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Change Your Life! |
Avoid suppliers credit |
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News |
March
12, 2000 As
foreign grants and donations have become dearer, different ministries of
the government are looking for
suppliers credit for suppliers credit for implementing development
projects, sources said. This
has become a matter of concern to the government. Finance Minister S A M S
kibria in a recent letter warned the Economic Relation Division (ERD)
about the adverse impact of avoid this because of high rate of interest. The
minister suggested the ERD to take soft loan instead of suppliers credit
for development projects. “Apparently
the suppliers credit seems to be attractive, but actually it is very
expensive. This type of credit crates pressure on foreign currency reserve
and the over all economy,” the minister said in his letter. “Loan-taking
under suppliers credit may invoke criticism in future, “ the minister
feared. The
government took $284 million under suppliers credit during the year since
the independence,” the minister said. When
contacted, a high official at the RED told the Daily Star that the
government took loans form donors or international financial organizations
under suppliers credit only when there was no alternative source of funds
for particular project. Suppliers
credit was unavoidable because of emergency needs like replacement or
repair of power plants to reduce load shedding, he said. He however could
not specify the total mount of such loans taken so far. The
rate of interest on suppliers credit varies depending on the terms,
conditions and the financing organizations. “But it hardly goes above
six percent. It has less grace period and repayment time”, the official
said. “We
term a credit as soft loan if the rate of interest is below one percent
with a repayment period of more than twenty years,” he said. Sometimes
soft loans are available with ten year’s grace period and fifty year’s
repayment period. The
Finance minister in his letter however recognized the need for foreign
assistance for development and appreciated ERD’s efforts for increased
aid commitments form donors. He
mentioned that the government had a tremendous success in getting foreign
aids during fiscal 1998-99, when commitments rose to $2847 million, which
was 50 percent higher than that in the previous year. Of it, project aid
was 2019 million, commodity aid 460 million and food aid 386 million. ”Though
the aid commitments increased by 50 percent, actual disbursement increased
by 32 percent,” the minister said in the letter. Disbursement
of food and commodity aid was higher because of donations for flood
recovery, but project aid declined by seven per cent compared to that in
the previous year, the letter said. Foreign
aid commitments totaled $19000 million during fiscal 1997-98. Policy
reforms and increasing utilization capacity are necessary for continuation
of the trend and amount of foreign aid, the minister said. He
mentioned that while making aid commitment, donors always emphasize reform
programs and issued related to development. The
most important issues are: efficient management of the government and the
macro economy, good governance, curbing corruption, creating and
increasing institutional power in the domestic sector, following a liberal
policy for achieving market-dependent and export-oriented economic
management, structural and policy reforms, increasing efficiency in
utilization of foreign aid and implementation of projects, reduction of
government’s commercial activities and their gradual privatization and
program oriented assistance and investment programs. Source:
The Daily Star.
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