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Pakistan - $2BN LOANS GRANTED EX-POST FACTO APPROVAL.

The federal cabinet has regularised nearly $2 billion foreign commercial loans that the government had obtained during second half of the last fiscal year without prior approval of the cabinet and also waived 10% tax on interest payments to foreign lenders.

It was the second time during the last nine months that the federal cabinet gave ex-post facto approvals of foreign commercial borrowings.

In February 2017, the federal cabinet had also regularised the $2.7 billion foreign commercial loans.

The Ministry of Finance had signed eight agreements between December 2016 and June 2017 with foreign banks to obtain $1.965 billion short-term loans to support the dwindling foreign currency reserves.

All the eight loan agreements had been signed without obtaining prior approval of the federal cabinet, which is necessary under the Rules of Business of 1973.

Rule 16(1)(d) of the Rules of Business states that ministries would bring "proposals for levy, abolition, remission, alteration or regulation of any tax and floatation of loans" for the approval of the federal cabinet.

However, the federal cabinet gave its ex-post facto approval of those loans on Tuesday, regularising the borrowings.

The ex-post facto approvals are in violation of the spirit of the Supreme Court judgment of August 2016. The apex court's ruling binds the government to initiate all fiscal matters with the consent of the federal cabinet.

All the eight loan agreements had been signed without obtaining prior approval of the federal cabinet, which is necessary under the Rules of Business of 1973.

Rule 16(1)(d) of the Rules of Business states that ministries would bring "proposals for levy, abolition, remission, alteration or regulation of any tax and floatation of loans" for the approval of the federal cabinet.

However, the federal cabinet gave its ex-post facto approval of those loans on Tuesday, regularising the borrowings.

The ex-post facto approvals are in violation of the spirit of the Supreme Court judgment of August 2016. The apex court's ruling binds the government to initiate all fiscal matters with the consent of the federal cabinet.

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Publication:Pakistan & Gulf Economist
Date:Oct 22, 2017
Words:398
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