Tuesday, March 26 2024

Banks to get preferential treatment
The federal government is set to provide preferential treatment to two domestic banks and is willing to take responsibility for their $88 million foreign currency lending to Pakistan International Airlines (PIA) without any restructuring. The handling of the foreign currency loan contrasts with the restructuring of PIA’s Rs243 billion domestic debt, which is being extended for 10 years at reduced interest rates. Government sources informed The Express Tribune that this decision will impose an additional burden on the exchequer in the shape of high interest rates in dollar terms and exchange rate risks over the next five years. Unlike the commercial banks’ domestic lending of Rs243 billion being restructures, the finance ministry has declined advice to convert the $88 million or Rs25 billion foreign loan component into domestic currency, said sources. The government has decided to take over the responsibility of the Rs268 billion commercial banks’ debt to PIA, including the Rs25 billion or $88 million foreign currency loan. A consortium of the National Bank of Pakistan (NBP) and Habib Bank Limited (HBL) provided a $88 million loan to PIA at the Secured Overnight Financing Rate (SOFR) plus 5.4%, equivalent to around 11% in dollar terms.
Related news categories: business comm-banks economic-indicators