Pakistan still assessing debt relief from G20

Finance secretary says situation remains unclear, impact of relief may be $1.7b

ISLAMABAD: The finance ministry said on Tuesday that the situation about debt relief from G20 countries remains unclear and Pakistan may get maximum possible relief of $1.7 billion.

“We are still reassessing the situation and the impact of relief from G20 countries might be $1.7 billion,” said Finance Secretary Naveed Kamran Baloch in a meeting of the National Assembly Standing Committee on Finance.

The secretary’s statement came a day after the International Monetary Fund (IMF) said that Pakistan had not yet officially approached G20 countries for debt relief.

The situation about debt relief remains unclear and there might be some clarity by the time standing committee meets again, said the finance secretary, adding that the economic affairs ministry was also analysing the situation.

When no official request was made to the G20 nations for debt relief, then why was misleading news circulating in the media that Pakistan would secure $12 billion worth of relief, said Senator Sherry Rehman in a statement. “This will not only cause chaos and confusion inside Pakistan but is also embarrassing in the eyes of international community,” the senator added.

There was detailed discussion in the standing committee about the need of relief for people and companies after the Covid-19 hit the economy that is now projected to contract for the first time in 68 years.

The committee expressed dissatisfaction with the performance of Utility Stores Corporation (USC) that, it said, could not ensure availability of subsidised food items despite a subsidy of Rs50 billion from the government. Parliamentarians also questioned the quantum of prime minister’s relief package that according to the government was Rs1.25 trillion and as per the IMF report it was around Rs500 billion.

Relief in interest payments to individuals and businesses being affected by lockdown cannot be provided until the federal government gives subsidy to offset losses to banks, said State Bank of Pakistan (SBP) Governor Dr Reza Baqir on Tuesday. The governor made the statement during the standing committee meeting, headed by PTI’s Faizullah Kamoka.

“If the government wants it can give subsidy for relief in interest payments,” said the SBP governor while responding to questions about deferring mark-up payments and giving interest-free loans.

Baqir said that it will be up to the federal government whether it wants to provide relief to the shareholders of banks or those of private companies. The mark-up is very important for the banks for better cash management, he added.

The central bank has deferred the principal loans repayments but provided no relief on interest payments.

“The interest rates restructuring should not be left on banks that are not keen to do it,” said Ali Pervez Malik of the PML-N. He said that banks were also reluctant to extend loans to pay salaries and the central bank should take these matters into its hands.

The interest payments that were due in March can now be negotiated till September, said Baqir. It is in the interests of the banks to protect their solvent clients, said the governor.

The banks should not be allowed to arm-twist their clients and the central bank should play its role proactively, said Kamoka. The committee members also demanded that interest-free loans may be provided to the small and medium sized business.

The chairman of the committee proposed that the prime minister relief package should also be extended to overseas Pakistanis who have lost jobs and are returning to Pakistan.

The governor also briefed about implementation of the measures that the central bank has announced to ease financial woes. The SBP had announced relief in principal loans payments and concessional loans to pay salaries to employees. About Rs1 trillion loans are maturing in the next one year and during the first two weeks of the facility, banks have extended Rs71 billion worth principal repayments, said Baqir.

He said that about 250 companies have also approached 22 banks for getting concessional loans to pay salaries. So far, the banks have received Rs20 billion worth financing request, said the governor. The releases under the PM relief package also remain painstakingly low and so far only Rs88 billion had been disbursed out of announced Rs1.25 trillion package, according to the briefing given by the finance secretary.

The finance secretary said that Rs25 billion were given to NDMA, Rs10 billion to USC and Rs53 billion have been disbursed among the poor beneficiaries of the BISP programme. But committee members belonging to all political parties criticised the performance of the USC and urged the Ministry of Finance to be extra careful while releasing funds. The chairman of the standing committee said that in his constituency five utility stores were shut down while there were also reports of misappropriation in procurement of pulses.

He hinted at sending the case to Federal Investigation Agency, if the USC management could not satisfy the committee in the next meeting.

The finance secretary told the committee that an effective mechanism for disbursement of Rs200 billion to the daily wagers will be finalised within two days.

Despite repeated questions about exact impact of the Rs1.25 trillion package on the budget, the finance secretary did not give a number to the parliamentarians. 

Published in The Express Tribune, April 22^nd, 2020.

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