ISLAMABAD, April 30: The government plans to introduce a comprehensive pension scheme in the coming budget as part of its financial sector reforms and is likely to put together pensions and national savings scheme to launch a mutual fund, Dawn has learnt.

"We would be introducing a full pension scheme in the budget," Finance Minister Shaukat Aziz told reporters here on Friday but declined to give further details. He said the World Bank and International Monetary Fund (IMF) have commended Pakistan for introducing sweeping reforms in the banking and financial sector that have led to the soundness and expansion of the private sector in these areas.

Mr Aziz said the World Bank-IMF joint assessment report prepared this month had fully supported Pakistan's initiatives and noted that the country had achieved a high degree of transparency in the monetary and fiscal policy.

The two lenders had, however, asked the government to further consolidate privatization and legal reforms to ensure that no policy reversals take place and at the same time called for the need to introduce reforms in the insurance sector as well.

The two institutions noted that Pakistan had turned a weak and sinking banking sector into an efficient and growing private sector and increased competition has spread to SMEs, Agriculture and other innovative sectors.

He said the report also noted that financial soundness and great resilience has also led to a situation where Pakistan's banking sector fulfilled international standards. The two lenders had called for further consolidating the reforms process and appreciated the rationalization of national saving schemes.

He took strong exception to the recent annual Asian Development report that forecast a looming banking crisis in the Pakistan and said none of the issues raised by the report were Pakistan-specific.

He said that Pakistan's banking sector was one of the best performing sector and was internationally recognized and itself spoke volumes about the excellent performance. Replying on point to point as raised by the ADB report, Mr Aziz said that as far as the supervision and regulation is concerned, after SBP was granted autonomy in 1997 the supervisory capacity has been strengthened over the years.

Further, on the weak corporate governance of banking sector in Pakistan as stated by the ADB, Mr Aziz said it is not acceptable since it was one of the best and recognized by many international financial institutions.

Our regulations are as per best international practices and a loan, including agricultural loan becomes non-performing loan (NPL) when it becomes overdue by 90 days, as compared with India, where it is declared NPL after 180 days and for agriculture it is one year.

Challenging the allegation of low capitalisation ratios, the minister said that capital adequacy ratio is 12.1pc for commercial banks which is far higher than internationally required which is 8 per cent, therefore, reducing the chances of systematic risk.

He said there was no increase in bad loans/NPLs as stated by ADB report, since NPLs of the banking sector in Pakistan have been on a decline and as of December 2003 were lower by Rs24 billion against the level of December 2002. The NPLs have come down to 5.2 percent in 2003 on net basis from 10.3 per cent in 2001.

The Committee for Revival of Sick Industrial Units (CRSIU) has restructured loans worth Rs45.3 billion and helped revive 170 sick units by allowing waivers and write-offs up to January 31, 2004.

The Corporate and Industrial Restructuring Corporation (CIRC) has a success story, which had purchased loans worth Rs46.886 billion from the banks at a discounted price of Rs5.087 billion and auctioned off 87 units recovering Rs 2.822 billion.