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$63m paid to donors on loans

October 05, 2012

– AFP (File Photo)

ISLAMABAD, Oct 4: The National Assembly’s special committee on foreign and domestic loans and grants was informed here on Thursday that international donors were making bigger commitments, but disbursing less amount to Pakistan.

The committee was informed that lack of proper timing and various other reasons have resulted in additional payment of $63 million as commitment charges by the country on loans to foreign donors due to failure of the government to utilise funds.

The committee, chaired by Shehnaz Wazir Ali, was informed that international donors had committed loans amounting to $11.77bn during 1999 to 2012. However, only $8.37 billion have been disbursed during this period.

Officials said that Pakistan in return had paid back $913 million, “Out of total the repayment, the principal amount was $490 million, interest rate $360 million and an amount of $63 million on account of commitment charges and others,” officials said and added that in some cases, disbursement increased against commitment due to variation in local and foreign currency.

The committee was informed that some donors were also charging insurance and management fee.

Ahsan Iqbal said that loan amount had jumped up to Rs12.5 trillion against Rs6.5 trillion during the last four years and government also obtained loan from International Monetary Fund (IMF).

“We should see how much these loans have contributed to enhance productivity of economy,” Mr Iqbal said, adding that the government should follow responsible borrowing and debt management.

The finance ministry official said that loan extended by the IMF was not meant for budgetary operations and was sought to build up foreign exchange reserves.

Saqib Sherani, former principal economic adviser to the finance ministry, said that Pakistan had sought loan of IMF in 2008 to build up foreign exchange reserves when they had dropped.

The members of National Assembly were informed that Pakistan had received commitment of $5.24 billion on account of budgetary support/balance payments.

“International lenders were quick to disburse $5.34 billion in this head during the period under review to meet the rising current expenditures due to rising expenses by civil and defence administration,” the officials said, adding that the pledges for sectoral reforms have not been up to the mark.

“Donors had pledged $256 million for improvement of petroleum refineries, but did not disburse anything. Similarly lenders had pledged $252 million for power reduction programme, but disbursed an amount of $120 million,” the committee was informed.However, the EAD official said that Pakistan Electric Power Company’s (Pepco) utilisation of loan was poor too.

“We have surrendered a loan of $60 million due to its slow utilisation.”

Parliamentarians expressed reservations over poor utilisation of foreign loans that had resulted in millions of dollars commitment charges.

They noted that the government was printing currency notes on the one hand, and getting also programme loans to bridge budget deficit, putting burden on the masses.

The committee members also questioned a loan of $400 million given by the Asian Development Bank (ADB), signed in 2006 for Private Participation Information.

“What are the tangible results of this loan and where it was spent,” Ahsan Iqbal said, adding that when he was in the government, he scrapped an unnecessary loan of $75 million.