Ministry of Finance has withdrawn a summary from the federal cabinet agenda that it had earlier moved to ratify a decision to sell 51% stake in a public sector company to the United Kingdom sans bidding by converting a grant into equity
The decision to withdraw the summary has saved the government from any possible legal troubles.
The Economic Coordination Committee (EEC) of the Cabinet on Thursday approved to sell 51% stake in the Pakistan Credit Guarantee Company (PCGC) to the UK through Karandaaz Pakistan.
This move had raised questions as to how a 12-year-old grant can be converted into an investment and whether a public sector company could be sold without a competitive process.
The UK’s former Department for International Development (DFID) and Bill Gates Melinda Foundation own the Karandaaz – an entity that is set up to give small loans.
The DFID is now renamed as the Foreign Commonwealth and Development Office (FCDO).
Presenting the ECC-approved items for the cabinet’s ratification, Secretary Cabinet Sardar Ahmad Nawaz Sukhera informed the cabinet that the ministry has decided to withdraw its summary
According to sources, Minister for Finance Dr Abdul Hafeez Shaikh also told the cabinet about his decision to withdraw the summary.
“I cannot give a reply,” Minister for Information Shibli Faraz said while responding to a question during a press conference about the cabinet’s decision to sell the company to the UK.
However, Special Assistant to the PM Nadeem Baber twice whispered to Shibli that “the summary has been withdrawn”. Ministry of Finance Secretary Kamran Afzal also did not give a reply.
The shareholding structure of the PCGC was part of those agenda items that had been approved by the ECC on Thursday and were placed before the federal cabinet for its ratification.
On Thursday, the Ministry of Finance brought the summary of “shareholding structure of the PCGC” as an additional agenda item after the deadline of seven days prior to the meeting. The then special secretary finance termed the approval as “urgently required”, according to the minutes of the ECC meeting.
The ECC had approved to transfer 51% shareholding to the DFID through Karandaaz by converting Rs3.8 billion actual grant into equity. The SBP was given 39% shares against the Rs2.9 billion interest it earned by placing grant money into government treasury bills.
The PCGC was established and registered with the Securities and Exchange Commission of Pakistan (SECP) as a public sector company on April 12, 2019, having shareholding with the government of Pakistan and State Bank of Pakistan (SBP).
In June last year, the government had declared the PCGC as Development Finance Institution. A public sector company can only be sold through a competitive process defined under the Privatisation Ordinance 2000, said the sources.
The official documents showed that it was the decision of the management of the SBP to hand over the Pakistani company to the UK through Karandaaz.
“The SBP’s Financial Inclusion Programme Steering Committee headed by the SBP governor, recommended in October 2019 that the PCGC was to be funded by contribution from unspent amount of the DFID’s (now FCDO) grant out of its original grant given during the period from 2008 to 2020 as equity share of the DFID in the PCGC through Karandaaz,” minutes of the ECC meeting said.
The profit earned on the unspent grant invested by the SBP will be invested in the PCGC as the SBP’s shareholding and Ministry of Finance’s investment of Rs300 million provided in 2010 will be treated as equity share of the federal government, according to the 2019 decision of the SBP.
According to the SBP’s correspondence, the DFID’s Rs6.7 billion had been invested in the treasury bills that will be maturing by the end of next month. The Ministry of Finance was initially opposed to the SBP’s move to sell a public sector company in return for grant money.
“The Finance Division is of the view that the MoU between the EAD, the SBP and the DFID was a grant agreement. Grants are one way transactions. They may be tied to specific utilization but are not refundable. If they are otherwise, they are not a grant,” said the official documents.
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