Dealing with SOE-related debt burden

Backed by the public exchequer to operate, the performance of different state-owned entities (SOEs) has often been an issue of concern for the successive governments in different times and contexts. Any lapse by these SOEs to perform duly ultimately adds to the financial and fiscal burdens of the central government. According to reports, this has again proved to be the case with some SOEs including autonomous, semi-autonomous, local governed bodies and corporations as the repayments against the debts they owe to the government, are deposited with their immediate controlling authority and not directly with the public exchequer through automated challan. That is exactly when the procrastinating bureaucracy halts the progress of work leading to avoidable delay and account mismatch. The debt service liability (DSL) of the SOEs in question has been accumulating and is learnt to have inflated unmanageably out of proportion. Failure to repay the debts including interests and principals against the loans obtained by some 142 SOEs as per schedule resulted in an astronomical amount of DSL at Tk 1.83 trillion by June 2023 and by June 2024 that amount further increased to Tk 2.18 trillion! This debt burden has also been coming in the way of timely implementation of the development projects. This is unacceptable for the simple reason that the humongous amount of debt liabilities has been a product of inexcusable laxity on the part of the bureaucracy involved and a lack of interdepartmental coordination in the government.

Notably, the SOEs behind this huge debt-burden on the government include the Bangladesh Power Development Board (BPDB), Rural Power Company Ltd., Bangladesh Textile Mills Corporation (BTMC), Bangladesh Jute Mills Corporation (BJMC), Bangladesh Road Transport Corporation (BRTC), Bangladesh Bridges Division and so on. Apart from these debt liabilities ascribable to accounting mismatch and delays in work delivery, the government has often to bear fiscal liabilities due to some SOEs' non-payment of loans provided to them against sovereign guarantees issued by the government. Since the failure to repay the debts in time by the SOEs in question is liable to invoke the provisions of the sovereign guarantee, finally, it compels the government to repay the debts by settling issues with the lending agencies at the expense of the state exchequer. Either way, these SOEs are actually fleecing the public's tax money, thanks to their various lapses in which bureaucratic tangle is playing a big part. According to the budget documents of the finance ministry, for instance, in FY24, a loan amount well over Tk1.17 trillion was being backed by the government's sovereign guarantees. Worse, the debt amounts against sovereign guarantee have been rising by 19 per cent annually.

Now to get around the ever-ballooning DSL on account of accounting mismatch, the finance division is learnt to have been planning to instruct the SOEs concerned to make repayments against their DSLs directly to the public exchequer and not via their controlling authorities. As separate legal entities, the SOEs can reach loan-related deals and debt-servicing agreements with lending agencies by themselves. There should be no legal barrier to their depositing payments relating to DSL directly with the state exchequer. Whatever the stance of the finance division or the ministry for that matter on the issue, the decision has to be prompt and not marred by prolonged delays that led to the present undesirable situation. The best way to address this kind of debt-burden will be to go for an overall strategy on SOE-lending and related debt-servicing. That would help avoid piecemeal dealing with these irrational debt burdens.