The government should carry out a detailed financial analysis into the Padma bridge project before it opts for alternative funding merely on political consideration, experts and economists said yesterday.
They said the government should consider opening dialogue with development partners, as they offer the cheapest loans on flexible conditions compared to commercial credits.
The observations came a day after the World Bank, a lead financier of the $ 2.9-billion project, on Friday revealed that the government wrote to it to say it was no longer pursuing the $ 1.2 billion funding from the Washington-based lender.
Mirza Azizul Islam, a former caretaker government adviser, said the impact of the decision would be unfavourable for the country.
He said it would not be possible to generate revenues for mobilising about $ 2 billion.
"We may have to go for drastic expenditure cut elsewhere under the Annual Development Programme, which means, many of the approved projects will be terminated.”
The government may go for other bilateral parties, which is definitely going to be a lot more expensive, in terms of interest rates and maturity period, said Islam, adding,
"It will not be economically rational if we jump into it without a detailed analysis."
According to Islam, the foreign exchange component in the project is very high. "So, if we take the foreign exchange liability, it will have a pressure on our exchange rate."
The bridge is an import-intensive project with about 75 percent of the total project cost going in imports of goods and services. It will require about $ 2.2 billion worth of imports.
Islam said the government can start the implementation of the project anyway. "But it has to keep the conclusion in mind."
Islam said he did not see the option for soft loans unless the government withdrew its letter and stated that it was willing to meet all the conditions.
"In such case, there will be a loss of face to a large extent."
Salehuddin Ahmed, a former central bank governor, said: "It is possible to construct the bridge with domestic resources, but it will not be logical."
The economist observed that the government should try to mobilise soft loans and open dialogues with development partners on getting cheap loans.
According to him the government's decision to pull out of the discussion will discourage other donors.
It is not necessary that this government laid the foundation stone for the project, said Salehuddin, adding, “It should first try to sort out the financial issues.”
Executive Director of Transparency International, Bangladesh Iftekharuzzaman, said the Padma bridge had become uncertain. What the government was saying was only the initial process. It was political statement.
"By shutting the door on discussion with the World Bank, the government has lost an opportunity to demonstrate committed towards its election pledge of fighting graft.
"It will also raise question about the government's priority as to whether it has sacrificed the country and the people's interest in protecting one or two persons," he told The Daily Star.
"The government's failure to bring all responsible people to book will encourage more high-level corruption."
Ahsan H Mansur, executive director of Policy Research Institute, a respected think-tank, said he saw no possibility of starting the physical work by September this year.
He said the government should initiate economic diplomacy and try hard to mobilise funds from other development partners as much as possible.
For example, the World Bank's IDA loan carries 0.75 percent per annum service charges, a decade-long grace period, and a repayment period of 40 years.