ECC approves guarantee to extend Rs50 billion bank financing for PSO
The Economic Coordination Committee (ECC) has okayed the issuing of a government guarantee to raise Rs 50 billion in financing from a consortium of banks to bailout cash-starved Pakistan State Oil (PSO).
Ministry of Energy (Petroleum Division) sought approval from the economic decision-making body in a meeting held on Thursday.
ABL, NBP, MCB, UBL and HBL had formed a consortium to provide Rs. 50 billion financing to PSO through a government guarantee.
The guarantee will help start the process of arranging loans from banks to Pakistan State Oil (PSO).
Keeping in view the financial constraints of PSO, the ECC granted approval to issue a letter of comfort to arrange Rs. 50 billion financings immediately.
It also directed the finance division to divert some other allocated guarantees to PSO not exceeding Rs. 105 billion limits for the 1st quarter of CFY.
is likely to approve the issuing of a government guarantee in favour of the National Bank of Pakistan (NBP) to extend a financing facility of Rs 50 billion to cash-starved Pakistan State Oil (PSO).
According to a summary moved by the Petroleum division, ECC had discussed PSO’s liquidity issues in detail in the ECC meeting held on July 31, 2022.
The cabinet economic body had taken certain decisions which include payment of Exchange loss of FE-25 loans through a supplementary grant of Rs. 30 billion by the Ministry of Finance.
It also included a payment of Rs. 20 billion on August 1, 2022, by CPPAG/Power Sector and another Rs. 12.8 billion by August 4, 2022
ECC approves Release of Rs 30b to Rescue PSO from Payments’ Default
It also discussed during the meeting to arrange a government-guaranteed loan of Rs. 50 billion to ease out liquidity issues of PSO.
Habib Bank Limited, on the directions/intimation of the Ministry of Finance, formed a consortium of banks including Allied Bank, National Bank, MCB Bank, UBL & Habib Bank and shared a draft term sheet for sanctioning a loan amounting to Rs. 50 billion for PSO.
However, the basic conditionality of the loan is that the loan is to be secured through a government guarantee as the banks have already stretched their limits to the maximum by obtaining waivers from the State Bank of Pakistan and they can no longer fund PSO without a GoP guarantee.
As the issuance of the guarantee will take time, therefore, the banks have shown their willingness to initiate the process of issuing loans on a Letter of Comfort issued by the Ministry of Finance. It is apprehended that in absence of this funding, PSO may not be able to fulfil its payment obligations.
Foregoing in view, it is proposed that the Ministry of Finance may be directed to issue a Letter of Comfort in favor of PSO for raising a loan facility of Rs 50 billion on an urgent basis, as PSO has to honour various International and local refineries payments amounting to Rs. 110 billion during 10 15 August 20, 2022.
