New debt act gets thru House

A new law entitled Public Debt Act 2021 gets through parliament with provisions easing local and foreign borrowings but punishing false information about investment in the national savings schemes.
The Jatiya Sangsad (JS) Thursday passed the bill on the act which replaces the British-era Public Debt Act 1944.
The main objective of the bill is to modernise the new financial instruments like shariah-based products.
Besides, the bill paves the way for raising debt by issuing sovereign bonds in local and foreign currencies.
Finance Minister AHM Mustafa Kamal introduced the bill which was passed by voice vote.
Earlier, the House resumed at 5:00 in the afternoon with Speaker Dr Shirin Sharmin Chaudhury in the chair.
The bill clearly mentions the contingent liability that will come on government shoulders after failure in repayment of the debts taken by the government-guaranteed institutions or enterprises.
Government provides guarantees and counter-guarantees against loans negotiated by various state-owned financial and non-financial enterprises, most of them for implementing different public policies and programmes. If the contracting organizations fail to pay back their loans in time, the guarantees are invoked and the liabilities for payment are passed on to the government.
The total guarantees valid beyond 30 June 2022 are worth Tk 926 billion, according to a budget document.
Finance Minister Mr Mustafa Kamal earlier in November placed the draft of the 'Public Debt Act 2021' for consideration by the lawmakers.
An official of the finance ministry said the incumbent Public Debt Act 1944 is a very old law that was extended on several occasions at a time when global debt management witnessed a radical change.
"The government is now facing problems dealing with other countries because of a lack of a proper debt act. After enactment it would help the country develop a new legal framework for better transaction of funds," says the official, who preferred anonymity. The cabinet gave its final nod to the draft Public Debt Act 2021 on September 6 in 2021.
The government will give a precise guarantee against a credit taken by the government from the people--native or foreign--that they would get back the money.
The government contemplates borrowing from domestic and foreign sources with interest/profit or without interest/profit to meet its budget deficit.
A new Islamic provision has also been incorporated into the bill for running a Shariah-based deposit system alongside the normal deposit system.
The public would be notified about the profit or interest against their deposits. If anyone does provide false information while purchasing government certificates, securities, and bonds, they would face a maximum of six-month imprisonment, Tk 100,000 in fines, or both.
The bill says the government will provide guarantees to state and private entities for loans or investments or quasi-fiscal liabilities in the host country. An official at the central bank told the FE Thursday that their bill incorporated the nominee issue through simplifying the matter.
The old act mentioned only "succession" establishing which is time-consuming.

jasimharoon@yahoo.com