Govt will pay back $6.5b foreign loans by 2018

SBP terms overall repayment situation positive

Islamabad

The government on Tuesday informed the Senate panel that Pakistan would pay back foreign loans of $6.5 billion including principal and markup till end of the tenure of the incumbent PML-N-led regime over next 17 months till June 2018.

“We are comfortable with our projected inflows on external account and there is nothing to worry about repayment obligations to the tune of $6.491 billion till June 2018,” Federal Secretary Finance Tariq Bajwa told the Senate Standing Committee on Finance which held its meeting under chairmanship of Senator Saleem Mandviwalla here at the Parliament House.

In the written reply, the Finance Ministry told Senators that the government was going to repay grand total foreign obligations up to $14.627 billion during the last four years starting from fiscal year 2013-14 till January 2017. 

Since June 2013 when the PML-N assumed power, the country has paid back $147 million. In fiscal year 2013-14, Pakistan had repaid $5.204 billion including $1.585 billion to the multilateral creditors such as the World Bank, Asian Development Bank, Islamic Development Bank and others and substantial amount of $3.130 billion to the IMF on account of loan obtained by the country during the last PPP led regime.

Pakistan paid back $3.487 billion foreign debt in shape of principal and interest payments in financial year 2014-15; $3.255 billion in fiscal 2015-16 and $2.534 billion in first seven months (July-Jan) period of the current fiscal year 2016-17.

Pakistan’s foreign debt obligations were increasing on account of commercial loans obtained from foreign banks as these loans were struck without undertaking open bidding and following PPRA rules, however, secretary finance told the media after the meeting that benchmark rate of previous deals became determining point for finalising such loan deals. 

Pakistan would have to pay back $6.491 billion till June 2018 including $858 million on account of loans obtained as commercial loans from foreign banks, $750 million as bond holders, $2.992 billion to all multilateral lenders including the World Bank, Asian Development Bank, Islamic Development Bank and others, $1.809 billion to bilateral creditors including China and others and $82 million to the IMF over next 17 months period.

When senators further inquired from the State Bank of Pakistan (SBP) regarding concerns expressed by the central bank on external account position, the SBP high-ups replied that the repayment obligations were reconciled with the Finance Ministry. They said that there were pressures on current account deficit but the financial account position was comfortable so overall look for balance of payment seemed positive. The SBP’s Director Monetary Policy stated that there was positivity because of China-Pakistan Economic Corridor (CPEC) but when senators inquired its exact impact then the central bank high-ups replied that one survey was underway because certain transactions were taking place offshore so it was not possible for them right now to differentiate exact levels of equity and loans out of CPEC inflows.

The Senate panel also decided to refer private member’s bill to further amend the Protection of Economic Reform Act 1992 to Finance Ministry with the promise that the government would seriously consider it for introducing it as government’s bill. 

The Senate panel also approved Public Private Partnership (PPP) Authority Bill 2016 with amendments under which the Authority’s Chairman was replaced from finance minister to minister of planning. With amendments approval, Pakistan has moved towards meeting conditions attached with World Bank’s programme loan to the tune of $300 million for which the Bank’s board is expected to meet around mid March 2017 at Washington D.C.

The existing Infrastructure Project Development Facility (IPDF) will be merged into upcoming PPP Authority and Viability Gap Fund (VGF) would be established to finance mega projects. On the request of Finance Ministry, the Senate committee allowed veto power to finance managers for including or excluding projects. The committee also deferred Limited Liability Partnership (LLP) Bill 2017 as the SECP was asked to share more comparable information.