Pakistan gets $526 million G-20 debt relief

Pakistan on Monday signed $526 million worth debt rescheduling agreements with three more members of the richest G-20 club, taking the overall benefit to below $1 billion.

The debt rescheduling agreements were signed with France, Switzerland and China by the Economic Affair Division, according to a handout issued by the Economic Affairs Ministry.

The agreement would result in delaying the repayments of $170 million to France, $9 million to Switzerland and $347 million to China. Pakistan is among the 76 poorest countries, mainly African nations that decided to avail the G-20 debt relief initiative.

In April, the G-20 countries together with the Paris Club creditors had announced a Debt Service Suspension Initiative (DSSI) to provide much needed fiscal space to stressed countries in their fight against Covid-19 pandemic.

The debt payments due for May-December 2020 period have been announced to be rescheduled by the G-20 club. The Economic Affairs Ministry said while taking advantage of this initiative, Pakistan entered into negotiations with 21 creditor countries for debt suspension amounting to $1.7 billion.

With the latest agreements, Pakistan has so far received little over $950 million worth of temporary relief. The Economic Affairs Ministry said Pakistan successfully negotiated and concluded rescheduling agreements with 19 bilateral creditors, including members of the Paris Club.

Saudi Arabia and the United Arab Emirates are the two remaining countries that have not finalized the debt suspension agreements with Pakistan, according to the sources.

Pakistan was expecting a $716 million debt freeze from the Kingdom and another $5 million from the UAE. In April, Saudi Arabia was also the president of the G-20 countries. From this month, Italy is the new president of the G-20.

Saudi Arabia has already decided to prematurely withdraw its cash-support to Pakistan. This compelled the Pakistan PTI government to borrow money from China and pay to Saudi Arabia.

Ambassador of Saudi Arabia to Pakistan Nawaf bin Saeed Al-Maliki called on Prime Minister Imran Khan on Monday, said to a handout issued by the PM’s Office. It stated the exchange of views focused on bilateral cooperation and the Covid-19 situation.

“The resolve to further strengthen the strong, longstanding Pakistan-Saudi Arabia fraternal ties was reaffirmed,” said the PM’s Office statement. In these eight months, Pakistan was set to make $1.7 billion repayments to G-20 members.

This included $1.4 billion principal loans repayments and around $300 million interest on the loans. A senior official of the Ministry of Economic Affairs said that Pakistan was not making repayments to Saudi Arabia and the UAE on the understanding that these members would eventually sign-off the deals.

The UAE last month also suspended issuance of new visit and work visas to Pakistan besides 11 other mostly Muslim countries.

Economic Affairs Division Secretary Noor Ahmad appreciated the debt suspension support provided by the G20 and Paris Club countries. The secretary said it is a timely initiative that has helped Pakistan save lives and livelihoods of millions during the difficult Covid-19 times.

However, the World Bank has recently suspended implementation of the $200 million coronavirus contagion mitigation project due to failure of the federal and provincial governments to put in place effective mechanisms for strengthening health systems.

Pakistan owes over $25 billion to members of the group of 20 rich nations.

One of the eligibility criteria was that the country would not “contract new non-concessional debt during the suspension period, other than the agreements under this initiative or in compliance with limits agreed under the IMF Debt Limit Policy or WBG policy on non-concessional borrowing”.

Last month, the federal cabinet also approved to make another formal request to the G-20 nations for extension in debt relief initiative for another six months (January-June) 2021.

This time, the Ministry of Economic Affairs has estimated that Pakistan can potentially get relief of $915 million, including $273 million in interest payments during the January-June 2021 period.

The maximum relief of $385 million is expected from China, followed by $211 million from Japan, $104 million from France, $53.6 million from Germany, $65 million from the US, $12 million from Saudi Arabia, $7 million from Russia and half a million dollar from the UAE.