26 February 2004	Thursday	05 Muharram 1425

PESHAWAR, Feb 25: The NWFP government's move to make savings by premature retirement of federal government's expensive cash development loan (CDL) did not yield the desired results as the federal authorities have not yet adjusted the amount already paid by the province at the start of the current financial year, official sources said.

The provincial government prematurely reimbursed to the federal government a sum of about Rs1.9 billion under CDL to save money on account of mark-up charged over and above the principal loan amount.

Last year, too, the provincial government had retired Rs5.7 billion earlier than scheduled. The province was expecting to record a saving of about Rs1 billion annually by prematurely retiring around Rs7.7 billion during the last 18 months.

However, said the sources, the province was deprived of the benefit it was eying at after the federal government did not account for the amount surrendered at the start of the year.

"Funds reimbursed already have not yet been adjusted by the federal government, taking away the benefit that was to result from the move", said a finance manager.

The provincial government took up the matter of adjusting the laid-off loans with the federal authorities concerned on several occasions since the Rs1.9 billion amount was repaid.

The federal government, said the sources, was reluctant to adjust the surrendered money because the move would disturb its capital receipts estimates for the current financial year.

However, a senior official of the provincial government said the matter was close to being resolved after the federal government agreed to adjust the sum in question.

"Though the federal government has disallowed any further premature retirement of expensive loans by provinces, it has agreed to adjust the amount already paid by the NWFP," said the officer who holds an important position.

The province also wanted to prepay some more expensive loans but the federal government did not agree to the proposition. Because the money surrendered was not accounted for by the federal government, the province had to pay mark-up on the loan during the first half of the current financial year.

Once the amount surrendered in repayment was adjusted by the federal government, recoveries from the province on account of mark-up would be stopped, the sources said.

The federal government deducts at source over Rs500 million on account of debt servicing from the province out of the federal transfers made to it every month against its share from the federal divisible pool of taxes.

Out of the Rs8 billion allocated for debt servicing during the current financial year, only an amount of about Rs1 billion would serve as the principal loan amount and the remaining Rs7 billion would go waste by serving as mark-up over and above the original loan amount.

In his recent press conference at Peshawar, federal finance minister Shaukat Aziz had maintained that rates of return on the provinces' rupee loans would be revised under the next year's federal budget.

Though the federal government's intended move to revise downward the rates of return on rupee loans would bring some relief to the provinces, the sources said their requests to let them borrow loans from the open market at low mark-up rate to prepay expensive loans of the federal government appeared to have been shelved.