As Meghalaya aims to grow into a $10 billion economy in the next five years, the Comptroller and Auditor General (CAG) has warned that the State's borrowing trend increased by over 63% in the past five years and could lead it into a debt trap.
In a finance report for 2021-22 for Meghalaya tabled in the Budget session recently, the CAG said the State's overall debt has increased by 63.22% from ₹9,485.08 crore (2017-18) to ₹15,481.09 crore (2021‑22).
Of the total debts, about 73% are internal in the form of market loans, ways and means advances from RBI, special securities issued to National Small Savings Fund and loans from financial institutions. Another 23% is public account liabilities and about 4% is loans from the Central government, the CAG noted.
In terms of GSDP percentage, the overall debt which was 32.14% in FY 2017-18 has increased considerably to almost 41% in 2021‑22, it added. In the yearly comparison, the outstanding debt at the end of 2021-22 financial year increased by 13.67% (₹1,862.35 crore).
The internal debt is ₹11,244.83 crore and is about 94.39% of the total outstanding public debt (₹11,912.82 crore).
Even the interest payment of ₹699.55 crore during 2021-22 was higher by ₹112.66 crore as compared to the FY 2020-21 as the government borrowed ₹1,608.00 crore in the form of market loans, it said.
“This indicates that a substantial portion of fresh market loans is being utilised towards servicing of existing debts which may lead to a debt trap in future,” the CAG report said.
It also noted that the State government is servicing its existing debts by taking out more and more loans.
In the Budget session, from March 20 to 28, Chief Minister Conrad K Sangma told the House that there is nothing to fear about debt or a debt trap.
“Loans are part of the government's expenditure. Every government takes loans. There is nothing to worry,” he said adding that the Government of India prescribes a system, a format and limits in which state governments can take loans. Mr. Sangma also said the State's economy will grow to $10 billion (₹80,000 crore) in the next five years.
The CAG has however expressed concern that the public debt percentage of GSDP was 31.49% and was higher than the 28% limit prescribed by the Meghalaya Fiscal Responsibility and Budget Management Act.
It suggested that in order to avoid the debt trap, the State must grow its GSDP “at a sufficient pace in order to generate enough revenues for future debt servicing”.