ISLAMABAD: The Federal Cabinet has corrected an error made by the Finance Division regarding the date of the $500 million loan from the Industrial and Commercial Bank of China (ICBC).
Under the Rules of Business, 1973, the Finance Division is responsible for arranging finances, including foreign exchange, to meet the country’s current and development expenditure needs, and for maintaining a sustainable balance of payments position.
A key mechanism for achieving this is raising foreign exchange from international financial markets, including commercial banks. Loans and credit facilities obtained by the Finance Division are exempted from the Public Procurement Regulatory Authority (PPRA) provisions, based on the Prime Minister’s approval and the PPRA’s recommendation.
Pakistan receives $500m from China’s ICBC bank
Official sources told Business Recorder it was also noted that a financing agreement was signed between the Finance Division and the China Development Bank for a loan facility of $1 billion on June 28, 2021. This was done after consulting with the Ministry of Law and Justice and the Office of the Attorney General for Pakistan.
The loan was presented to the Cabinet through a Summary on December 8, 2021, and approved on December 21, 2021. At that time, the reference interest rate was LIBOR, which was used for the loan agreement.
However, since LIBOR was phased out after June 30, 2023, an Amendment Agreement was executed with the China Development Bank on April 28, 2023, to transition the reference rate from LIBOR to SOFR. This Amendment was cleared by the Ministry of Law and Justice.
The Cabinet was further informed that a financing agreement was executed between the Finance Division and ICBC for a loan facility of $500 million on March 1, 2023, with funds disbursed on March 3, 2023.
Approval for this loan was sought from the Cabinet through a Summary dated July 7, 2023, and was approved on August 9, 2023, under case no. 537/Rule-19/2023.
However, due to a clerical error, the disbursement date was mistakenly listed as March 3, 2021, instead of March 3, 2023, in the Summary. As a result, the Cabinet’s decision needed to be amended to reflect the correct disbursement date of March 3, 2023. The Cabinet approved the amendment without further discussion.
Copyright Business Recorder, 2024