The volume of suppliers' credit increased by 248 percent during the five-year period of the BNP-Jamaat-led alliance government (FY'02-'06) compared to the corresponding period of the Awami League (AL)-led government (FY'97-'01).

According to Economic Relations Division (ERD) statistics, the volume of soft loans dropped by 1.52 percent during the same period of the BNP-Jamaat-led alliance's regime.

Sources said despite strong oppositions to financing projects through suppliers' credit, the immediate past government went on with it largely with a motive for corrup-

tion.

There are a number of instances that indicate large amounts of funds were misappropriated by such an opaque financing system, sources said.

The ERD statistics show that from FY'02 to FY'06 Bangladesh received suppliers' credit worth $739.59 million while in the five years from FY'97 to FY'01 the total of such credit had been $212.16 million. The BNP-Jamaat-led government took more than a half of the total suppliers' credit the country has received since independence, the data reveals.

ERD sources said the suppliers' credits were taken for projects in railway, telecommunications, roads

and highways, and industries sectors.

Sources explained that since soft loans are invariably tagged with many conditions, different ministries are more inclined to take suppliers' credit. The BNP-Jamaat government after coming to power, however, adopted a policy guideline on suppliers' credit scheme where such a mode of financing was allowed only as an exception.

Sources said although the BNP-Jamaat alliance government's finance minister M Saifur Rahman also had a strong stance against financing projects through suppliers' credits, he was compelled to

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pursue such credits following pressures from a section of government high-ups.

The interest rate for soft loans is less than 1 percent and the loans are repayable within up to 50 years whereas in suppliers' credit, the interest rate ranges from 3.5 to 12 percent and the repayment schedule stretches up to 12 years only.

Moreover, goods supplied against a suppliers' credit are all too often overpriced. For instance, if the original cost of goods is Tk 100, it is priced at Tk 500 in a suppliers' credit scheme, a source said.

Saifur and other BNP policymakers strongly opposed the AL government's policy at the end of its tenure when it financed projects through suppliers' credit.

"The BNP-Jamaat-led government even formulated a guideline to discourage suppliers' credit," said an ERD official.

He said there were a number of instances during the immediate past government's regime when the purchase committee headed by the finance minister was compelled to accept a number of projects financed by suppliers' credits due to

pressures from a section of government high-ups. "Those projects had earlier been rejected by the same purchase committee," the official said.

The practice was so rampant that the International Monetary Fund (IMF) cautioned the government in FY'06 that it would not provide any aid if the government did not stop taking suppliers' credit.

"Governments take suppliers' credit when donors are not interested to fund projects which have no viability or have low quality," economist Zaid Bakht told The Daily Star. "Failing to get donors' funding, vested quarters of governments finance projects through suppliers' credit with motives for corruption," he said.

He said although the Bangladesh Bank is authorised to oversee such matters, it could not work properly due to government pressure.

A source cited a case by saying when the BNP-led alliance government came to power in 2001, it suspended two Di-Ammonium Phosphate (DAP) fertiliser plant projects on grounds of corruption by the previous AL government. But

later, it completed the projects by financing them through suppliers' credits. "Corruption was the main motive for such a policy," the source said.

The ERD statistics show that the total volume of soft loans taken by the BNP-Jamaat-led government was $7.11 billion and the figure had been $ 7.22 billion during the AL regime.

However, during the BNP-Jamaat regime soft loans from multi-lateral donors increased by 13.96 percent, and 60 percent of it was from the World Bank. During the same period, bi-lateral loans decreased by 19.39 percent compared to the corresponding period of the AL regime.

"The BNP-Jamaat government failed to get more soft loans as it was not successful in curbing corruption and at the same time its performances in bringing reforms to different sectors were not satisfactory," an ERD official said.

He said there was a total of $7 billion aid from different development partners in the pipeline, but the BNP-Jamaat-led government failed to get the money.