Bank asked to bring down interest rate

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ISLAMABAD: In order to arrange financing for the $500 million Neelum-Jhelum hydropower project, the government has asked a foreign commercial bank to bring down its interest rate for competing with other banks, sources said.



The project’s total financing need stands at $1 billion wherein the government has decided to obtain a $500 million commercial loan from banks and negotiate the remaining $500 million from China’s EXIM Bank.


“We require $1 billion financing for the project and all options will be used in a transparent manner,” Director General Debt to the finance ministry Zafar Sheikh said.


According to official minutes of the meeting held on March 16, 2013, at the Water and Power Development Authority house, Lahore, the government will convene another meeting on March 25 in which 10 banks, including local and international, are invited to offer the rate for financing the crucial project.


The invited commercial banks include the National Bank of Pakistan, Muslim Commercial Bank, Habib Bank Limited (HBL), Faisal Bank, Barclays Bank, Allied Bank Limited, United Bank Limited (UBL), Al Baraka Bank, Citibank and another foreign bank. Standard Chartered Bank (SCB) was in addition as its sheet had already been received.


SCB had offered to arrange the financing at 7.5 percent, while China’s EXIM Bank had offered almost 5.5 percent for the remaining portion of the $500 million loan. “Keeping in view the difference in the offered rate, the government has asked SCB to reduce its rate and compete with other banks bidding on coming Monday, if they want to avail this opportunity.


Representatives of four banks participated in the meeting held on March 16, including UBL, Al Baraka, HBL and Citibank. During the meeting, all the banks’ representatives requested that they needed seven to 10 days to enable them to provide any offer.


SCB was also invited for technical discussions on their term sheet and Khalid Rasheed, SCB Head of Capital Markets, Wholesale Banking, attended the meeting. Thorough discussions were held regarding their term sheet and it was stressed that the bank should further reduce its pricing.


On this demand, SCB’s representative said that he would revert on the issue after consultation with the bank’s management.


However, Sheikh said that he would ensure that this transaction takes place in a transparent manner as they invited ten other banks as well and asked them to give their offers. Thus, the government would take a decision in an open manner by ensuring transparency.


Meanwhile, Sheikh, who also serves as Director General Central Directorate of National Savings launched a handbook on national savings. In his address, he said that they sought approval of the finance ministry for launching Dollar bond, Remittance bond and Shariah- compliant bond (sukuk). “We can generate $500 million through dollar bonds by luring investment from overseas Pakistanis,” he added.

Courtesy:  The News


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