KARACHI, Dec 21: The State Bank of Pakistan is all set to bring down Pakistan’s external debt liability to $35.63 billion by June next year. On Saturday the State Bank has taken another initiative by allowing pre-payment of foreign private loans.

Estimated at around 2.45 billion dollars in June this year, the foreign private loans have been obtained mostly by private power operators, a few cement companies and many other private companies. A substantial amount of this private foreign loan has been contracted by the IPPs and private companies under suppliers’ credit scheme, pay as you earn (PAYE) and export credit agencies in OECD. The federal government does not give any guarantee on such private foreign loans but State Bank of Pakistan guarantees convertibility.

“In its further pursuit of liberalising foreign exchange regime, reduce burden of expensive commercial loans on the country and to align the future debt servicing capacity with debt service obligations, the State Bank has decided to allow pre-payment of foreign private loans by the Pakistani private companies and firms to their creditors on a case to case basis,” a press release on Saturday announced.

The State Bank has allowed pre-payment of private foreign loans to all those borrowers who have the rupee counterpart available with them or they have the capacity to generate rupee funds at their own and that the loans are otherwise remittable that is remittance formalities have been completed.

The press release said that State Bank had already repaid government’s expensive external debt and liabilities amounting to $4.3 billion during last three years. It put the total outstanding amount of private non-guaranteed debt approximately $2 billion. The State Bank expects a further reduction in country’s external debt liability from the initiative taken on Saturday.

The last annual report of State Bank for the year 01-02 indicates that total external debt liability was brought down to 36.53 billion dollars by June 2002.

“By June 2003, Fe-45, FE-31 and National Debt Retirement Programme (NDRP) would be liquidated,” the State Bank of Pakistan’s annual report said and indicated of partial payment of BOC, Central Bank Deposits and first instalment of 155 million dollars Eurobond. In overall terms, the total stock of Pakistan’s external debt and liabilities should gradually decline.