QUETTA, Nov 28: The State Bank has converted Balochistan’s overdraft of Rs17.5 billion into a loan payable in six years.

Official sources said that the State Bank’s move would enable the provincial government to save from Rs700 to Rs800 million a year that it was paying on account of mark-up.

Balochistan’s Finance Secretary Mahfooz Ali Khan and SBP’s finance director signed an agreement in this connection on Friday.

The agreement fixes a mark-up of 11.9 per cent for the soft loan.

The governor of the State Bank had agreed on the mark-up rate during meetings with Balochistan Chief Minister Nawab Aslam Raisani in Karachi and Quetta.

The secretary finance said that the conversion of the overdraft into a soft loan would allow the government to tide over its financial crisis to some extent and help it to generate resources for development projects.

Balochistan will pay monthly instalments of Rs200 million during the first two years, Rs225 million in the third year and Rs260 million in the fifth and sixth years.

The State Bank has also decided to waive the four per cent penalty amounting to Rs926 million if the provincial government fully implements the agreement.

The penalty will remain in place if the agreement is violated.