$250m RISE-II loan: Negotiations with AIIB next week likely

ISLAMABAD: Pakistan and Asian Infrastructure Investment Bank (AIIB) are likely to hold negotiations for $250 million loan on Resilient Institutions for Sustainable Economy (RISE-II) next week, official sources told Business Recorder

The objectives of the proposed programme are to (i) enhance the policy and institutional framework to improve fiscal management, and (ii) improve the regulatory framework to foster growth and competitiveness. These objectives will promote social protection and economic resilience to prevent long-term damage to the productive capacity, including human capital, of Pakistan’s economy.

Under the programme, to establish effective institutions and strengthen inter-governmental fiscal arrangements, the Finance Division has provided legal mandate to the macro-fiscal policy unit to undertake the annual publication of the national medium-term fiscal framework, debt sustainability analysis and fiscal risk statement and two Provincial Finance Departments have enabled the implementation of the Fiscal Responsibility Laws that are consistent with the federal RFDLA amendments.

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To keep property assessment ratios at no less than 85 per cent of market value, the Provincial Boards of Revenue have adopted the Federal Board of Revenue valuation tables as their district Collectorate valuation tables in at least 21 districts.

According to AIIB, to help reduce the stock of power sector circular debt in FY 2023 Finance Division transferred Rs 335 billion to contain the circular debt flow increase and absorbed Rs 35 billion of Power Holding Private Limited (PHPL) debt into the public debt stock in FY 2023. The FBR has agreed to refund the CPPA-G approximately Rs 6 billion for overcharged goods and services tax.

To better target and reduce the fiscal cost of power subsidies, the Cabinet approved a second phase of subsidy reforms for domestic consumers that (i) reduces subsidies for users above 200 units/ month for six consecutive months and; (ii eliminate the incremental block tariff benefit.

Under pillar -B, to harmonize the goods and services across the country, FBR and relevant provincial authorities have enabled the implementation of the common goods and services tax laws.

To reduce the anti-export bias of the National Tariff Policy, the Tariff Policy Board (TPB) has (i) approved a reduction of the additional customs duties from 7 to 6 percent on all tariff lines with customs duties equal or greater to 20 per cent and (ii) reduced the un-weighted average of total import duties by at least 5 per cent, with respect to the baseline in FY 2019.

According to the proposed agreement of RISE-II programme, AIIB has agreed to lend $ 250 million to assist the programme. The borrower may withdraw the proceeds of the loan in accordance with section II of schedule of loan agreement. The front-end fee payable by the borrower shall be equal to one quarter of one per cent (0.25 per cent) of the loan.

The commitment fee payable by the borrower shall be equal to one-quarter of one percent (0.25 per cent) per annum on the withdrawn loan balance.

Copyright Business Recorder, 2023