The Government has signed term sheets with 18 commercial banks for an installation of Islamic finance of RS1,275 billion ($ 4.5 billion) to help pay the growing debt in their electricity sector, government officials said Friday.
The government, which has or controls much of the energy infrastructure, is dealing with the “circular debt” of globe, unpaid invoices and subsidies, which has drowned the sector and heavy in the economy.
The liquidity crunch has interrupted the supply, discouraged the investment and has been added to the fiscal pressure, so it is a key approach under the IMF program of $ 7 billion of Pakistan.
Finding funds to connect the gap has been a persistent challenge, with a limited fiscal space and the resolution efforts of high -cost debts of more difficult cost.
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“Eighteen commercial banks will provide loans through Islamic financing,” Khurram Schehzad, an advisor to the Minister of Finance, told Reuters.
The installation, structured under the Islamic principles, is assured at a 3 -month Kibor concession rate (the reference rate that banks use to price loans) less 0.9%, a formula agreed by the IMF.
“It will be paid in 24 quarterly installments for six years,” and will not join the public debt, said Energy Minister Awais Leghari.
Existing liabilities have higher costs, including late payment surcharges in independent energy producers of up to Kibor plus 4.5%, and older loans that go slightly above the reference rates.
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Meezan Bank, HBL, National Bank of Pakistan and UBL were among the banks that participated in the agreement.
The Government expects to assign RS323 billion annually to pay the loan, limited to RS1,938 billion for six years.
The agreement is also aligned with the objective of Pakistan to eliminate interest -based bank for 2028, with Islamic finances that now comprise approximately a quarter of total bank assets.
