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Dec 20, 1999

  1. International
  2. Finance
  3. Industry
  4. Policy
  5. Trade
  6. Gulf

Commercial banks reschedule $512m debt

Pakistan on Sunday signed the PTMA (Pakistan Trade Maintenance Agreement) with eight commercial bank creditors for the rescheduling of $512.3 million of short-term trade credits, a finance ministry announcement said.

In the terms of this agreement, the credits have been rescheduled under an amortisation schedule that begins from Jan 1, 2001 and ends on June 30, 2002. The agreed rate of interest is Libor plus a margin that ranges from 1-1.5% during this period.

According to an official handout, this agreement is part of the government's strategy of orderly debt management and normalising relationships with creditors. The Faysal Islamic Bank is the agent bank.

The finance minister, whom the bankers met after the signing of the agreement, expressed the government's deep appreciation for the support, understanding and cooperation which the banks had extended to the present government by rescheduling their credits.

Details of the syndicated amounts that have been rescheduled are as follows: Arab Investment Company, borrower is PSO, $50.5 million; ANZ Grindlays, PSO, $27.7m, ABC Islamic Bank, PSO, $39.1m; Chase/Indosuez, PSO, $40m; ABN-Amro Bank N.V., Ministry of Petroleum and Natural Resources (M/o P&NR), $150m Dubai Islamic Bank, M/o P&NR, $25m, Faysal Islamic Bank of Bahrain, E.C, M/o P&NR, $100m; ANZ Grindlays, NRL, $30m; Citibank, RECP, $50m.

The government believes that the signing of the PTMA will improve Pakistan's short-term foreign currency from selective default to B by Standard & Poors. Long-term foreign currency issue rating is also expected to increase from selective default to B minus.

Earlier, Pakistan had already signed agreements for rescheduling its medium-term commercial bank loans for an amount of $365m, and a short-term loan of $50m.

10 per cent income tax on FCAs imposed

Central Board of Revenue on Thursday announced imposition of 10 per cent Income (Withholding) Tax on Foreign Currency Accounts (FCAs) from Dec 16 (Thursday), and withdrawal of the immunity from investigation into the source of money put into FCAs.

A CBR announcement said that while it was still working out the details of Tax Amnesty Scheme announced by Chief Executive General Musharraf on December 15, 1999, the details offered in respect of 10 per cent levy and withdrawal of immunity for FCAs holders were as follows:

The profits on new Foreign Currency Accounts (FCAs) opened by resident persons on or after December 16, 1999 and incremental deposits in existing FCAs made or after this date, shall not be exempt from Income Tax.

The profits on such deposits will be liable to 10 per cent tax withholding. Immunity for the existing accounts holders will continue. The profits on Special US Dollar Bonds (USDBs) purchased out of new FCAs opened on or after Dec 16, 1999, or out of incremental deposits made after this date in existing FCAs shall not be exempt from Income Tax.

SBP stops sale of forex bearer certificates

The State Bank has asked all the banks to stop sale of foreign exchange bearer certificates (FEBCs) and three-year foreign currency bearer certificates (FCBCs) from Dec 16, '99.

'It has been decided by the government to stop further sale of foreign exchange bearer certificates and three-year foreign currency bearer certificates with immediate effect,' says a SBP circular issued to banks on Thursday.

The circular advises the banks to issue instructions to their branches dealing in FEBCs and FCBCs to stop the sale of these two papers after the close of business on Dec 15. The circular also advises the banks to surrender to the offices of chief managers of State Bank in Karachi and Lahore the unsold stock of FEBCs and FCBCs.

The sale of FEBCs and FCBCs has seemingly been stopped to let the tax amnesty scheme work. Chief Executive Gen Pervez Musharraf in his policy speech on Wednesday unveiled a one-time amnesty to tax evaders and set March 31, 2000 as the deadline for this purpose.

Fresh FCY deposits swell to $800m

The volume of fresh foreign currency deposits that fell to $720 million on Oct 19 has risen to $800 million indicating that the confidence of the depositors stands restored.

"Fresh foreign currency deposits of $773 million on Oct 12 had come down to $720 million within a week due to panic-driven withdrawals," said a senior banker close to State Bank. "But once the people realized things were not that bad the deposits began to grow again. Now these deposits total more than $800 million."

The banks were allowed in June 1998 to generate fresh foreign currency deposits after the State Bank had frozen $11 billion worth of existing foreign currency deposits on May 28 in the wake of nuclear detonation.

Bankers say over $8.5 billion of frozen foreign currency deposits stand converted into rupees or dollar bonds so far.

TFCs on 21st

The Rs250 million Term Finance Certificates issue sponsored by the Pakistan Industrial Leasing Corporation (PILCORP) will open for public subscription on Dec 21 and close on the same date.

Musharkat TFCs

Sitara Chemical Industries Ltd (SCIL) has announced to introduce Musharkat term finance certificates (MTFCs) worth Rs 150 million.

 $50m credit renewed

Validity of the reciprocal credits of 50 million dollars granted to each other by the Pakistan and Iran has since been extended upto July 27, 2000.

According to a SBP circular issued banks were asked to bring the extension to the notice of their constituents concerned.