PESHAWAR, July 23: The German development financing institution, DEG, holding a 13-per cent equity share in the provincial public sector Bank of Khyber, wants to dispose of its stake due to “increasing interference” by the Muttahida Majlis-i-Amal-led NWFP government in the bank affairs, said the sources.
Well-placed banking sources told Dawn here on Wednesday that DEG recently conveyed its dissatisfaction regarding the handling of BoK affairs on the part of the provincial government.
“The issue would figure prominently in discussions during the course of meetings to be held between the DEG management and a team of NWFP government in Germany,” said one of the official sources.
Irked by the NWFP government’s interference in the BoK affairs and the introduction of interest-free Islamic banking in the provincial public sector entity, the German institution conveyed its willingness to “pull out”, said the sources.
The way the provincial government removed the BoK’s managing director and handled the bank’s affairs after his removal in April also forms one of the core issues making the German institution think about withdrawing from the BoK’s equity partnership.
If DEG sticks to its stand then the provincial government would become the sole owner of BoK. At present, the provincial government holds 87 per cent share of the BoK.
The DEG’s move would apparently be a major setback to the provincial government’s intention of floating the bank’s share — a requirement under its multi-million-dollar loan agreement with the World Bank.
The DEG, said the sources, wanted the NWFP government to buy its equity share totalling Rs19m out of the total paid-up capital of Rs1.5bn the bank is maintaining with the State Bank of Pakistan.
“It is not a question of money, which indeed is not much, but one of credibility which matters most,” said an officer, adding that, “DEG’s decision would cause a serious blow to the MMA-led NWFP government’s credibility.
Earlier, GTZ — a German technical agency — providing assistance to the government of Pakistan in various spheres, stopped extending financial assistance to the Mera Ghar pilot project (meant for destitute women) beyond June 30, the date of its completion, after developing differences with the provincial government.
Similarly, the World Bank, which provided $90 million assistance to the NWFP government to support its multi-sectoral reforms programme in its first year of implementation in the 2002-03 financial year, is hesitant to release the second tranche during the current financial year due to the government’s failure to avoid political interference in the government departments and the BoK in addition to failing to fulfil certain other conditionalities.
Provincial minister for finance Mr Siraj-ul-Haq, who is leading the NWFP government team, talking to Dawn on Tuesday said that the visit was meant to persuade the donor agencies, including the DEG, to extend financial support to the provincial government’s social sector institutions.