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— File Photo
— File Photo

ISLAMABAD: Two days before the end of its five-year tenure, the government is likely to sign a $500 million commercial loan agreement with a foreign bank to finance the $2.8 billion Neelum-Jhelum Hydropower Project of 969MW capacity.

According to an official, the agreement is being finalised at about eight per cent interest that works out to about 15 per cent after accounting for currency exchange despite the government’s sovereign guarantees.

He said two key officers, who had opposed the loan for being expensive and finalised without following proper procedure, had been removed immediately from their posts by the finance ministry. The officers believed that the interest rate should have been lower because of the sovereign guarantees. Masroor Ahmed Qureshi who had served as Director General of the Debt Office for over eight years was sent back on Tuesday to his parent organisation, the National Bank, and the National Savings Organisation’s DG Zafar M. Shaikh was given additional charge of the post.

According to sources, Mr Qureshi declined to process the loan’s term sheet because he felt the proper procedure had not been followed.

The ministry’s Joint Secretary for External Finance Rizwan Bashir was also removed and replaced by Younas Gaga who had recently been promoted to grade 21.

The sources said a meeting for signing the loan agreement would be held in Lahore on Thursday.

The ministry’s spokesman Rana Asad Amin was not available for comments, but a senior officer said Mr Qureshi himself had requested Finance Minister Saleem H. Mandviwalla to relieve him of his assignment because his contract was expiring in a few months and he wanted to be repatriated to his parent organisation before the caretaker government came in.

He confirmed that Mr Qureshi and Mr Bashir had objected to the finalisation of the loan agreement, arguing that Wapda, the executing agency of the project, had not followed the procedure.

The Water and Power Development Authority had written a letter to the ministry of water and power for execution of the loan and sent a copy to the finance ministry. Under the standard procedure, a formal request should have been made to the finance ministry to examine the loan conditions and finalise the term sheet.

“This was an operational issue that should not have led to removal of the DG,” the official said, adding that the minister could have simply asked the water and power ministry to send a formal request or assign any other officer to finalise the term sheet.

He said Mr Bashir had also sought leave because he was awaiting promotion to grade 21 and did not want to serve under Mr Gaga, his junior who had been given early promotion.

A former finance secretary said Mr Gaga had never worked in the ministry before his current posting.

The sources said a minister who was among the electricity dues defaulters had come up with a proposal from a European firm which had earlier been named in Iraq’s ‘oil for food’ issue to supply oil worth $2bn on deferred payments to be provided through the same international bank.

However, the loan conditions offered by the bank were termed too expensive by the finance ministry’s key officers. The bank wanted an advance deposit of $100 million to enable it to arrange the financing of $50m monthly supplies, they said.

The terms were such that the bank would not have used its own resources and would have rolled over Pakistan’s advance to enable the foreign firm to arrange oil supplies from sources of its own choice.

Mr Qureshi and former finance secretary Abdul Wajid Rana had opposed the proposal.

Comments (13) Closed

ishrat salim Mar 14, 2013 11:25am
you guys call for SC to take suomoto...then it is criticized for doing the, it is the govt & such glaring irregularity issue should be take up by the parliament....
Immad Mar 14, 2013 03:11am
Mr Chief Justice take a suo moto here as well please.
Syed Mumtazuddin Ahmed Mar 14, 2013 04:31am
In other countries, governments are prohibited from signing agreements, especially long term onerous agreements, towards the end of their term. Even Philippines, a country previously considered one of the most corrupt in South East Asia, had laws against this and the SC was empowered to cancel any such contracts after review. Those political leaders who are opposed to this loan/project should voice out their opinion loudly, inform the lending agency that if they come to power they will cancel this loan, and move the SC to stop the signing of this contract.
Khan Mar 14, 2013 05:09am

In Canada bank is charging 1% while giving loans to banks and banks are charging 2.5 to 3.5% for housing loans to normal individuals. In case of sovereign guarantee the interest rate will be much low. 8% is not sure from which bank the government is getting loans, the officer has rightly raised the objection

Asad Khan Mar 14, 2013 05:37am

Yes, these deals are so critical for the country that they need to be signed by March 15th. And what have we been doing the last 5 years? Suddenly the urgency shown by this lame duck government to sign all kinds of shady deals with external organizations makes life so much more difficult for any upcoming establishment. Any future government will be left to clean the mess left here, besides tackling an already tough economic environment.

Asad Khan Mar 14, 2013 05:42am

$2.8 B for a 969 MW power plant that is built by the Chinese! That is more that $2.8 M for each MW. If my estimation is correct, this is one expensive power plant. And who comes up with these price estimates anyways. And how come the price of these projects escalates faster than any reasonable estimates of inflation. Also this plant has been under construction for over 5 years. How much longer will it take, and how much more money it will need?

Husain Jan Mar 14, 2013 05:44am

This is exactly what the nation has seen over the past 5 years of this "democratic" govt i.e. to remove those who oppose or object to any plan due to being expensive /faulty or being carried out without adopting proper procedure. How dare you oppose us instead of supporting and facilitating our plans regardless of viability, has remained the attitude of our present rulers. No wonder then that the apex court on many occasions had to take suo motu actions and stop the govt from wrong doings thus causing undue extra burden on courts. But the present rulers seem to be hell bent on continuing with same old practice in last few days of its govt.

Jawed Rajput Mar 14, 2013 07:58am
If nothing is working and Finance Ministry is all out to go for the expensive loan arrangment then Supreme Court should take a Suo Moto or a petitition should be moved in to further investigate the arrangments of borrowing when Chinese Bank is offering the same at a lower pricing structure.
akhter husain Mar 14, 2013 08:10am
Why we can not come out of the borrowing mentality and why cant we have finance minister who can use our own resources without totally depending on borrowings? We are rich in man power, cement and other manufacturing facilities in public and private sector.Just use it and minimize the loans for loans will not take us any where as far as concerned..
akhter husain Mar 14, 2013 08:16am
Agreed.Though I am not in favor of suo- moto actions yet this a fit case for hearing.Rid us of such peoples.
Akhtar Mar 14, 2013 08:22am
This must be stopped as somebody must be taking a cut. SC must take suo moto notice, or a petition must be filed immediately.
Nadeem Ullah Mar 14, 2013 02:25pm
Bro, what's the credibility of this parliament? :-)
Syed Ahmed Mar 14, 2013 02:44pm
the CJ must take suomoto immediately.