ISLAMABAD, June 17: The government plans to extend over Rs117 billion loans to the provinces and public sector institutions next fiscal year, up by about 25 per cent over the current year’s revised estimates of Rs94 billion. These also include Rs19.4 billion equity investments.

Development loans and advances are made to the provinces, AJK, public sector institutions and local bodies to help them carry out development activities. Total development loans for the next fiscal year have been estimated at Rs87.6 billion, showing an increase of 17 per cent over the revised estimates of Rs74.8 billion in the current fiscal year, official documents suggest.

This will include cash development loans of Rs41.6 billion for the next year, about 5.6 per cent higher than the current year’s revised estimates of Rs39.4 billion. External development loans for the next year have been estimated at Rs46 billion, about 30 per cent higher than Rs35.4 billion for the current year.

The provincial governments and Wapda have been demanding of the federal government for about five years to allow them retire expensive cash development loans (CDLs) and replace them with cheaper loans available in the banking industry and international lenders.

Their demand has partially been accepted and the provinces have started taking development loans from international lenders such as the World Bank and the Asian Development Bank. The CDLs that increased in size over the last decade carry in some cases as much as 20

per cent interest rates.

The four provinces together owed Rs190 billion foreign loans and about Rs145 billion cash development loans until last year. Every year, the provinces have to take fresh CDLs to service the existing CDLs. Sindh’s liability for the payment of CDL amounts to Rs28 billion while the foreign loan burden has increased to Rs71 billion. Punjab carries a total debt burden of Rs143 billion that includes Rs73.61 billion CDLs and Rs69.78 billion foreign loans. The NWFP shows Rs22.26 billion CDL liabilities and more than Rs49 billion foreign loans. Balochistan carries more than Rs51 billion loans, but no figures are available for a break-up of foreign and domestic loans.

Besides the cash development loans, the government would be extending current loans of more than Rs10 billion mostly to various institutions to enable them to meet their loans and investment requirements. The estimate for the next year is about nine per cent higher than Rs9.3 billion for the current fiscal year.

Major chunk (Rs4.57 billion) of the current loan would go to the AJK government as ‘ways and means advances’ while another Rs3.4 billion would go Wapda to finance price differential between high and low sulphur fuel oil. Another Rs2 billion would be provided to the government servants. The government continues to provide one million rupees every year to finance loans payable to Junagarh and Kathiawar chiefs.

Federal government’s current investments for the next fiscal year have been estimated at Rs19.4 billion.