ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Monday approved about Rs72 billion financing facility for payment of the Balochistan government’s obligations in the Reko Diq Project dispute settlement.

The meeting presided over by Finance Minister Ishaq Dar, however, deferred proposals for increasing the minimum prices of about 177 medicines because of poor defence by the Drug Regulatory Authority of Pakistan (DRAP) chief executive and the secretary of national health services.

While the meeting rejected a proposal for increasing the price of Remdemsivir 100mg injection from the existing Rs1,892 per vial, it directed Drap and the Ministry of National Health Services to prepare their case and come back to the ECC to justify an increase in prices of 177 other medicines.

The ECC also deferred a summary for the appointment of the International Finance Corporation (IFC) of the World Bank as transaction adviser for the outsourcing of the country’s three top airports — Karachi, Lahore and Islamabad — for 25 years.

ECC defers summary for price increase in 177 medicines

The ECC approved a summary of the Ministry of Energy regarding the arrangement of Rs65bn ($337.2m) to fund the Government of Balochistan’s share of obligation in Reko Diq project dispute settlement. It directed the Ministry of Finance to arrange payment of markup amounting Rs6.238bn for the period from March 31, 2022 to Dec 30, 2022 to the National Bank of Pakistan (NBP) for the short-term finance facility of Rs65bn.

The meeting was informed that the Ministry of Finance had arranged a short-term finance facility of Rs65bn from the NBP on the balance sheet of Government Holdings Private Ltd (GHPL) — a subsidiary of the Ministry of Petroleum — with government guarantee for Balochistan’s share of $337m in March last year.

As the final settlement was in progress, the interest on the amount became due to the tune of $12.72m as Balochistan’s share towards interest payable to Antofagasta for a period up to Dec 15, 2022 and was deposited in the escrow account from the Rs65bn loan facility. The facility expired on Dec 30, 2022 and the NBP issued notice for repayment of the principal amount of Rs64.478bn along with Rs6.238bn interest.

Therefore, the entire funding facility had to be refinanced. The Ministry of Finance initially resisted the interest payments and refinancing arrangement and asked the petroleum division and GHPL to arrange the funding but they had no financial resources.

The petroleum division reminded the ECC and the finance ministry that even earlier arrangements had been made with a written commitment of the finance division which should provide a technical supplementary grant from Rs180bn block allocations for supplementary grants and provide a guarantee for refinancing the NBP loan facility.

Under the refinancing facility, the Rs65bn loan would attract 0.20pc of margin and 0.16pc of processing fee for seven years plus a grace period of two years. The repayment period would be five years at a base rate of six-month Kibor on a semi-annual basis.

It may be recalled that after the endorsement of a $6.5bn settlement deal with Reko Diq consortium by the Supreme Court of Pakistan, the government had in December last year approved a payment of more than $900m to the Chilean firm Antofagasta over six years to exit the Reko Diq project.

Published in Dawn, March 28th, 2023