ECC gives go-ahead for G20 debt relief

Authorises EAD to sign $1b worth of agreements for July-December 2021


Shahbaz Rana June 10, 2021
The ECC allowed K-P government to borrow Rs43 billion after the province busted its budget limit. PHOTO: PID

ISLAMABAD:

The federal government on Wednesday allowed the Khyber-Pakhtunkhwa (K-P) government to borrow Rs43 billion after the province busted its budget limit and also authorised to sign $1 billion worth of temporary debt relief agreements with the club of richest nations.

Headed by Finance Minister Shaukat Tarin, the Economic Coordination Committee (ECC) of the cabinet approved $70 million in additional grant for procurement of coronavirus vaccines. It also made a commitment for another $1 billion grant for vaccines but pended formal approval.

The National Disaster Management Authority (NDMA) chairman had sought $1.1 billion to place bulk orders for vaccinating 65 million people by December this year. The State Bank of Pakistan (SBP) governor told the ECC that the previous payment of $100 million for vaccines had put pressure on exchange rate and the central bank may be informed in advance to make arrangements for the payments, said the sources. The ECC approved Rs42.9 billion grant for the Finance Division for ways and means advances availed by the provincial government, according to a handout issued by the Ministry of Finance after the meeting.

“The government of Khyber-Pakhtunkhwa has availed Rs42.9 billion cumulatively during the current financial year till the date and the expenditures have been booked under other loans and advances by the federal government without having budgetary provisions,” the ECC was informed. The approval of the ECC for the supplementary grant equal to the amount of Rs42.9 billion is required to adjust the amount, it added.

Read: ECC to approve extension in govt guarantee

K-P Finance Minister Taimur Salim Jhagra was not available for comments.

The situation arose due to a ban on borrowings from the central bank by the federal and provincial governments under the International Monetary Fund (IMF) deal. Prior to the IMF condition, provinces were availing the SBP overdraft facility.

The finance ministry told the ECC that the relaxation in limits would not have implications for the overall fiscal deficit of the federal government as the payments are for a limited period and as and when cash balance position of the provinces improves, as a result of the divisible pool transfers, SBP reverses the transactions together with mark-up and the same is booked as capital receipts and non-tax receipts of the federal government.

G-20 relief

The ECC approved the request of Economic Affairs Division to proceed with the formal request for availing the G-20 debt relief for July-December 2021 period, said the finance ministry. The ECC also permitted the signing of MoUs with bilateral creditors in terms of the prevailing rules and regulations, it added.

Under the third-phase (July-December 2021) of the Debt Service Suspension Initiative (DSSI) by the G-20 countries, Pakistan will get around $1 billion relief, the economic affairs ministry said in April. This includes $785 million worth of pause on principal loan repayments and the remaining on account of interest repayments.

An International Monetary Fund (IMF) staff report has put the relief amount under first two phases at $2.5 billion. This has brought the total temporary relief to $3.5 billion under three phases. Pakistan along with 76 other poor African countries had qualified for the G-20 debt relief initiative, announced in April last year, initially for May-December 2020 period, to combat the adverse impacts of the pandemic.

China remains the single largest country that has provided a total $1.2 billion relief, including $516 million in the third phase. The economic affairs ministry’s estimates show that Pakistan will get a total around $740 million worth of temporary relief from Saudi Arabia in three phases.

Pakistan has also received draft agreement from Saudi Arabia under first phase of the deal. A $395 million relief is expected from France till the end of this calendar year, including $108 million under the third phase. About $110 million debt suspension is expected from Germany, $796 million from Japan, $75 million from South Korea and $260 million from the United States till December this year.

Pakistan owes $25.4 billion to the Group of 20 rich nations as of August last year. Pakistan’s public debt situation remains precarious, as its obligations have peaked to 94% of the gross domestic product, which is quite alarming for a nation that pays its loans by taking fresh loans.

Covid vaccines

“The ECC expressed the government’s commitment to provide $1.1 billion for procurement of Covid-19 vaccine for achieving the vaccination target (minimum 45 million and maximum 65 million) till December 2021,” the finance ministry stated.

Last month, the ECC had already approved $130 million for procuring the vaccine for the month of June 2021. However, due to the increased target of vaccination by NCOC, another $50 million was required in addition to the already approved amount for the month of June 2021.

Read more: ECC green-lights Rs20b for Chinese vaccine

“The ECC approved the additional funds of $70 million for achieving the vaccination target for the month of June 2021,” said the finance ministry. Vaccine procurement is currently the responsibility of National Disaster Management Authority (NDMA).

The ECC approved Rs2.2 billion budget for the intelligence bureau, Rs1.2 billion for capacity enhancement of the civil armed forces, Rs430 million internal security duty allowance for the military

The administration of vaccine shall be the responsibility of the Ministry of National Health Services Regulation and Coordination and Provincial Health Departments but the vaccines will be procured by the NDMA.

The National Coordination Committee on Covid-19 approved to make the NDMA a lead agency for vaccine procurement in the future. The NDMA has been tasked to arrange doses for 70 million people by December 2021.

The estimates based on the current government secured prices suggest that vaccine for population of 70 million shall cost $1.5 billion, the ECC was informed.

The ECC has already approved $153 million through restructuring of Pandemic Response Effectiveness Project. The ADB is expected to give $200 million loan for vaccine procurement while Pakistan is asking for $500 million. In addition to these committee loans, the ADB, AIIB and Islamic Development Bank have promised to give $470 million for procurement of vaccines.

Published in The Express Tribune, June 10h, 2021.

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