HAMID WALEED

LAHOER: The Punjab government has planned to borrow Rs.25 billion during fiscal year 2017-18 through issuance of government securities with the help of State Bank of Pakistan (SBP), according to the budget documents.

The government securities have been classified in two major categories that is Punjab Treasury Bills (PTBs) which are discount instruments with maximum maturity of one year or less and Punjab Saving and Investment Bonds (PSIBs) which are coupon bearing fixed rate instruments with maturities of more than one year, as per the budget documents.

The current level of provincial debt stands at slightly above 3pc of Gross Regional Product (GRP) in Punjab.

Issuance of Government Securities will have several benefits including the enhancement in the size of the Annual Development Plan and access to potential lenders/investors e.g. pension funds, provident funds, mutual funds, insurance companies, corporate treasuries and individuals etc. in addition to domestic banks.

Furthermore, the Securities will be tradable in the secondary market which will result in familiarity of market participants with, and market-based pricing of, government of Punjab’s debt.

Also, as the Securities can be issued for a variety of tenors, these will help Punjab government in diversifying the maturity profile of its debt which will have a positive impact on the repayment capacity and creditworthiness of Punjab government.

The Punjab government has planned to raise more debt in a prudent manner with the primary objective of enhancing its development spending and hence the growth rate of the provincial economy.

A number of initiatives, including introduction of Fiscal Responsibility and Debt Management Law; obtaining domestic credit rating on a regular basis; issuance of short-term and long-term provincial government securities; and issuing provincial guarantees to encourage Public-Private Partnerships and other priority development projects and programs, are in the offing which will strengthen the economic landscape of the province.

Considering the rising population of the province and its large and growing development needs, provincial debt and guarantees are increasingly becoming important instruments of resource mobilization, says the budget documents.

According to the budget documents, the Debt Management Unit (DMU) has been recently established in Finance department to assist in formulating and implementing a comprehensive Debt Management Strategy that can support the economic growth of the province in a sustainable manner.

During FY 2016-17, the Finance department was able to partially recover its long overdue receivables from the Federal government on account of Net Hydel Profits. This was done by discounting a Promissory Note issued by WAPDA from a large commercial bank at a very competitive rate.

It was a unique transaction that was executed in a short period of time. Finance department also issued guarantees to financial institutions to expedite the installation of 1180 megawatt Power Plant in record time. The guarantees were later released upon successful completion of the project.