PESHAWAR, Sept 7: The NWFP will save Rs 30 billion on account of premature retirement of expensive development loans given by the federal government, official sources said.

The provincial government has paid Rs10 billion to the federal government during the past four years in line with the government’s policy of off-loading some of the most expensive loans which involve 15 to 18 per cent interest/mark up rate.

Officials said that Rs7.5bn paid to the centre as premature retirement of some of its expensive loans during the 2002-03 and 2003-04 was duly adjusted by the finance division, Islamabad.

However, an amount of over Rs2bn, which the NWFP government voluntarily surrendered to the federal government to clear some more expensive loans in the 2004-05 had not yet been adjusted.

“There is some progress on the issue but it will take some time before the remaining amount of Rs2bn is adjusted against the loans,” said a finance manager of the province.

Officials said that the move, undertaken in accordance with the World Bank-funded Provincial Reforms Programme, initiated by the last provincial government, had accrued annual saving of about Rs2bn.

Though the cushion created so, said the sources, had already been exhausted by upward revision of public sector employees’ salary in line with the federal government’s decision, still the off-loading of expensive loans would result in huge financial benefits to the province for a longer period.

The government, said the source, would save a total of Rs30bn — an amount which the province will have to pay as mark-up in case the loans were to be paid in the stipulated period.

Officials said that Chief Minister Akram Khan Durrani and Finance Minister Sirajul Haq were keen to execute the provincial debt reduction strategy approved by the provincial cabinet two years ago.

Progress on the provincial debt reduction strategy, said the officials, could not be made chiefly because of the federal government’s reluctance to let the provincial governments to clear expensive loans as it would have deprive the centre of a substantial amount it receives on account of capital receipts.

The officials said that the NWFP had cleared a total of about Rs20bn loans during the past three years.

Besides the Rs10bn which the government prematurely retired since 2002-03, the province, said the sources, had also paid an equally large sum — against principal amount — during the past three years.

Before the introduction of the provincial reforms programme in 2001-02, the NWFP owed Rs44bn to the federal government on account of loans.

The total loans would have required the province to pay about Rs170bn as mark-up — over and above the principal amount of Rs44bn — during the next 15 to 20 years.