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FINANCE

May 08 - 21, 2000

  1. International
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  6. Gulf

ADB to release stalled loan

Asian Development Bank (ADB) has informed Pakistan that it will soon release a stalled loan of $125m to cover the balance of payment and $100m for the establishment of a Microfinance Bank (MFB), official sources told.

A message to this effect was handed over to Finance Minister Shaukat Aziz who visited Bangkok last week to attend the ADB Board's meeting.

Sources said, the ADB will be the first international agency to provide a foreign loan to Pakistan since May 28, 1998 when Pakistan conducted N-tests at Chagai leading to economic sanctions from different countries and suspension of loans from International Monetary Fund (IMF) and World Bank.

Sources said the Bank had now agreed to provide $100m as a loan to Pakistan for the establishment of Micro-finance Bank.

The Bank had earlier offered $50m for this purpose but now it had agreed to give $100 million for the MFB.

Sources believe that the release of $125 million to Pakistan at this stage meant that IMF and World Bank were satisfied with the new policies of Pakistan in the monetary field.

The country mission of the ADB had held talks with the visiting IMF mission to Pakistan in the first week of April, as well. Reportedly, the ADB team had exchanged their views and notes with the IMF mission about the presentations made by the different government agencies regarding financial and social reforms in Pakistan.

A majority of shareholders of the ADB are American investors, sources said and added that was why Mr. Aziz also held a meeting with the American investors in Bangkok.

Pakistan, Korea sign $16m loan accord

Pakistan and Republic of Korea on Thursday signed an agreement on the Extension of Economic Development Cooperation Fund (EDCF) loan to Pakistan amounting to about $16 million.

The loan is for the "procurement of grid Station materials for the 5th STG Project".

The terms and conditions of the loan will be at the rate of 2 per cent per annum with repayment period of 30 years including a grace period of 10 years.

The agreement was signed by Nawid Ahsan, Additional Secretary (Incharge), Economic Affairs Division on behalf of the government of Pakistan and Yoon Jee-Joon, Korean Ambassador to Pakistan on behalf of the Republic of Korea.

Loan defaults stand at Rs 141.135 bn

At the end of December 1999, Rsl41.135 billion or 15.6 per cent of total loans of the banking system was in default: at the end of March 2000 the amount rose to Rsl43.053 billion or 16.0 per cent of total loans.

These figures are contained in the third quarterly report of the SBP on the state of the economy released here on Monday. The report shows that loan: default ratio that stood as high as 18.6 per cent in December 1996 remained almost stagnant at 18.5 per cent the next year but fell sharply to 16.6 per cent in December 98.

IT rates

The Pakistan Banking Association has proposed to bring down the income tax rates from financial institutions at par with the other public companies, from 58 per cent to 33 per cent.

A meeting of the Executive Committee of the Association held at the National Bank of Pakistan head office gave clearance for repurchase (Repo) transactions under Section 41 of the Banking Companies Ordinance, 1962.

Govt borrowing from SBP tripled

The federal government borrowed Rs94 billion from the State Bank in the first nine months of this fiscal year—more than three times of its borrowing of Rs29 billion in the same period of the last fiscal year.

Meanwhile, the government retired Rs70 billion worth of debts of commercial banks in the nine months to March 2000 thereby reducing its net borrowing at Rs24 billion.

In a year ago period, the government had retired commercial bank debt of Rs74 billion. These figures are contained in the third quarterly report of the SBP on the state of Pakistan economy.

Economists close to the central bank say the unusually large borrowing of the government from the SBP was so timed that it helped the government retired expensive commercial bank debts from funds obtained at much cheaper rates.

NCBs in UK being merged in two banks

Four major Pakistani banks operating in the United Kingdom are being merged into two banks, banking sources told.

According to these sources, Habib Bank and Allied Bank are being merged in to a one bank to be called Habib-Allied Bank, while National Bank of Pakistan and United Bank Limited are also merging in to a single bank likely to be named as United National Bank.

These sources said that merger between Habib and Allied is in the final stages and the two banks have already filed an application with Britain's Financial Services Authority (FSA), the banking regulation body in UK.

One source said that the two banks are likely to get the permission for merger by the end of June as they have already been asked to conduct independent audit.

When a source in the Habib Bank was contacted, he said, the two banks roughly have accounts totalling 300 million pound while their joint assets were around 80 million.