Section 9C: Prohibition on the Government borrowing

9C. Prohibition on the Government borrowing.⸺(1) The Bank shall not extend any direct credits to or guarantee any obligations of the Government, or any government-owned entity or any other public entity. (2) The prohibition laid down in sub-section (1) shall not apply to government-owned or publicly-owned banks and other regulated entities, which shall be given the same treatment as privately-owned banks. (3) The Bank shall not purchase securities issued by the Government or, any government- owned entity or any other public entity on the primary market. Nonetheless the Bank may purchase such securities in the secondary market. (4) The Bank shall not guarantee any loan, advance or investment entered into by the Government, any government-owned entity or any other public entity: Provided that the existing outstanding debt owed to the Bank in the form of loans, advances or Government securities purchased on the primary market, at the time of the commencement of the State Bank of Pakistan (Amendment) Act, 2021 shall be retired in accordance with the terms and conditions under which such outstanding debts were extended. In compliance with the prohibition of monetary financing under this section no roll-over or re-profiling of such existing outstanding debt of the Government owed to the Bank shall be permitted. (5) The guarantees issued by the Bank to secure the obligations of the Government outstanding on the commencement of the State Bank of Pakistan (Amendment) Act, 2021, shall not be increased, but can be rolled-over in accordance with the terms and conditions under which such outstanding guarantees were issued. (6) The amount of overdraft outstanding against Pakistan Railways shall be converted into long term debt with a duration of eight years and remunerated at market interest rates.]

Effective date: 1956-04-18

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