State Bank of Pakistan Acting Governor Yaseen Anwar has stressed that the financial sector play its role in resolving the ongoing energy crisis in the country, which is hampering both business activities and the life of common man.
“An early resolution of this issue is in the interest of all, including the banking industry itself,” he added.
Presiding over a meeting of the Chief Executives of banks at SBP for resolving the problems being faced by Independent Power Projects (IPPs) Anwar assured the banks that the State Bank would facilitate them in case they require any regulatory support towards early resolution of the circular debt crisis. He pointed out that the Prime Minister’s committee is focusing on remedial steps to develop a long term solution of the energy crisis. Anwar emphasized that a quick remedy is needed to overcome the immediate financial requirement. The Prime Minister recently constituted a high level committee for resolution of energy-related issues facing the country of which Yaseen Anwar is a member.
Independent Power Producers Advisory Council Chairman Abdullah Yusuf and representatives of IPPs briefed the meeting about the severity of the issue and identified the factors behind the crisis. They informed the meeting that Government of Pakistan (GoP) is considering various short and medium term options for resolution of the energy crises faced by the country on a sustainable basis, which include possibilities like use of coal as a substitute to oil, import of gas as raw material and the construction of small hydel power projects.
During the discussions, it was emphasized that the issues being faced by the IPPs are primarily driven by the paucity of short-term liquidity. A number of proposals were also presented to the banks for addressing the issues including allocation of working capital limits to PEPCO, extension of L/C time period from 60 days to 90 days for the IPPs and the conversion of outstanding circular debt into long term Pakistan Investment Bonds (PIBs).
While appreciating the sincerity of the GoP in early resolution of the issue, the banks suggested that the government should first focus on resolution of its direct circular debt of Rs300 billion through issuance of PIBs on priority basis, whereas financing to individual IPPs (existing and incremental) would be taken care of by the banks individually on case-to-case basis. They also proposed that the government may look into the possibility of incremental financing through PIBs, which is considered to be more viable and would help distribute the responsibility for financing to a larger number of banks and development finance institutions.
