Over two-thirds of PM Imran’s Covid-19 relief package remains unspent

ECC approves $105 million bailout package for Roosevelt Hotel in New York

ISLAMABAD:

The Rs540 billion – or a whopping over two-thirds of Prime Minister Imran Khan’s Covid-19 economic relief package that had to be distributed through ministries, could not reach the people during peak crisis times, depriving them of much-needed help.

After the money remained unspent in the last fiscal year 2019-20, the Economic Coordination Committee (ECC) of the cabinet approved the usage of Rs540 billion in this fiscal year, according to an announcement by the Ministry of Finance (MoF).

The ECC also approved $105 million bailout package for Roosevelt Hotel, New York, to stop the prime property falling in the hands of M/s MSD PCOF Partners.

The MSD not only holds air rights of the building but is also the indirect lender of $68.2 million debt, being obtained by the Pakistan International Airlines-Investment Limited (PIA-IL) that owns the hotel.

Covid-19 package

“The ECC also discussed and approved a supplementary grant of Rs540 billion having remained unutilised due to procedural conditions under the Covid-19 relief measures announced in FY2020-21,” according to Ministry of Finance handout.

The ministry’s officials noted that around Rs770 billion had to be distributed through government ministries and departments among the citizens and businesses being affected by the respiratory disease. However, these ministries disbursed less than Rs240 billion.

For instance, Rs50 billion had been announced to provide subsidise items through Utility Stores Corporation but the actual spending was around Rs21 billion.

Sources said that the ministries and departments did not have the capacity to handle the relief package.

In April, PM Imran had announced Rs1.240 trillion economic relief package to offset impacts of the Covid-19.

However, serious questions had been raised over the exact quantum, as the government even showed Rs280 billion spending on wheat procurement and tax refunds as part of the programme.

Sources said that with the approval of the federal cabinet, the MoF had opened a Covid account in the State Bank of Pakistan to park Rs540 billion there.

But the plans were spoiled by the Controller General of Accounts (CGA) who did not endorse the idea, the sources added.

They said that this was also the reason for relatively low budget deficit of 8.1% of the GDP or Rs3.4 trillion in the last fiscal year as against the earlier estimates of 9.4% of the GDP.

The government wanted to book Rs540 billion or 1.3% of the GDP in the last fiscal year but had been aiming to use the money in this fiscal year, which the CGA did not allow.

Roosevelt Hotel

“The ECC has given principled go-ahead to the payment of all liabilities and responsibilities resulting from a debt of $105 million secured by the Pakistan International Airlines Corporation Limited (PIACL)-owned Roosevelt Hotel in Manhattan, New York,” according to the Ministry of Finance.

The handling of the entity is yet another example of bad governance in the country.

The ECC was informed that even partial operations of the hotel were not sustainable at the moment.

Roosevelt Hotel had acquired a loan of $105 million from JP Morgan at an interest rate of 5.05% with maturity in April 2021.

Annual interest payment had been calculated at approximately $6 million.

However, the JP Morgan later sold its loan of $68.25 million to MSD PCOF Partners.

The sale of the loan complicated the situation for the entity due to certain reasons.

“For the past several years, the MSD has been expressing its desire to be a joint venture partner in the development of Roosevelt Hotel’s site. MSD may attempt to leverage its position in achieving the goal. It also holds air rights in the vicinity of Roosevelt,” said the Aviation Division summary.

The PIAIL management was of the opinion that MSD had acquired the major portion of Roosevelt loan – by design – in order to become the sole lender, and in case of default, it could quickly step in and seek foreclosure.

The PTI government had also tried to sell the hotel on the advice of ministerial “task force” but the Privatisation Ordinance became a hurdle.

In the ECC summary, it was proposed that Roosevelt’s operations should be shut down and all union and non-union employees be laid off against severance payment of approximately $20 million.

The board said that the current debt of $105 million secured against property mortgage and with PIAIL’s guarantee should be paid forthwith to stall any attempt of acquiring hotel by the MSD.

According to the MoF, “The ECC also asked the Finance Division to engage with Law Division, Aviation Division and Planning Commission to formalise the mode of payment/refinancing as per schedule of the loan contracted by the Roosevelt Hotel to meet its financial challenges, and submit to ECC in its next meeting for formal approval”.

What appears to be a controversial move, the ECC also decided to give Rs40 billion to the Federal Board of Revenue (FBR) to pay the income tax refunds.

According to the standard accounting practices, the refunds have to be paid against the gross tax collection.

Any attempt to make refunds through supplementary grants would tantamount to inflate the FBR’s revenue collection that will also provide undue share to the provinces that get 57.5% of the collection.

The ECC approved to reallocate through technical supplementary grant of lapsed funds of Rs8 billion under sustainable development goals achievement programme to respective ministries and divisions.

The body also discussed and approved amendments to the Import Policy Order 2016 to streamline international trade in live animals and their meat products in accordance with the international rules and practices.

The committee approved a proposal by the Finance Division to allow the Asian Development Bank to launch Offshore Pakistan Rupee (PKR)-Linked bonds based on conducive market conditions.

The ECC also considered approving a revision in key terms of prime minister’s Kamyab Jawan Youth Entrepreneurship Scheme for making the programme accessible to all Pakistani citizens meeting the set criteria.