under a reform recipe that would determine their eligibility for subsidies or loans.

Officials disclosed the move made in the wake of ballooning of DSLs (debt service liabilities) of the state-owned enterprises (SoEs). The government grants loans in favour of the SoEs but a good number of them pray for waiving or turning those into equities.

Such conversion is seen as injustice to taxpayers' money.

Government borrows from foreign development partners like the Asian Development Bank and others and hands out the money to the SoEs on certain terms and conditions.

And there are many instances where the government sanctioned funds from budgetary allocations to the SoEs as subsidies but the government itself later demanded repayment with profits.

Bangladesh Blade Factory is one such SoE that now demands that all its loans be converted to government's equity.

The state-owned Bangladesh Petroleum Corporation (BPC) is an instance where the government gave subsidy but later demanded its repayment. The corporation argues that the government allotted subsidy as they had sold petroleum products at subsidised rates and that is why the government cannot claim it.

The finance division sought Tk 50 billion from the BPC as it now turned a profitable concern on the back of international oil slump.

Under such a situation, the government now considers cut-off time for the SoEs -- considering their balance sheets -- to be classified as those actually eligible for getting loans and those for subsidies.

Finance Minister AMA Muhith recently approved such a reform agenda to promote government expenditure in a more transparent and efficient way.

The government is now in the final stage of framing a programme under the finance division to conduct an elaborate study on at least 116 SoEs.

People familiar with the developments told the FE that there were huge conceptual mistakes about loan and subsidy as the government has sanctioned subsidies to many SoEs which are actually not entitled to such state ex gratia.

They, however, said under the reform recipe they will identify SoEs which act as market- intervening entities and they may get loan waivers.

"We may waive loans of some of the SoEs considering their natures of business and the balance sheets," said an official familiar with the process of transformation.

He also said they may recommend restructuring the loans after a thorough study of the SoEs.

Policy Research Institute of Bangladesh (PRI) vice chairman Dr Sadiq Ahmed said there is major concern relating to the treasury's contingent liabilities emerging from the operations of the state-owned public non-financial and financial enterprises.

"The last time I looked at the accounts of the non-financial SoEs in the fiscal year 2014 when their contingent liabilities amounted to Tk 3254 billion which was 24 per cent of that fiscal," he said in a recent meeting held in the city.

"The point is while these contingent liabilities are a huge challenge facing the treasury, there is no analysis on this issue in the budget," he said.

Dr Ahmed said it is very important to have a proper database and analysis of the financial flows between the treasury and the SoEs covering all financial transactions, including subsidies, equities, loan write-offs, debt servicing, investment financing.

As of June 30, 2015, outstanding DSL of SoEs was over Tk 799 billion.

Jasimharoon@yahoo.com
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