The Ministry of Finance said on Wednesday that it accepted the “most economical offer from prospective providers” in order to borrow $408 million but did not disclose the terms of the deal.
“The $408 million borrowing was finalised after all prospective providers were asked to participate and the most economical offer was accepted,” read a handout issued by the ministry on Wednesday -a day after The Express Tribune reported that the government borrowed the sum.
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Secretary Finance Dr Waqar Masood, who is currently holding negotiations with International Monetary Fund (IMF) in Dubai for release of the next loan tranche, drafted the release on the ‘advice’ of Finance Minister Ishaq Dar who is in Germany.
The Finance Ministry further stated that Credit Suisse had formed a syndicate in which a number of bankers have provided resources, including Chinese Banks. The ministry did not disclose the interest rate and the maturity period of the borrowings.
“”One of the main challenges was absence of external financing which was causing turbulence in the domestic exchange markets and tilting the composition of public debt towards domestic debt and that too into shorter maturities creating vulnerabilities and entailing high rollover and refinancing risks,” stated the finance ministry.
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“Stemming the depleting foreign Exchange reserves and stabilising a fast depreciating currency that was fuelling inflation became paramount concerns. Pundits had even predicted a probable default by June 2014. In this scenario, the macroeconomic stability achieved by the present government is being acknowledged globally by renowned multilateral institutions.
“Secondly, the government has repaid over $10 billion of external debt till end December 2015, which mainly related to the borrowings of the previous governments.
Despite this heavy repayment, presently the foreign exchange reserves of the country have risen to nearly $21 billion, of which SBP reserves are about $16 billion, which is equal to nearly five months of import-cover as compared to less than around 3 weeks of import-cover in February 2014 when the SBP reserves stood at $2.8 billion. Thus it is important to maintain adequate reserves for upcoming external debt repayments.
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“Thirdly, as far as the said borrowing of $408 million is concerned it was finalised after all prospective providers were asked to participate and the most economical offer was accepted. The Credit Suisse has formed a syndicate in which a number of bankers have provided resources, including Chinese Banks. These borrowings, meant for balance of payment support, have been undertaken in accordance with the provisions of law.”
The Express Tribune had reported that the government entered into an agreement with Credit Suisse on March 29 to borrow $408 million. But like other similar transactions, the ministry did not invite bids through advertisements in the press for it, as prescribed under Public Procurement Regulatory Authority (PPRA) Ordinance and PPRA Rules.
Published in The Express Tribune, May 5th, 2016.
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