04 June 2004	Friday	15 Rabi-us-Saani 1425

KARACHI, June 3: The Asian Development Bank opened dialogue with local and foreign banks operating in Pakistan to see how the banks can make rupee lending for infrastructure projects on behalf of the ADB.

Two ADB officials met executives of some leading local and foreign banks at the State Bank headquarters here on Thursday. Participants of the meeting told Dawn that the ADB officials discussed with them their plan to make long-term rupee lending in Pakistan for infrastructure projects. Head of Treasury of the State Bank Mr Zafar M. Shaikh presided over the meeting.

Mr Ajay Sagar who is senior structure finance specialist of the private sector department of the ADB and his colleague Mir Muhammad Ali briefed the bankers about the proposed lending programme.

The banks whose treasurers and other senior officials attended the meeting included (i) National Bank (ii) Habib Bank (iii) United Bank (iv) Citibank and half a dozen other banks.

Mr Sagar told the meeting that the ADB could go ahead with its rupee lending programme by entering into a dollar-rupee swap with the government of Pakistan. Under the swap deal the ADB would give the government a certain amount of foreign exchange and the government would give back the rupee equivalent of this amount.

Then the ADB would use this rupee fund for financing long- term infrastructure projects spanning over 5-15 years through local and foreign banks operating in Pakistan.

But the ADB would not lend the rupee equivalent of more than $75 million to a bank. Nor would it provide more than this amount for a single project. The ADB would select the banks for this purpose keeping in view their credit ratings by an international rating agency-and it would prefer private banks rather than those in the public sector.

Participants of the meeting said the ADB officials told them that the ADB would provide rupee financing for a fixed term of 5- 15 years and on a fixed interest rate for all infrastructure projects. But the officials did not discuss the pricing formula.

Senior bankers said the ADB officials would also hold similar meetings with top corporates and then finalize the nitty gritty of the proposed swap deal with the State Bank and the government of Pakistan.

Though the ADB officials discussed in details the proposed dollar rupee swap for creating a rupee fund to finance infrastructure projects in Pakistan they indicated that the ADB could also issue a rupee bond for this purpose.

In late February this year the ADB issued local currency bonds of five billion Indian rupees for financing of infrastructure projects in India. The ADB is keen on financing infrastructure projects in Pakistan as part of its drive to reduce poverty in the developing countries.