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Punjab seeks permission from

Centre to launch bonds to fund projects

By Jawwad Rizvi

LAHORE: The Punjab government has sought permission of the federal government for launching commercial bonds to meet financial requirements of development projects.

The News has learnt that officials of the provincial finance department gave a briefing to Punjab Chief Minister Shahbaz Sharif and later a request was made to the federal government.

It was pointed out that to meet financial requirements of the province for development projects, the province will issue mid-term and long-term commercial bonds of Rs30 to Rs40 billion. Presently, total debt of Punjab (internal and external) is over Rs387 billion, out of which internal debt is over Rs47 billion.

On the other hand, the province would also get some Rs10 billion in the form of debt this financial year for meeting financial requirements of social sector’s development projects. Punjab has also a liability of Rs11.86 billion of federal cash development loans which was taken by the provincial government in the past.

The decision of floating commercial bonds locally was taken to minimise dependence on foreign loans as these grow with the depreciation of the rupee.

Sources in the Punjab government revealed that under Article 161 of the Constitution a province could generate loans locally with the permission of the federal government.

They pointed out that initially Punjab needed some Rs30 to Rs40 billion which would be generated from commercial bonds and these bonds would be like federal government’s investment bonds. These bonds would be for three to ten years and even more than that.

Once the federal government allows the provincial government to launch the commercial bonds for commercial debt, the province would negotiate the rate of interest with commercial banks. The rate of interest would be above KIBOR (Karachi Inter-bank Offered Rate).

They further revealed that the federal finance department had no objection to the proposal of allowing Punjab to manage financial requirements from its own options.

If the Punjab can meet its financial requirements by launching long term commercial bonds and get long term or mid term soft loans then there is no harm rather it would set an example for the other provinces as well to go for new options of local debt, they added.