PESHAWAR, Sept 18: The NWFP has retired about Rs1.9 billion debt out of the total expensive cash development loan payable to the federal government, official sources told Dawn .

In continuation with the previous military-backed civil government’s policy of retiring expensive loan prematurely to bring down the total size of provincial debt and control interest payment over and above the principal loan, the MMA-led provincial government paid Rs1.9 billion to the federal government at the beginning of the current financial year in July, last.

The latest premature retirement of expensive debt has raised the total debt cleared by making payment to the federal government since July 1, 2003, to Rs7.6 billion.

In July, last year, the provincial government had retired Rs5.7 billion expensive cash development loan in line with its debt management strategy.

The premature retirement of the loan, according to official claims, saved about Rs843 million for the province in the 2002-3 financial year.

“Had the province not cleared the Rs5.7 billion expensive loan it would have to pay about Rs843 million as interest over and above the principle amount,” said an official of the provincial government. The move, added the official, would annually save Rs1.1 billion for a province which has paid over Rs66 billion as interest over and above the principle amount taken as loan from the federal government since 1972-73 financial year.

Against the total cash development loan of Rs43.9 billion taken from the Centre between 1972-73 and 1997-98 financial years to support development activities in the province, the NWFP paid in debt servicing a total amount of Rs73.8 billion till June 30, 2002 — of which only Rs7.4 billion served the principle amount and the remaining went down the drain on account of interest payment.

Official sources said the Rs5.7 billion retired in the 2002-3 financial year and Rs1.9 billion this year would result in total saving of around Rs20 billion on account of mark-up. The Rs1.9 billion debt cleared recently would accrue saving of around Rs350 million on account of mark-up payment during the current financial year.