Govt to issue Tk5,665cr more bonds to repay power companies' dues

The government is going to issue bonds worth Tk5,665 crore to 24 more banks to repay the outstanding debts of private power companies.

The Ministry of Finance signed a memorandum of understanding (MoU) with the banks and independent power producers to this effect on Wednesday.

An official of the Finance Division told The Business Standard that a letter will now be sent to the Bangladesh Bank for bond issuance in favour of these banks. The central bank will issue the bonds to the banks in phases, he added.

The government on 24 January issued bonds for the first time to repay the dues of private power companies. The finance ministry then issued bonds worth over Tk2,000 crore to two banks.

Govt issues over Tk2,000cr bonds to repay power companies' dues

The government provides huge subsidies for electricity and fertiliser every year. Due to financial constraint, the government's huge amount of subsidy money has been in arrears for many years. According to the Finance Division, the arrears in subsidy amount for fertiliser and electricity stands at Tk42,000 crore as of December 2023.

The Finance Division later decided to issue bonds to repay the outstanding subsidies for IPPs and fertiliser sector. On 4 January, the finance ministry issued a special bond worth Tk3,316 crore to repay the outstanding dues for import of fertilisers.

Officials of the Treasury and Debt Management Division of the Finance Division said the arrears of all IPPs will be repaid gradually. That will require the government to issue bonds worth nearly Tk15,000 crore, they said.

These bonds have a maturity period of 10 years with an interest rate equal to the repo rate of the Bangladesh Bank, which is currently 8%.