ECC okays Rs402b more for debt servicing

The government on Monday approved over Rs402 billion worth of supplementary grants for external debt servicing in the outgoing fiscal year after the allocated budget fell short of the needs due to unexpected short-term debt repayments and steep currency devaluation.

The Economic Coordination Committee (ECC) of the cabinet took various decisions having a direct bearing of a total of Rs444 billion on the federal budget, including a provision of Rs9.5 billion worth of sovereign guarantees for the construction of the Sukkur-Hyderabad motorway.

Headed by Finance Minister Ishaq Dar, the ECC also fixed the prices of 49 medicines that are being introduced in Pakistan for the first time.

The ECC approved Rs402.3 billion as a technical supplementary grant for debt servicing for foreign loans and credits, according to the Ministry of Finance’s press statement.

For the current fiscal year, the National Assembly had approved a total of Rs4.4 trillion budget for payment of foreign loans, short-term foreign commercial loans and interest payments on foreign debt.

However, the allocation of Rs142 billion for short-term loan repayments and Rs511 billion for interest payments on the foreign loans proved insufficient, the ECC was informed.

Against the approved budget of Rs142 billion, the short-term foreign loan repayments surged to Rs331 billion due to some unexpected external debt repayments after some foreign commercial banks refused to extend their loans, said the sources.

The government had hoped that the European and the Gulf-based commercial banks would refinance their loans but its expectations could not materialise due to downward credit ratings revisions and high risks of default.

Similarly, the National Assembly had approved Rs511 billion for interest payments on foreign loans. But the Economic Affairs Ministry has now estimated the interest cost on foreign loans at Rs725.4 billion due to currency devaluation -- showing a gap of Rs214.3 billion, said the sources.

Due to wrong estimates of the Rs186 to dollar exchange rate parity for the outgoing fiscal year, the budget allocation for interest payments fell short of the needs. The sources said that the average interest rate on interest payments for the outgoing fiscal year was Rs235 to a dollar.

For the next fiscal year, the government has approved the Rs290 to dollar exchange rate parity -- an assumption that will again result in fewer allocations for the external debt servicing. The sources said that the State Bank of Pakistan had advised the finance ministry to prepare the next fiscal year’s budget at the Rs308-to-a-dollar exchange rate.

Other decisions

The ECC also approved issuing a sovereign guarantee amounting to Rs9.5 billion for the construction of the Hyderabad-Sukkur motorway on a build-operate-transfer basis. The project is being undertaken under the public-private partnership and the bidder will spend Rs307 billion from its own resources that will be recovered through toll fees.

The ECC also approved Rs12 billion in supplementary grants for the procurement of relief items to replenish the reserves of the National Disaster Management Authority in order to be better prepared to respond to any impending disaster.

The ECC approved a Rs9.2 billion supplementary grant in favour of the Power Division for the execution of the 1320 MW coal-fired power project Jamshoro.

The ECC considered a summary of the Ministry of National Health Services and after detailed discussion approved the fixation of Maximum Retail Prices of 49 new drugs on the basis of being lower as compared to their prices in the neighbouring countries, according to the Finance Ministry. These are drugs which are being introduced in Pakistan for the first time mostly at prices considerably lower than the region, according to the handout.

The ECC also approved Rs839 million in supplementary grants in favour of the New Gwadar International Airport, which Pakistan wants to complete by September this year. It also approved a Rs120.5 million supplementary budget for salary and non-salary expenditures.

An amount of Rs140.6 million was approved in favour of the Establishment Division for payment to government departments for services rendered from various sources. An amount of Rs700 million was given to the Ministry of Information to meet the shortfall in salary payments.

The ECC approved Rs348 million in favour of the Ministry of Interior to complete the raising process of the 6th Battalion of Pakistan Post Guards for anti-smuggling purposes. An amount of Rs1.3 billion was approved for the FATA Temporary Displaced Persons Emergency Recovery Project of NADRA to serve vulnerable families, affected by military operations.

An amount of Rs49.5 million in favour of the Ministry of Interior for further disbursement of the amount as financial assistance for the families of Shuhada and injured persons of the Swat terrorism incident.

A sum of Rs1.4 billion was given to Pakistan Atomic Energy Commission to meet its employee-related expenditure.

The ECC also approved Rs5.3 billion in favour of the Ministry of Defence for meeting expenses of employees related expenses.