Decision on borrowing cost put off

Pakistan on Tuesday deferred a decision on changing its benchmark rate for foreign borrowing to finance power projects due to the absence of crucial information about the financial impact of the decision on electricity prices. The Economic Coordination Committee (ECC) of the cabinet did not endorse a proposal of the Ministry of Energy about replacing the existing London Interbank Offered Rate (Libor)-based borrowing with a new benchmark – the Secured Overnight Financing Rate (SOFR). The ministry proposed to replace the key debt rate with effect from July this year, both for new and existing projects. Headed by interim Finance Minister Dr Shamshad Akhtar, the ECC approved the release of a six-month salary for 3,100 employees of the closed Pakistan Steel Mills (PSM). The factory has been closed since June 2015 but the government is paying salaries and the cost of gas for running the boilers. The last two governments were not able to make a final decision on the fate of the mill, which remains on the active privatisation list. A press statement of the Ministry of Finance said that the ECC considered a summary regarding transition from Libor to SOFR. The ECC, after discussion, directed the Ministry of Energy to prepare a detailed analysis of the financial implications of the decision and bring it to the next ECC meeting for discussion and approval.