Overdraft limits enhanced: Sindh s highest among four provinces

Thursday, 14 January 2010 11:26

From International Desk - Special Reports

KARACHI  : Following the International Monetary Fund s directives, the State Bank of Pakistan has enhanced overdraft limits for all provinces by up to 360 percent. Sources in the ministry of finance told Business Recorder on Wednesday that the IMF had expressed dissatisfaction over the overdraft limits of Punjab, Sindh, Balochistan and NWFP during negotiations for the third tranche of loan and asked Pakistan Government to develop a proper mechanism for allocating overdraft limit, which were previously being allocated without any criteria.

Sources said the IMF has instructed that overdraft limits would be equivalent to six weeks salary of provincial wages and salaries totalling Rs 47 billion (for all provinces). While in case of end of the overdraft limit, the cheque of province should be declared as bounced, they added.

Earlier, the overdraft limits for the provinces were different and they were enjoying OD facility without any criteria as the limits were depending on the financial demands of the provinces. However, following the IMF directives, the federal government has enhanced the OD limits of the provinces and now they can avail of more than the earlier limits to meet their current expenses, sources said.

 As per the new limits, Punjab can get an overdraft of Rs 27 billion from the central bank for financial assistance as compared to previous limit of Rs 13.8 billion, depicting an increase of about 100 percent, sources said. As per the new criteria given by the IMF, Sindh overdraft limit has been increased by Rs 7.8 billion or 362 percent to Rs 9.95 billion. It previously stood at Rs 2.15 billion since 1998.

Similarly, with an increase of 177 percent, the NWFP can now obtain a maximum overdraft of Rs 5.55 billion as compared to Rs 2 billion since 2001. In addition, overdraft limit for Balochistan has now risen to Rs 4.52 billion from Rs 2.5 billion in 2001. Sources said the agreements on these limits have been signed by the State Bank and the provinces.

Currently, Balochistan and Sindh are enjoying strong financial positions and their overdrafts are on positive side, while Punjab and NWFP have got billions of rupees ODs to meet their financial needs, sources added. Sources said presently Punjab is facing serious liquidity crisis as it has utilised about 80 percent overdraft limit. The Punjab overdraft stood at Rs 21 billion last Saturday against the allocated limit of Rs 27 billion. NWFP overdraft stood at Rs 487 million. Sindh and Balochistan have a surplus of Rs 25 billion and 4.9 billion, respectively in their accounts.

Sources said the two different agreements have also been reached between the SBP and Punjab and Balochistan to convert their outstanding overdrafts of Rs 50.9 billion and Rs 8.8 billion, respectively, into four-year loans with interest equal to the 6-month T-bill rate, to be repaid in monthly instalments. The government provided a guarantee to the SBP for these loans, while for the other two provinces, no long-term loans were needed, sources said.