Government extends guarantee for Rs 5 billion PIA loan by two years


ISLAMABAD – The Economic Coordination Committee of the cabinet (ECC) on Tuesday decided to extend by two years the government guarantees for Rs 5 billion loans of the Pakistan International Airlines Corporation (PIAC), approved conversion of Rs 1 billion loans of the Heavy Electrical Complex (HEC) as government equity to make the entity viable for privatisation and formed a sub-committee to decide the quantity of strategic reserves of wheat to be maintained.
Finance Minister Dr Abdul Hafeez Shaikh chaired the ECC meeting. The Defence Division had sought an extension in the government guarantee for PIAC’s loans of Rs 5 billion. It recommended the continuation of the guarantees by the Ministry of Finance and rolling them over on a yearly basis for the duration of the loan.
The Finance Division had already endorsed the extension of government’s guarantees for PIAC loans for two years from various banks.
An official source said the meeting rejected a proposal to remove the PIA-owned Roosevelt Hotel in New York from the active list of privatisation due to the slump in the US real estate market. However, the meeting decided to retain it in the active list considering the financial position of PIAC. On the recommendations by the Privatisation Commission, the meeting approved the financial restructuring of HEC. The commission had sought that over Rs 1 billion loan availed by HEC be converted into government equity to improve the balance sheet of the entity before its privatisation.
The Finance Division had earlier supported the proposal for conversion of loans payable by the company to government equity. The ECC also deliberated on wheat procurement, export and strategic reserves. The finance minister observed that wheat exports should be proportionate to domestic wheat production. The meeting was informed that the country was likely to harvest wheat crop of over 23 million tonnes, while the domestic consumption was estimated at 21 million tonnes, with 1.8 million tonnes of seed requirement for the next crop and 0.5 million tonnes for exports to Afghanistan. The meeting was informed that the country still had wheat stocks of over five million tonnes.
The meeting formed a sub-committee under the chairmanship of the agriculture minister for reviewing the proposal for curtailing the strategic wheat reserve at 1 million tonen from 3 million tonnes in light of the wheat procurement target of 6.57 million tonnes for the year. The finance minister said that under the devolution plan, agriculture was a provincial subject and thus determining the size of the strategic wheat reserves should be decided at the provincial level, or if it was left to the federal government, then the Agriculture Ministry should determine the criteria for the strategic reserve.
The ECC decided that the minister for agriculture would convene a meeting to be participated by the Planning Commission deputy chairman, federal agriculture secretary, and provincial ministers for agriculture and representatives of the Finance Division to discuss the strategic reserves of wheat.