ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has directed the Finance Division to divert other allocated guarantees to Pakistan State Oil (PSO) without exceeding Rs105 billion domestic guarantee limit during the first quarter of the FY 2022-23, sources close to the Finance Minister told Business Recorder.

These directions were issued to the Finance Division on August 11, 2022 during discussion on a summary of the Petroleum Division meant for supplementary grant of Rs 30 billion for the PSO.

The Petroleum Division informed the ECC that in the last meeting of the ECC held on July 31, 2022, liquidity issues of Pakistan State Oil were discussed in detail and the decisions included payment of exchange loss on FE-25 loans through supplementary grant of Rs.30 billion by Ministry of Finance, payment of Rs. 20 billion on August 1, 2022 by Central Power Purchasing Agency Guarantee Ltd (CPPA-G)/power sector and another Rs12.8 billion by August 04, 2022.

Petroleum Division claimed that to ease out liquidity issues of PSO, it had requested to arrange a government guaranteed loan of Rs. 50 billion. As the matter remained under discussion and while taking the Finance Division on board, Habib Bank Limited formed a consortium of banks including the Allied Bank Ltd, National Bank of Pakistan, MCB Bank, United Bank Ltd and Habib Bank Ltd. A draft term sheet for sanction of a loan amounting to Rs. 50 billion for PSO was shared with the conditionality of securing government guarantee.

To facilitate PSO, the banks indicated willingness to initiate the process of issuing loan on a “Letter of Comfort” to be issued by Ministry of Finance, to be subsequently followed by government guarantee. It was apprehended that in the absence of the required funding PSO might not be able to fulfill its payment obligations.

The Petroleum Division requested the ECC to consider the proposal to direct the Ministry of Finance for issuance of Letter of Comfort in favor of PSO for raising a loan facility of Rs. 50 billion on urgent basis as PSO had to honor various international and local refineries payments amounting to Rs. 110 billion during August 10-15, 2022.

After detailed discussion on the summary “syndicated running Finance Facility for PSO” the proposal was approved subject to the Finance Division diverting some other allocated guarantees to PSO without exceeding Rs105 billion domestic guarantee limit during the first quarter of the CFY 2022-23.

Copyright Business Recorder, 2022