Home »Week Highlights » SATURDAY JUNE 27: Power Holding Company: syndicate of banks giving fresh credit line
ISLAMABAD: A syndicate of big banks is giving a fresh credit line of Rs 7.5 billion at 2 percent above KIBOR to the Power Holding Company as it is not able to pay interest on the Rs 134 billion of Term Finance Certificates, it is reliably learnt. The interest had fallen due at the end of February this year. And, banks were afraid that as over 90 days had elapsed - they would have to classify the amount of principal plus interest, as per State Bank regulations, as a non-performing loan.

The banking syndicate, therefore, decided to enforce the sovereign guarantee issued by the Ministry of Finance, on behalf of the government of Pakistan, against the TFCs issued. In case of default, the government had guaranteed to pay the principal plus interest amount. Banks had asked for payment by June 29th, 2015, as per terms of the guarantee.

Since the government cannot borrow from SBP due to its commitment to the International Monetary Fund (IMF) - it is forced to take this route since the provincial surpluses envisaged may not materialise of end June, 2015. Budget 2014-15 estimated the provincial surpluses at Rs 289 billion. Now Ministry of Finance estimates these surpluses would be much less - Rs 142 billion. That too if the revenue estimates provided by the Federal government to the provinces are met. Since provincial transfers of Rs 1575 billion are committed the provinces, have linked their surplus to Federal transfers from the divisible pool. Ministry of Finance is expected to do a credit-debit accounting entry at the end of the year and at the beginning of next financial year as per practice followed for the last two years.

Copyright Business Recorder, 2015


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