Pakistan’s Economic Coordination Committee (ECC) of the Cabinet has approved a sum of Rs. 6.2 billion as part of the Reko Diq Mines Settlement Deal. Additionally, it authorized a loan of Rs. 65 billion to make share payments by the federal government on behalf of the Balochistan government.
Finance Minister Ishaq Dar presided over the meeting. However, the ECC deferred a summary of the Ministry of Aviation on the engagement of the International Finance Corporation (IFC) as a transaction advisor for outsourcing three airports. In December 2022, Prime Minister Shehbaz Sharif instructed to hire the IFC as a transaction advisor and outsource airports in three months, a deadline that had lapsed.
Some cabinet members questioned the motive behind bringing the transaction advisory service agreement in the ECC, saying it was not the right forum, while other members objected to certain clauses of the draft agreement.
The IFC – an arm of the World Bank Group – is being hired to prepare a transaction structure for the outsourcing of the airports at a consultancy cost of around $4 million. The members also objected to imposing penalties on the IFC for missing the milestones. Pakistan has been struggling to arrange $6 billion in loans to meet a condition by the International Monetary Fund for reaching a staff-level agreement.
In another development, the ECC approved a summary regarding the arrangement of a finance facility for funding the Balochistan government’s share of obligation in the Reko Diq project dispute settlement.
It also gave directions to the Finance Division to arrange payment of mark-up amounting to Rs. 6.2 billion for the period from March 31, 2022, to December 30, 2022, to the NBP for the short-term finance facility of Rs. 65 billion. The ECC also authorized the finance ministry to finalize a new finance facility of Rs. 65 billion for a seven-year term at six-month KIBOR Rate with the NBP, which currently stood at 22%.
The liability of the previous Short-Term Finance Facility of Rs. 65 billion would be cleared through a new finance facility. The repayment of the finance facility would be made directly by the Finance Division through budget allocation.
In 2019, the International Centre for Settlement of Investment Disputes (ICSID) slapped a total $6.5 billion fine on Pakistan and in favour of the M/s Tethyan Copper Company Pvt for the country’s failure to implement the Reko Diq copper-gold mineral resources development project.
As a result of a settlement with the foreign investors, Pakistan agreed to pay $900 million to TCC along with interest in addition to giving 50% stakes to Barrick Gold Corporation in the Reko Diq project. The remaining 50% was equally distributed between the federal and provincial governments.
