ECC approves to roll over $142m Roosevelt Hotel debt

Committee okays cuts on interest rates for loans under PM’s housing project

ISLAMABAD:

The government on Friday approved to roll over $142 million debt of Roosevelt Hotel in New York, and cut interest rates on loans under Prime Minister Imran Khan’s housing project after commercial banks termed existing rates unaffordable for the people.

Headed by Federal Minister for Finance Shaukat Tarin, the Economic Coordination Committee (ECC) of the Cabinet also approved Rs2.4 billion annual subsidy for foreign exchange companies to lure them to deposit their cash dollars with the commercial banks. Under the arrangement, the government will pay Rs1 over and above the exchange rate to the dealers for depositing the dollars.

The step aims to offset pressure on the rupee value.

During the meeting, the Aviation Division submitted a summary on the financial challenges of Roosevelt Hotel and a request of PIA Investment Limited for re-rolling of the principal amount along with mark-up payments by the National Bank of Pakistan (NBP) for a further period of two years ending on December 31, 2024.

The ECC approved to roll over $142 million debt of Roosevelt Hotel, owned by Pakistan International Airlines, for two years.

Affordable Housing

The ECC approved a summary to revise terms for lending under Naya Pakistan Housing and Development Authority (NAPHDA) for low-cost housing projects and allowed the inclusion of Housing Finance Companies in the scheme. The federal government is providing subsidies to make housing affordable for low-income groups.

However, according to an appraisal of the existing scheme being carried out by the Commercial Banks, the bankability of the applicants belonging to the Tier-1 NAPHDA Projects is not viable mainly due to the higher debt-burden ratio and low socio-economic ranking of the applicants, the ECC was informed.

Therefore, the applicants are unable to qualify for the required amount of loans. In order to address the situation. The government has now reduced the interest rate for low housing project from 3% to 2% for the first five years and from 5% to 4% per annum during the next five years.

It also increased the subsidy period from 10 years to 15 years and set a 5% per annum rate during the 11 to 15 years lending period.

Motorway subsidy

The ECC also approved the proposal of the Ministry of Communication for a special allocation of additional funds of Rs8 billion against approved government share for the Sialkot–Kharian Motorway Project. Public-Private Partnership Authority Board meeting in August this year accorded approval for the execution of PPP Agreement with M/s FWO & M/s SMC (Sultan Mahmood & Company.

Exchange companies subsidy

The ECC approved Rs1 per US dollar cash incentive for exchange companies that will surrender each USD mobilized from inward remittances. As against the existing requirement of surrendering only 15% of inward remittance, the exchange companies will now be required to surrender 100% of inward remittances in the interbank market. The ECC approved the proposal with direction to review the model to achieve further improvement.

The average monthly inward remittances for the first 5 months of the current fiscal year are $200 million. Based on this trend, the expected annual inward remittances mobilized by exchange companies may reach a level of $2.4 billion, according to the Finance Ministry.

It added an annual amount of approximately Rs2.4 billion would be required to incentivize the exchange companies against surrender of foreign exchange in the interbank market. For the next half of the current fiscal year, at present, a budgetary allocation of Rs1.2 billion would be required.

The ECC also approved the Petroleum Division’s proposal of debt swapping against a long-term loan secured by SNGPL worth Rs54.7 billion at 6 months KIBOR+110 basis point for the construction of a dedicated pipeline project.