Senator Saifullah Abro recommends the SBP to provide details regarding deficits in all accounts & utilization of the IMF loans

ISLAMABAD, Sep 23 (SABAH): A meeting of the Senate Standing Committee on Economic Affairs was held on Monday under the chairmanship of Senator Saifullah Abro at the Parliament House. Other participants included Senator Taj Haider, Falak Naz, Kamran Murtaza, and representatives of attached departments. 

The Committee addressed agenda items, including a compliance report on recommendations made during meetings held on July 5, August 1, and August 22, 2024. The Chairman Committee enquired about the utilization of funds received from the IMF since 2018, stating that this is the 26th program of the IMF. He recommended the State Bank of Pakistan to provide details regarding deficits in all accounts (current and financial) and the utilization of the IMF loans. The Chairman Committee lamented that requisite information had been sought over three meetings and submit it within three days. He further enquired about actions taken by the State Bank regarding the return of extra amount of approx. Rs. 65 billion from various commercial Banks to Govt. of Pakistan in lieu of over invoicing of LCs during the year 2022, noting that the then Finance Minister had also recognized the issue and directed an investigation. 

The State Bank of Pakistan officials presented concerns about bank over-invoicing. Senator Saifullah Abro asked for clarification on the term “over-invoicing,” referencing media reports about Independent Power Producers (IPPs) engaging in this practice, which has reportedly cost the country billions annually. The Chairman Committee emphasized that State Bank of Pakistan must provide a comprehensive report to the committee and directed it to deliver details of Letters of Credit (LCs) issued from April to September 2022 in a tabulated format, including the name of the bank, amount, the dollar rate for that day, and the rate of the bank opening the LC and action taken by State Bank of Pakistan. 

State Bank of Pakistan officials indicated that actions had been taken regarding regulatory violations. Senator Kamran Murtaza asked whether anyone had been held accountable, to which officials replied that the State Bank of Pakistan had prosecuted and fined for such violations. It was noted that commercial Banks were fined 1.4 billion rupees, prompting Senator Murtaza to question the adequacy of this penalty relative to their 65 billion rupee earnings. The Chairman Committee expressed dissatisfaction with the response, stating that the matter would not be closed lightly. 

Senator Kamil Ali Agha remarked that the State Bank’s admission of banks over-invoicing constituted a significant error, and after assessing the situation, disciplinary action was taken. The State Bank of Pakistan officials noted that Federal Board of Revenue (FBR) imposed a 10% forex income tax last year; however, the matter later went to court and is currently under hearing. 

Senator Saifullah Abro highlighted that officials of State Bank of Pakistan are not acknowledging the alleged 65 billion rupee loss, despite the Finance Minister’s assertions. He insisted that all relevant details be provided to the committee within three days. Senator Kamil Ali Agha emphasized that without the presence of the Federal Minister and Secretary in the meeting, the issue would remain unresolved. 

Senator Kamran Murtaza questioned whether the State Bank had identified weaknesses on its part and the individuals involved, to which officials responded that the State Bank of Pakistan had no role in the matter. Murtaza inquired about the duration of the issue, and officials stated it extended over two to three months before action was taken.

Senator Rana Mahmood ul Hasan remarked that the State Bank of Pakistan had delayed action for five months. Senator Saifullah Abro expressed that this was a national issue and criticized the State Bank of Pakistan’s awareness. He reiterated the need for detailed information within three days, while officials of State Bank officials requested an extension, arguing that the timeline was insufficient. The Chairman Committee countered that two weeks’ time would be adequate for the requisite data. Furthermore, the Committee was also briefed in detail about on-going projects of Water Sector under multilateral development partners with commitments of US $ 2,,844.40 million and disbursement of US $ 705.62 million. The projects under bilateral development partners were with the commitments of US$ 730.94 million and disbursement of US $ 480.61million.

The Committee also received a detailed briefing on the Tarbela 5th Extension Hydropower (T5HP) project, the WAPDA officials informed that project was launched in 2017, involves a tunnel to release water for irrigation needs and has been in operation for 90 days. The tunnel will function when sufficient water is available in the Dam. The Officials mentioned that  provinces had previously objected to closing the tunnel for four years, but later agreed. The total cost of the project is estimated at 860 million dollars, with 690 million dollars provided by the Asian Development Bank and Asian Infrastructure Investment Bank. The project is set to be completed in three phases by 2026.

After the detail deliberations, the Committee unanimously decided and defer the agenda item to be further discussed in the next Committee meeting. The Committee recommend EAD and all it’s concerned to provide the details as per the agenda item within one week to the Committee. The Committee recommended EAD to invite Chairman, WAPDA to attend the next Committee meeting. The Committee unanimously decided and recommended EAD to establish a desk headed by technical person at Ministry in order to have a better monitoring mechanism and follow up regarding the projects under multilateral development partners, bilateral development partners and UN agencies.