Finance Division refuses to waive Rs139m guarantee fee for WAPDA loan

Guarantee was given on a $125m loan taken by WAPDA

ISLAMABAD: The Finance Division and the Economic Affairs Division (EAD) have refused to back a proposal for waiving the guarantee fee of Rs139 million on a loan taken by the Water and Power Development Authority (Wapda) during the tenure of Pervez Musharraf’s government to meet financial obligations of power distribution companies.

Wapda took a loan of $125 million from Standard Chartered Bank in June 2007 with government guarantee. The loan was partially paid in two installments of $25 million each in 2009. The remaining around $70 million was converted into local currency in 2010, which came in at Rs6.45 billion.

That portion of the loan, as part of the Rs216-billion circular debt, was to be transferred to a holding company, but the government could not do so, as Standard Chartered argued that the agreement was not acceptable to its syndicate members.

The loan was finally adjusted and settled after issuing Pakistan Investment Bonds (PIBs)/treasury bills in April 2011. The EAD worked out a guarantee fee of Rs138.95 million on the foreign currency loan.

Wapda was of the view that it acquired the loan only to meet financial obligations of ex-Wapda companies working under Pakistan Electric Power Company (Pepco) in 2007. The loan was repaid by the Finance Division, therefore, the guarantee fee should either be paid by the Finance Division or it may be waived, it said.

The Ministry of Water Resources was of the view that the EAD and Finance Division did not support the waiving of the guarantee fee. “Since Wapda is a revenue generating entity, the EAD does not support the waiver, rather strongly emphasises for depositing the guarantee fee amounting to Rs138 million along with penal interest … for the period of default outstanding against Wapda as soon as possible and as per agreement,” it said.

The matter was taken up in a meeting of the Economic Coordination Committee (ECC) last month. The Water Resources Division pointed out that the loan had been settled and therefore, the finance ministry should either pay the guarantee fee or it should be waived.

However, the finance ministry and the EAD opposed the proposal. During discussions, the ECC noted that viewpoints of the EAD and Finance Division merit consideration and the proposal of the Water Resources Division should be moved after further consultation with all stakeholders.

Published in The Express Tribune, February 21^st, 2019.

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