KARACHI, May 8: Finance Minister Shaukat Aziz said on Saturday that the Rs20.5 billion financing facility to Parco will reduce financial cost, risk and improve profits of the company.

He was speaking at the signing ceremony of the facility, the largest long-term syndicated financing in the history of Pakistan, for Pak Arab Refinery Company by a consortium of local and foreign banks at EPB conference room here.

Secretary Economic Affairs, presidents of NBP, HBL, UBL, MCB, Standard Chartered Bank and Managing Director of Parco were also present on the occasion.

The minister said that Pakistan had prepaid $400 million of expensive debt which included $350 million loan of Japan Bank of International Corporation (JBIC) to Parco and $50 million debt on Civil Aviation Authority (CAA).

He pointed out that this loan was carrying an interest rate of 7.3 per cent while the local financing facility would charge 2.4 per cent markup rate.

This would make a significant saving on account of interest rate, currency fluctuation risk, subsidies and increase profit, he added.

He hoped that the profit would be distributed among the shareholders.

Mr Aziz said that this transaction would not have possible without the macroeconomic stability and banking reforms introduced by the government during the last four years.

"The government has created enabling environment for doing business in the country," he added.

Talking about the government's serious desire to retire expensive debt, the minister said that Pakistan had repaid $1.71 billion loan to ADB and it was planning to clear another $1 billion debt this year.

He was of the opinion that rising foreign exchange reserves of the country and macroeconomic stability including growth rate which was expected to tough 6 per cent later this year, were responsible for reduction in the bank rate.

He said that credit appetite had increased due to cut in interest rates as a result of reforms in the banking sector.

He said that this transaction would augur well for Parco, which was the major player in the power sector, a joint venture of Pakistan and the UAE.

He said that energy sector was playing a critical role in the growth of the economy as this sector was growing at a rate of 7 to 8 per cent annually.

He observed that the country would grow at a rate of 8 per cent with the help of improved infrastructure including gas, oil power, roads in the years ahead.-APP