The Ministry of Finance has deferred a Federal Cabinet's approved bailout package of Rs 11.5 billion to Pakistan Railways (PR), informed sources revealed exclusively to Business Recorder.
The Ministry of Finance remains focused on reactivating the stalled International Monetary Fund (IMF) Stand By Arrangement (SBA) which would allow an injection of 1.7 billion dollars into the cash strapped economy and bring the budget deficit to sustainable levels in the current year; and the IMF is unlikely to support government's decision to extend bailout packages to inefficiently run entities like PR, economists point out.
In December 2010 the cabinet had approved a bailout package of Rs 11.5 billion for PR but no money has yet been released from the approved package so far. The package was expected to be released in February 2011, however, as talks between the IMF and the government were scheduled for March, the Ministry of Finance took the stance that before the fifth review was satisfactorily concluded, and the penultimate tranche under the SBA released, no money would be released.
Sources revealed that PR had assured the government that it would return the amount within 18 months, if rehabilitation and reconstruction of 142 locomotives is completed. Out of the total amount of Rs 11.5 billion, Rs 6 billion was earmarked to be spent on repair of engines.
Out of 500 locomotives available with PR only 227 are in running condition and there are no funds for essential repairs. As a result running of passenger trains on four routes was closed last year and only 4 freight trains are running daily against the normal capacity of 16 or 17. Rs 1.5 billion out of the total package was to be allocated for spare parts to be imported from China and Rs 2 billion for Railway tracks rehabilitation. The government allocated Rs 13.6 billion in the budget for 2010-11; however this was reduced to Rs 7.3 billion after a cut in allocations for development.
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