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ECC okays Rs.27 bln for immediately transfer funds to Kuwaiti company to avoid default

ISLAMABAD (our reporter):- The Finance Minister Ishaq Dar has convened emergency meeting of the Economic Coordination Committee (ECC) of the Cabinet to allow immediately transfers of Rs27 billion for Kuwait Petroleum Company to avoid the country from international default, sources revealed.

The ECC meeting was held under the chairmanship of Finance Minister Ishaq Dar here on Tuesday to review the two pointes agenda. According to the official Statement of the Finance Ministry, the Ministry of Energy (Petroleum Division) submitted a summary on credit facility from Kuwait and presented that the Government of Pakistan is utilizing a credit facility extended by Kuwait Petroleum Corporation (KPC) against supply of Diesel Oil under the term contract with PSO since 2000 and the term contract is extended every year.

The PSO deposits Rupee equivalent with NBP after 30 days from the bill of lading date of each shipment and NBP transfers the cargo cost to KPC, Kuwait. In the current situation, this account has witnessed huge exchange losses due to upheaval in the Rupee-dollar parity during the last 12 months.the GoP is committed to cover these exchange losses. Considering the above situation, the ECC approved an immediate technical supplementary grant of Rs. 27 billion for Kuwait Petroleum Company.

Sources told the scribe that the ECC, in the meeting of 21st Dec 2022, considered a summary of the Petroleum Division for a supplementary grant of Rs. 17 billion in respect of exchange losses incurred on the subject facility. The ECC directed that a Committee of professionals/alongwith their TORs.

The Terms of Reference (TORs) of the Committee included three types of facilities I.e., Kuwait Petroleum Company credit facility, FE-25 loan facilities and Islamic Trade Finance Corporation (ITFC) loans being availed by PSO for import financing purposes.

The committee, while reviewing the matter in its meeting held on 13th March 2023, realized that report on mechanism for exchange loss on these facilities would take some time due to complexity of the issues and feedback required from some other important stakeholders. However, since an international default situation is developing on KPC credit facility payments, an immediate supplementary grant may be sought from the ECC. The committee will however, try to conclude the matter by end of March, 2023.

The credit facility for the last year has expired on 31st December 2022 however, four transactions /remittances are still due for which available funds will be short beyond 20th March 2023, they said.

The NBP account has witnessed huge exchange losses owing to prevalent upheaval in the Rupee-Dollar parity during last 12 months. As of 10th March 2023, NBP account has balances of Rs. 14.3 billion, while these payments require about Rs 42 billion, sources.

Details of current balances of the NBP account and outstanding payments may be perused at Annex-Ill. There is definite possibility of international default unless an injection of Rs 27 billion is made before 20th March 2023, said the sources.

In this situation, the ECC has approved immediate supplementary grant of Rs 27 billion for transfer of funds in NBP account in order to avoid international default, sources further said. The NBP may also be directed to arrange payment of 20/3/2023 through bridge financing, if required.

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