PESHAWAR, Aug 29: NWFP’s total internal and external loan liabilities will grow at a annual rate of 8 per cent during the four years recording a substantial increase in comparison with the existing level of loans payable by the provincial government, official sources told Dawn.

The total debt of the province, according to sources, would stand around Rs80bn by the close of the current financial year.

However, due to over dependence on foreign loans to execute medium and mega development projects, the provincial government’s total debt would keep on registering increase in foreseeable future.

It is expected that the provincial debt would grow by another Rs20bn during the next three years touching the Rs100bn mark by the end of the 2005-06.

The foreign loan component is expected to grow from Rs36bn in the 2002-03 to Rs46bn by the close of the 2003-04.

Around Rs10bn foreign loans expected to be provided to the NWFP in 2004-05 for development projects would raise the size of the foreign debt component of the provincial government to Rs57bn by the end of the 2004-05.

Another amount of Rs3bn loan would take the total size of the foreign loan component to Rs60bn by the end of the 2005-06, according to sources.

“In all,” said the sources, “the provincial debt is expected to grow by around 25 per cent swelling up to Rs100bn”.

Though the provincial government, said the sources, had envisaged a plan - for its successor which would come into power after the Oct polls - to divert major chunks of money towards debt repayment during the next three years, it would have little impact as far as keeping the size of the provincial debt at a reasonable level was concerned.

As per the sitting provincial government’s debt repayment plan, said the sources, a sum of Rs8.6 bn would be paid in the 2002-03, Rs8.1bn in the 2003-04, Rs7.8bn in the 2004-05 and Rs7.6bn in the 2005-06 — projecting to use Rs32bn for debt repayment during the four years.

However, interestingly, of that amount only a sum of Rs10bn would serve the principal amount of the total debt liabilities of the province whereas the remaining Rs22bn would go down the drain on account of interest repayment.

“The government is planning to repay more and more of the principal amount of the loan liabilities bringing down the quantum of funds that get drained out due to serving the interest amount”.

In this respect, said the sources, the government had decided to retire the most expensive of the Cash Development Loan to be payable to the federal government.

As per the debt repayment strategy of the provincial government, it would bring the total size of the cash development loan (CDL) from Rs32bn to Rs28.6bn in 2003-04, Rs25bn in 2004-05 and Rs24.5bn in 2005-06.

In this way, said the sources, an over all reduction of Rs7.5bn would be made during the next four years by diverting greater amount of funds to retire the CDL which in some of the cases involved over 18 per cent interest rate.