ISLAMABAD: The Public Accounts Committee (PAC) in an in-camera meeting will examine the list of 620 individuals/ companies who were refinanced under the State Bank of Pakistan (SBP) Temporary Economic Refinance Facility (TERF) during the previous Pakistan Tehreek-e-Insaf (PTI) government.
Noor Alam Khan chaired the meeting of the PAC on Wednesday to examine the audit report of the Federal Board of Revenue (FBR) for the year 2019-20.
The committee also invited the secretary finance, the governor State Bank, the secretary Economic Affairs Division (EAD), the secretary commerce, and the chairman FBR to examine the list of 620 borrowers whom Rs398 billion were disbursed at subsidised rates.
Issuance of interest-free loans: PAC seeks list of firms, individuals benefited during PTI tenure
The secretary finance showed his willingness to carry out an impact assessment of the TERF on export and other sectors of the economy.
The governor State Bank apprised the committee that the refinancing scheme was an initiative of the central bank under its mandate and was launched in 2020 during the Covid pandemic for the revival of industry and mainly, the import of machinery.
He said the package was offered two percent less than the policy rate of the central bank. First year, the rate was seven percent 2020 which further reduced to five percent in the following year. He stressed that the central bank has the mandate to refinance such kinds of schemes without consultation with the government at that time.
He said 674 individuals approached the commercial banks for the loan scheme and sought Rs690 billion for 10-year loan, however, the commercial banks with independent boards approved 620 cases and approved Rs437 billion loan facility without any foreign component. The amount disbursed was Rs398 billion.
He further clarified that the central bank provided mark-up subsidy to the public sector and private banks, no risk for the government involved. As many as 85 percent lending was provided through private banks and 15 percent through government banks. The objective of the scheme was the revival of industrial units hit by the Covid epidemic and the provision of employment.
Talking about various sectors of the economy, he said 42 percent loan was disbursed to the textile sector, 12 percent food business, nine percent steel-related business, seven percent to the auto sector, and five percent to the packing industry.
Member committee Saleem Mandviwalla said there must be pre-consultations for the scheme at the government level as the government had only the mandate to launch such schemes and it could not be the initiative of the central bank itself. In addition, he said it was not for the revival of the industry but for the expansion of industry as it was utilised in the purchase for local machinery and import of machinery which required foreign currency.
Challenging, Secretary Finance and Governor State Bank’s statement that under privilege clause, they could not disclose the list, Saleem said that commercial banks should be made accountable as they played onlyan intermediary role to disburse public money. The senator further showed his apprehensions to find out why the TERF was launched in a hurry without consulting relevant ministries and departments. He also suggested holding a forensic audit of the refinancing scheme.
The secretary commerce apprised the committee that the ministry was not consulted. The refinancing scheme had not addressed horizontal expense and SME sector and neither industry was consulted.
Another Member Mohsin Aziz said that the refinancing scheme helped to boost the export remittance from $12.5 billion to $19.4 billion and such schemes were introduced in previous regimes.
The committee was apprised that the central bank has now the autonomy and has no mandate to launch refinancing scheme after amendments in its Act.
The chairman committee directed to ensure a pre-consultation process before launching of such schemes. He agreed to hold an in-camera meeting as the central bank refused to accommodate the committee’s earlier directive to public the list.
The validity of the TERF was one year, ie, from March 17, 2020 till 31st March 2021. It was further extended.
Copyright Business Recorder, 2023