Apropos Dr Hafiz A. Pasha's article on 'Response to the IMF', carried by Business Recorder on October 19. The article contains certain assertions with regard to accounting of privatisation proceeds of public sector banks, which have no factual basis. To set the record straight, it is clarified that United Bank Limited was privatised in FY 2002-03 through Privatisation Commission, by offloading 51% shares in the bank. SBP was holding 99.6% shares in that bank at the time of its privatisation and, therefore, the transaction could only be executed by drawing down on the SBP shareholding in the UBL. SBP duly received the privatisation proceed, net of transaction related expenditure as are authorised under the Privatisation Commission Ordinance, 2000.
The learned writer appears to be under the impression that impact of entire amount of privatisation receipts should have been reflected in the bottom line of the SBP' Profit and Loss Account for that year. In this regard, it is clarified that SBP maintains its books of accounts under the concept of accrual basis of accounting in accordance with international accounting standards as opposed to the cash/modified cash basis of accounting which is followed in the government. Accordingly, the bottom line of SBP reflected the net impact of privatisation proceeds, net of cost of investment, privatisation expenses and reversal of provision for diminution in value of investment. It is, therefore, inappropriate to trace the entire amount of privatisation proceeds in the net profit of the Bank.
So far as the Habib Bank Limited transaction is concerned, it is clarified that during the FY 2014-15, 609.3 million shares were disinvested, out of which 595 million shares pertained to SBP holdings whereas remaining 13.7 million shares were owned by the federal government. Consistent with underlying ownership of shares, the sales proceeds of 595 million shares were received by the SBP whereas Federal Government was in receipt of balance amount. In accordance with Bank's financial reporting framework, the excess of net proceeds over the cost of investment was transferred to Government as part of SBP's surplus profit. The contention that it was departure from the previous transaction is factually incorrect and hence categorically denied. As a matter of fact, similar accounting treatment was accorded to all the previous transactions, including the sale of shares in Allied Bank Limited and United Bank Limited. It is further clarified that in all the years in which shares in above referred entities' were carried on the books of the Bank, dividend's receipts were duly received by the SBP and reflected as profit. As the Federal Government had its own stakes in these banks, over and above the SBP's shareholding, dividend receipts on such holdings must not be confused with dividends on SBP holdings, which were always reflected in its Profit and Loss Account in the relevant years.