German grant and soft loan worth 31.56 million euros will not be utilised for micro finance by the Pakistan Poverty Alleviation Fund (PPAF) under the "Livelihood Support and Promotion of Small Community Infrastructures" project, Business Recorder has learnt.
In its meeting held on January 12, Economic Co-ordination Committee (ECC) considered the summary for approval of German grant/soft loan to PPAF for Livelihood Support and Promotion of Small Community Infrastructures project submitted by Economic Affairs Division (EAD) and decided that: (i) the money used for micro finance shall be returned with interest by project executing agency, PPAF; and (ii) grant allocated under the project will not be recovered from PPAF.
According to sources, ECC was informed that during Pak-German bilateral negotiations, both the governments had agreed on Livelihood Support and Promotion of Small Community Infrastructures Project to be executed by PPAF and an amount of Euro 31.56 million (Loan of Euro 16,701,660.86 and Grant of Euro 14,860,399.40) was committed by the German side.
The interest rate for loan part is 3/4 percent per annum with 10-year grace period and 30 year repayment period with commitment charge of 1/4 percent per annum on un-disbursed loan amount. As per the draft agreement, both the grant as well as loan amounts are to be passed on as non-repayable grant to PPAF.
ECC was briefed that passing on both grant and loan to PPAF as grant constitutes departure from the existing re-lending policy, which stipulates 15 percent interest per annum and, therefore, requires relaxation by ECC. It was also noted that the project activities/measures comprise of small community-based projects such as physical community infrastructure, schools, health stations with sufficient coverage for training/social mobilisation and capital/operational costs for project implementation, preferably within the North West Frontier Province (NWFP).
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