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Government to Borrow Rs 103.8 Billion From Banks

Islamabad: The Privatization Board authorized the solicitation of Rs 103,8 billion in debt from local banks via competitive bidding to replace the government’s financing prior to the privatization of two LNG-fired power facilities.

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The board advised that scheduled banks and Development Financial Institutions (DFIs) be solicited for Expressions of Interest (EOI) in order to raise Rs103.8 billion in debt.

The board of directors authorized the issuance of debt for a term of seven years at a maximum interest rate of KIBOR plus 1.8%. Contrary to the earlier recommendation of the Privatization Commission, the National Electric Power Regulatory Authority (Nepra) has fixed the KIBOR + 1.8% interest rate cap at KIBOR plus 1.8%.

After obtaining the debt that will replace the PDFL funding, the government would sell the 30% equity holdings in each of the two power facilities. By June 2019, the Pakistan Tehreek-e-Insaf (PTI) administration intended to privatize these factories.

State Bank of Pakistan and local banks were contacted for commercial borrowing, and a committee was also formed by the Cabinet Committee on Privatization (CCoP) to resolve the matter pertaining to long-term financing arrangements and its capital structure with Nepra’s determined tariff and the repayment of government loans.

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After the committee meeting, it was decided that the Privatization Commission would replace the government’s excess equity and loan with commercial borrowing from local banks. The rate for debt financing is set by Nepra.

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