ISLAMABAD: The Economic Coordinating Committee (ECC) of the Cabinet has ordered the Finance Division to divert other guarantees allocated to Pakistan State Oil (PSO) without exceeding the domestic guarantee limit of Rs 105 billion during the first quarter of the 2022-23 financial year, sources close to said the Minister of Finance company registrar.

These instructions were forwarded to the Finance Division on August 11, 2022 during a discussion of a Petroleum Division summary for an additional grant of Rs 30 billion for the PSO.

The Petroleum Division informed the ECC that in the last ECC meeting held on July 31, 2022, the liquidity issues of Pakistan State Oil were discussed in detail and the decisions included the payment of foreign exchange loss on FE-25 loans through an additional grant of Rs. 30 billion by the Ministry of Finance, payment of Rs. 20 billion on August 1, 2022 by Central Power Purchasing Agency Guarantee Ltd (CPPA-G)/power sector electricity and an additional Rs 12.8 billion by 04 August 2022.

The oil division claimed that to alleviate PSO’s liquidity problems, it had applied to arrange a government guaranteed loan of Rs. 50 billion. As the matter remained under discussion and while taking the finance division on board, Habib Bank Limited formed a consortium of banks including Allied Bank Ltd, National Bank of Pakistan, MCB Bank, United Bank Ltd and Habib Bank Ltd. sanction of a loan amounting to Rs. 50 billion for OSP was shared with the conditionality of obtaining a government guarantee.

To facilitate the PSO, the banks have indicated their willingness to initiate the process of issuing a loan on a “letter of comfort” to be issued by the Ministry of Finance, which will then be followed by a government guarantee. It was feared that without the required funding, PSO would not be able to meet its payment obligations.

The Petroleum Division has requested the ECC to consider the proposal to order the Ministry of Finance to issue a letter of comfort in favor of the OSP for raising a loan facility of Rs. 50 billion on an urgent basis as PSO had to honor various payments from international and local refineries amounting to Rs. 110 billion from 10-15 August 2022.

After detailed discussion on the summary of the “Syndicated Funding Facility for PSOs”, the proposal was approved subject to the finance division diverting certain other guarantees allocated to PSOs without exceeding the national guarantee limit of Rs 105 billion during the first quarter of CFY 2022-23.

Copyright Business Recorder, 2022

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