ISLAMABAD, April 29: Provinces have asked the centre to allow them to borrow from banks to repay the high-cost Cash Development Loans (CDLs) worth about Rs100 billion, it is learnt. The cash development loans carry up to 20 per cent interest while commercial banks are ready to lend at a mark-up of 4 to 5 per cent. Sources in the finance ministry told Dawn on Friday that almost all provincial governments had taken up the issue with the federal government in recent days and the centre had promised to look into the matter.

Provincial representatives had also raised the issue at the National Finance Commission (NFC) meeting on Thursday. A source quoted a provincial representative as complaining at the meeting that while the federal government was getting more than Rs30 billion a year as repayment of the principal loans and mark-up, the provinces had been facing growing financial difficulties.

The source said that provinces considered the CDLs a perpetual liability and wanted to get rid of it at any cost. The crux of the argument was that why the provinces had been made to get loans from the federal government at an interest rate of 20 per cent when commercial banks were offering loans at 3-4 per cent mark-up.

Provinces are legally and constitutionally required to obtain formal permission from the federal government to raise loans for development.

According to a government official, provinces have now proposed that an inbuilt mechanism should be provided in the new NFC award so that they can raise cheap funds from the market to repay the costly CDLs.

He said that Balochistan Chief Minister Jam Yousaf, who met Prime Minister Shaukat Aziz earlier this week, had also discussed the issue of raising market funds to ward off his province’s CDL which has gone up to Rs30-35 billion.

The CDL has been a problem for provinces for more than a decade now. A couple of years ago the repayment situation became so difficult for Sindh and Balochistan that the World Bank had to intervene and provide soft-term loans to both the provinces on the federal government’s guarantee.