Debt relief

There was some good news on the national debt front as the Paris Club of creditors has agreed to suspend debt service payments from Pakistan as part of a G20 debt relief deal. Pakistan, Chad, Ethiopia, and the Republic of Congo take the total number of countries granted relief under the deal so far to 12. At least 30 countries have applied for relief, which was offered to 77 of the world’s poorest countries. Reports suggest that the overall relief from the Club would amount to $1.8 billion payable by Pakistan to 11 countries till June next year. The dues would be added to the amounts due under the rest of the payment schedules. The Paris Club hopes the relief deal will help developing countries focus on combatting Covid-19 and keeping their economies afloat.

In addition, a recent IMF report showed that up to $12.7 billion worth of Pakistan’s external debt repayment obligations for the next year might be covered by the plan. This is because the Paris Club — which only includes countries — has asked commercial lenders to also offer the same terms to countries it approves for relief. Apart from Paris Club members and commercial lenders in these countries, Pakistan also has significant payments due to China and Chinese lenders, Saudi Arabia, the UAE, the World Bank and the ADB.

The approval appears to have considered the appeals made by PM Imran Khan and others in recent times for relief to allow debt-riddled developing countries to get out from under the Covid-19 pandemic with their health systems and economies intact. As part of his “Appeal for Global Initiative on Debt Relief”, Imran had also ordered the foreign ministry to go into diplomatic overdrive to convince countries to join Pakistan on the same page. While the government, and indeed the country, can breathe a small sigh of relief, it will have to be short-lived because the loans have only been rescheduled, not waived. We still need to figure out how to come up with the money to repay them. 

Published in The Express Tribune, June 12^th, 2020.

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