Govt blocked floating of $4bn GDRs, bonds: Ishaq Dar

[Naveed Yaseen]

Ishaq Dar says PPP govt got confused and shelved plans

Friday, November 07, 2008
By Mehtab Haider

ISLAMABAD: Despite presenting a plan before the federal cabinet, the PPP-led government has been unable to push ahead with $4 billion transactions related to issuance of Global Depository Receipts (GDRs) and exchangeable bonds of Oil and Gas Development Company. This has forced the country to discuss a bailout package with International Monetary Fund, it is learnt.

Earlier, the government stopped GDRs of National Bank of Pakistan, Kot Addu Power Co (KAPCO), sale of 15 per cent shares in Habib Bank and 10 per cent exchangeable bonds of OGDC, arguing that these institutions are silver assets and they would not be sold. However, within six months, the government has taken U-turn and is ready to sell Qadirpur gas field, sources said.

“The government blocked $4 billion worth of transactions without giving authorities concerned any alternative option for generating dollar inflows,” a source said and pointed out the situation in the international market was not so bad during April compared to present difficult conditions in the aftermath of financial turmoil afflicting many economies of the developed world.

“We missed an opportunity and are now forced to pick up begging bowl for dollar inflows from the IMF programme at the cost of national sovereignty,” the source added.

Talking to The News on phone, former finance minister and PML-N leader Ishaq Dar disclosed that he had placed a viable plan to generate $4 billion before June 30 keeping in view the difficulties faced by the country on the external front. “Out of these $4 billion, Islamabad received $400 million from the US on account of disbursements made to Pakistan Army for its ongoing operation in FATA,” he said.

But, according to him, “PPP got confused and its leadership decided to shelve other plans such as issuance of GDRs and exchangeable bonds in order to avoid shattering of confidence that actually resulted in creating more difficult situation for economy.”

Referring to his recent speech delivered in the Senate while discussing the issue of national economy, he said that the increase in interest rates on the demand of the IMF would be simply a disaster for the economy of this country.

He also criticized the government policy for raising the support price of wheat saying that if the government wanted to give international prices to food commodity then it should also increase per capita income of people of Pakistan in accordance with international standards. “It is time for prayer but we should also do right things to place economy on the right track,” he concluded.

The sources in Finance Ministry said that the former finance minister had tabled a plan during the cabinet meeting on April9, 2008 for generating $4 billion before June 30, 2008. When the PML (N) decided to quit the government on the issue of restoration of judges, the PPP government blocked $4 billion transactions on the directives of President Zardari.

“Even at that time, the Finance Ministry had given mandate to JP Morgan, ABN Amro Bank (now RBS) and Barclays Bank and kick-off were convened on April 22 and 23, 2008,” the sources recalled.

The delay in issuance of GDR of NBP, KEPCO, 10 per cent exchangeable bond of OGDC and offloading of 15 per cent share of HBL resulted into creating panic in the market and forced the government to discuss bailout package with the IMF in order to get $4 billion as first tranche of expected Standby Arrangement (SBA) within this month.

Pakistan’s beleaguered state of the economy worsened further with the decline in its foreign exchange reserves. According to State Bank of Pakistan country’s foreign exchange reserves declined to $6.6 billion. The depleting foreign exchange reserves has been playing a critical role in economic collapse a it led to a 26 per cent depreciation in the value of national currency against US dollar over the last 8 months.

When Secretary Finance, Dr Waqar Masood was contacted for seeking official comments on it, he said that the Standard & Poor raised the issue soon after announcement of the 2007-08 budget that the fiscal side would remain quite weaker in this scenario.

He said that when the incumbent regime took over reigns of power at that time three quarters (July-March) had already passed. He said that the fiscal side had gone out of control before assuming power by the incumbent regime and fiscal deficit was much higher than initial estimates made by the previous government

Owing to weakening fiscal side, he said the spread had gone over 600 basis points and the international market was not ripe to enter into it with new transactions.

At that time, there were two views and one of them was to stop these transactions because it could be hasty borrowing, which would not provide benefit to the country’s economy.

http://www.thenews.com.pk/daily_detail.asp?id=145225