Dec 17 - 30, 2001
IMF against concessions to foreign investors:
IMF has urged Pakistan to avoid the past practice
of providing guarantees to foreign investors for minimum return on
capital, protection and prices along with generous tax exemptions.
The advice was given by a Fund's mission in the
context of discussions on a draft tax regime for fresh investment in
energy sector. "Such privileges are at the root of many a current
fiscal and structural problems," the IMF officials are believed
to have told the government. The IMF felt that such privileges
"should be allowed to lapse as soon as the contracts allow."
The government has promised to take up the issue in
the discussions with the World Bank staff on energy policy.
The World Bank has provided special funding and
expertise for financing independent power projects (IPPs) through the
now defunct National Development Finance Corporation (NDFC) that
assured the project sponsors "minimum guaranteed returns" on
their capital. It took 8-9 prime ministers to approve the first IPP
project and help forge financial model that was to be followed in
As a lender, the World Bank was an active
participant in the cumbersome and complex procedures for evolving the
financial model as a lender. Pakistani lenders and professionals did
not have an expertise in funding IPPs. In the processing of IPP
projects, local expertise was developed in the NDFC and Ministry of
Water and Power but later the cells created in these two organizations
In the public offer of shares in 1994, Hubco had
stated in its prospectus that returns to shareholders will be derived
primarily from the equity return component of the capacity purchase
Hubco arrived at a real internal rate of return of
at least 17 per cent, which was generated by the Financial Model under
the base set of assumption. A 30-year power purchase agreement was
concluded with Wapda and tariff formula was agreed upon. Hubco had
prepared the financial model based on the terms of the agreement and
some assumptions related to variables.
Slowdown in deposit growth reversed
Deposits mobilization earlier on wane, has recorded
turnaround with surging propensity in the growth of banks' deposits.
Deposit mobilization by the banks, which dwindled
considerably after calendar year 1997 as a proportion of GDP, declined
from 42.4 per cent in 1997 to 38.5 per cent in calendar year 2000,
informed sources said on Thursday.
Growth rate of overall deposits of scheduled banks
have gone down from 10.1 per cent in calendar year 1997 to 6.7 per
cent in calendar year 2000. However, the slowdown seems to have been
arrested and reversed in 2000 with growth increasing from 3.6 per cent
Group-wise performance of deposit mobilization is a
reflection of the varying degree with which each group has been
affected as a result of foreign currency accounts freeze.
Investors interested in public sector units
A number of Dubai-based international investors
have shown their keen interest to participate in the privatization of
some of the state sector enterprises including PTCL, Habib Bank ,
United Bank and government's 30 per cent shareholding in the oil and
Informed sources said that Secretary Privatization
Commission Ahmad Waqar left Islamabad on Tuesday for Dubai to meet
some of the potential investors and apprise them about the new road
map drawn for disinvesting some of the important public sector
corporations by December 2002.
Package to facilitate KESC sell-off
The federal government has decided to make special
budgetary allocations in 2002-03 to fund a special financial
restructuring package for the Karachi Electric Supply Corporation.
The package would enable the government to take the
utility to the sale counter by July 31, 2002 and complete its
privatization process by Dec 31, 2002, official sources said.
PECO land offered for sale
Privatization Commission (PC) on Thursday offered
for sale the land of Pakistan Engineering Company Limited (PECO)
located at Badami Bagh, Lahore.
The land, known as "Badami Bagh Works"
has been offered on 'as is where is' basis through a competitive
process, sources at PC said. Pre-bid conference is scheduled to be
held on January 24 at Islamabad to facilitate the prospective bidders,
and the date for bidding has been set at January 28, 2002.
The land has been offered by PC in three lots-lot
A1, A2 and B. Lot A1 has an area of 19 kanals 4 marla; lot A2 has an
areas of 4 kanal 10 marla and lot B consists of 13 kanal one marla.
All of that is located in the South of Lahore Railway station and in
the North of Badami Bagh Railway station.
Public debt swells to Rs3,000 billion
Pakistan's increased fiscal and current account
deficits have resulted in an explosive accumulation of Rs3,000 billion
public debt and over $43 billion external debt.
According to latest official projections firmed up
and shared with the World Bank, IMF and the Paris Club creditors, it
was increasingly becoming difficult to have any meaningful debt
management, keeping in view the massive public and foreign debt that
especially accumulated during the last 8 to 10 years.