Significant Financial Irregularities Uncovered in Economic Affairs Division

An audit has revealed financial discrepancies of approximately Rs98.56 billion within the Economic Affairs Division (EAD) for the fiscal year 2023-24. A primary cause is the outstanding balance of foreign loans that have not been recovered.

The Auditor General has advised the government to actively pursue the recovery of these foreign loans through diplomatic and political channels at the highest echelons.

According to the Audit Report 2024-2025, a major instance involves the non-recovery of re-lent loans from a cement factory, amounting to €67.646 million, which is roughly Rs20.57 billion.

Details of the Cement Plant Loan

The loan was initially acquired in 1994 from a French financial institution to establish a cement manufacturing facility in Hub, Balochistan, with a Pakistani bank acting as the guarantor. Following instances of default, the Pakistani government took over the debt under the 2001 Paris Club agreement.

Despite numerous interventions by the Economic Coordination Committee (ECC), proposed asset sales, and consultations with legal experts, the sum remains unrecovered. The audit highlights that the extensive delays and inadequate enforcement have directly impacted the public treasury.

Non-Recovery of Loans to Several Countries

The audit also indicates the non-recovery of foreign loans totaling US$ 304.50 million, approximately Rs85.26 billion, extended to nations such as Sri Lanka, Bangladesh, Iraq, Sudan, and Guinea Bissau during the 1980s and 1990s under various export credit arrangements. Despite earlier directives from the Public Accounts Committee and diplomatic efforts via the Ministry of Foreign Affairs, these loans remain outstanding. The report cautions that these defaults not only signify a substantial monetary loss but also exacerbate Pakistan’s foreign exchange challenges.

Furthermore, the report highlights instances of records not being produced, irregular and unauthorized expenditures, and poor oversight of projects supported by foreign aid.

Recommendations by the Auditor General

The Auditor General has suggested assigning responsibility for the losses, initiating necessary legal actions, and reforming the financial oversight systems within the EAD.

  • Pursue un-recovered foreign loans at the highest diplomatic and political levels
  • Enforce guarantees and repayment schedules for domestic re-lent loans
  • Strengthen internal controls and debt management systems
  • Conduct regular valuations and reviews of debtor companies’ assets to avoid undervaluation losses