April 17, 2007	Tuesday	Rabi-ul-Awwal 28, 1428

PESHAWAR, April 16: The NWFP government will not be able to create fiscal space through premature retiring of expensive federal loans in the current fiscal year as no funds have so far been earmarked for the same.

Financial managers of the MMA-led provincial government are uncertain whether the province will be able to avail recent offer of the Centre allowing the provinces to early repay their Cash Development Loans (CDLs) in the remaining two and half months of the current fiscal, Dawn has learnt.

The premature debt-servicing had been one of the contentious issues between the Centre and federating units. The provinces had been insisting on retiring the expensive CDLs, which carries an average interest rate of above 17 per cent. The federal government had been turning down the provinces’ requests time and again.

However, a shift in the federal government policy was witnessed on April 9, at a meeting of the Inter-Provincial Coordination Committee (IPCC), where the provinces were allowed to repay expensive CDLs.

A provincial functionary termed the IPCC decision a follow-up of the federal government policy, which was recently circulated among the provinces. Under this policy different types of CDLs have been identified that can be retired before their schedule, the official said.

The NWFP and Punjab were the two provinces, which according to Minister for Inter-provincial Coordination Salim Saifullah, had earlier retired CDLs amounting to Rs17 billion prematurely.

Even though, the NWFP government had been pursuing its Debt Management and Reduction Strategy (DMRS), now it seems unenthusiastic towards availing such offer at least in the current fiscal year, the official opined.

According to the budget documents, the provincial government neither paid a single penny in last fiscal year 2005-06 nor had it made any allocation in the current fiscal for premature repayment of federal government’s loans.

The MMA government actively followed the DMRS prepared by the previous military-cum-civilian government that aimed at replacement of expensive federal government’s loans with inexpensive credit available in the market.

Its initial planning was to retire Rs25 billion expensive loans in five years to enhance fiscal space for meeting its current and development expenditures.

As per the strategy, it had retired Rs12 billion worth of CDLs from 2003 to 2005 and created a permanent fiscal space of over Rs2.1 billion with the financial assistance of the World Bank.

Likewise, for the fiscal year 2005-06 the NWFP government had planned the premature retirement of Rs3,249.679 million worth three different loans to save Rs622.408 million annually. However, not a single penny could be spent in this head.

Officials say apparently there was no dearth of resources to keep DMRS intact, however gathering maximum resources for the completion of maximum development projects ahead of next general election could be the prime reason.

Interestingly on the one hand the government is getting rid of expensive federal loans, on the other its overall debt stock was swelling, as it is expected that overall debt stock, which stood at Rs71.587 billion at the beginning of current fiscal year would reach Rs97 billion by end of financial year 2009-10, when most of the new debt including foreign loans will come up, officials added.