Shoring up revenue: Civic body plans to issue municipality bonds

Amendments proposed in the CDA Ordinance 1960 to seek powers for borrowing

ISLAMABAD: The capital’s civic agency plans to issue municipal bonds against its assets to borrow money from local and foreign lenders to meet its development and non-development expenditures.

The Capital Development Authority (CDA) has decided to approach the federal government seeking powers to borrow money by pledging its assets and commercial properties, says a document available with The Express Tribune.

The loans will be obtained through the issuance of “municipal bonds, Sukuk (Islamic bonds) or debentures” by pledging, transferring, assigning, leasing out, mortgaging, or sharing the CDA’s assets and properties, movable or immovable, it says.

For this purpose, some amendments to Section 16 of CDA’s Ordinance 1960,  “borrowing powers” will have to be done to materialise the plan.

The said section says that with the approval of the federal government, the CDA could raise funds by issuing bonds against guarantees by the government.

Four amendments have been proposed explaining the process of borrowing, payment of interest, interest rate, and guarantees against loans.

According to the documents, the proposed amendments call for the incorporation of a new clause, 16(C), to the Section 16 of the CDA Ordinance 1960.

“For the purpose of raising funds and borrowing money -- including through issuance of bonds, Sukuk, and debentures,  -- the CDA shall be entitled to, with the prior approval in writing of the federal government, sell, transfer, assign, lease [out], share, mortgage, pledge, hypothecate or otherwise encumber or dispose of its assets and properties (movable and immovable),” reads the proposed clause 16(C).

Since its establishment in 1960, the CDA has been relying on the sale of residential and commercial properties to shore up its revenues to meet development and non-development expenditures.

In 2011, a similar move was planned by the then city managers but it never materialised.

In 2007, during the tenure of Kamran Lashari, the CDA board had opted to unconventional means to generate funds by investing Rs1.5 billion in the stock market. The investment backfired and the CDA suffered huge losses.

“It’s not yet known how much money will be borrowed and which properties will be pledged against it. Currently, we are just finalising the amendments to get approval from the government,” said a senior official of the civic agency’s finance wing, requesting anonymity.

Published in The Express Tribune, May 17^th, 2016.