ISLAMABAD: Making an addition to the loss making state-owned entities, the government on Friday officially confirmed that two major financial institutions — House Building Finance Corporation Limited (HBFCL) and Zarai Taraqiati Bank Limited (ZTBL) — were also in the red and unable to clear even their interest liabilities.

This was announced after a meeting between Finance Minister Ishaq Dar and State Bank of Pakistan Governor Ashraf Wathra on Friday. This was the second meeting in almost a week for the resolution of SBP credit line issue with HBFCL and ZTBL.

“The finance minister and all the three major stakeholders including the SBP, ZTBL and HBFC unanimously decided to convert their loans into equity at par and for immediate payment of interest by HBFC to SBP,” an official statement said.

The SBP chief informed the finance minister that HBFCL owed Rs13.2 billion since 2006. The institution has not been able to clear its overdue credit line, he added.

“The HBFCL has not been performing well for the last many years and has been unable to recover loans from defaulters. On top of that, the salary bill was consuming whatever meager earnings it had in the form of repayment of house building loans,” he informed.

Also read: Budget and HBFC

More alarmingly, it was revealed that ZTBL owed Rs93.2bn (principal Rs.54.5bn, mark up 38.7bn) to the SBP and for the last 15 years, the credit line had not been cleared. Poor balance sheet of ZTBL had hampered its progress and financial standings, the meeting was informed.

Both these institutions are becoming sore points during the course of discussions with the International Monetary Fund, the SBP chief said.

Dar said that it was very unfortunate that both these important financial institutions had poor balance sheets and were not performing up to the expectations.

He said the government would like to strengthen both the institutions so that they can aggressively market their products, provide facilities to farmers and ordinary people for house building.

The minister, speaking to the management of ZTBL and HBFC, emphasised that they would have to start afresh with new management and boards to aggressively market their products. He further advised that a task force should be formed for the recovery of non-performing loans and the entities would become vibrant again.

It was further decided that all legal, corporate and administrative requirements will be completed by July 21, 2014 subject to approval by the SBP Board of Directors in order to resolve this 15 years old outstanding issue which was hampering the performance of both the critically important financial institutions.

The meeting was also attended by Finance Secretary Dr Waqar Masood, SECP acting chairman Tahir Mahmood, ZTBL President Talat Mehmood, HBFC Managing Director Pervaiz Saeed, Adviser to the Finance Ministry Rana Assad Amin and Additional Finance Secretary Shahid Mahmood.

Published in Dawn, July 12th, 2014