The Public Accounts Committee (PAC) on Wednesday ordered a forensic audit of $3 billion in loans granted to various companies and individuals under the Pakistan Tehreek-e-Insaf (PTI)-led government as part of COVID-19 relief measures.
Appearing before the PAC, State Bank of Pakistan (SBP) Governor Jameel Ahmed agreed to share the list of borrowers in an in-camera briefing but refused to make it public. Agreeing to this, the PAC chairman directed the central bank to share a list of borrowers in an in-camera meeting within three days.
The meeting was led by Chairman Noor Alam Khan and included the participation of the finance secretary and SBP governor, as well as representatives of the Ministry of Defense, the Ministry of Commerce and the Auditor General’s office.
During the meeting, the PAC was informed that the textiles, cement, tire and auto industries had secured $3 billion in loans under a refinancing scheme at a 5% interest rate during the PTI-led government. Alam noted that on April 19 the PAC had sought, under Article 66 of the Constitution, a complete record of the 620 people that were granted loans but this had yet to be submitted. He also inquired if the loans had benefited the economy.
The finance secretary informed the PAC that the loans were granted under a refinancing scheme, adding the scheme was implemented through commercial banks. Such information, he said, was solely between the relevant bank and client. He said the scheme had been launched in March 2020 during the COVID-19 pandemic and had no foreign currency exchange component. Its primary target, he said, was to benefit the industrial sector.
“More than 85% of lending was from private banks. Of this, 42% of borrowers are from the textile sector,” he told the committee. “We are worried because most of the companies do not return loans and open companies with new names,” replied the chairman.
The SBP governor, however, clarified that while the SBP had access to the list of borrowers, it could not reveal such confidential information. He said Rs. 394 billion had been disbursed under the scheme thus far, reiterating that all funds were released in rupees, not dollars. He said the scheme carried no risks to either the government or the SBP, adding that commercial banks lent to clients at their own risk.
He further explained that at its launch, the scheme had been charged an interest rate of 9%, which was later revised down to 7%. “This scheme was used only for the purchase of machinery,” he said.
Questioning the secrecy, Alam inquired who had conceived the scheme and why the names of borrowers could not be disclosed. The SBP governor said the State Bank Act empowered the central bank to establish refinancing schemes, adding approval was sought from the government only if the plans carried any risks. “We can give a briefing on the benefits of this scheme,” he added.
The committee then ordered a forensic audit of the $3 billion dollar loan scheme, adding that representatives of the defense, commerce, and planning ministries should be included in the inquiry.