Paris Club extends Pakistan’s debt payment deadline

Creditors say Islamabad to increase spending to mitigate health, economic and social impact of Covid

PARIS:

The Paris Club of creditor countries on Friday said it was giving Pakistan another extension to service its debt so that it could dedicate its resources to combatting the Covid pandemic.

The country has until December to make the payment, the club said in a statement, without releasing a figure. Islamabad “is committed to devote the resources freed by this initiative to increase spending in order to mitigate the health, economic and social impact of the Covid-19 crisis,” the statement said.

Pakistan’s debt amounts to some 90% of its gross domestic product, according to the International Monetary Fund (IMF). It has said that the country owes $11.5 billion to the Paris Club. Pakistan’s debt service for the 2021-22 fiscal year totals $56.9 billion, according to the IMF.

Read more: Pakistan, Japan sign $367m debt relief pacts

Prime Minister Imran Khan was among the first leaders to issue a global call for the word community, particularly the financial organisations to offer debt suspension and relief to help developing nations recover from the crisis triggered by the Covid-19 pandemic.

The latest announcement by the Paris Club will provide the necessary relief to the Pakistan Tehreek-e-Insaf (PTI) government, as the country’s debt increases over the past three years, and so as the debt repayments.

According to a media report, the government has added Rs14.9 trillion to the public debt during almost three years in power, which is equal to 140% of the total debt the previous Pakistan Muslim League-Nawaz (PML-N) government acquired in five years.

According to the State Bank of Pakistan’s (SBP) annual debt bulletin, released in the last week of August, the public debt soared to Rs39.9 trillion by June this year – an addition of Rs14.9 trillion within three years. The total public debt increased by a whopping 60% from July 2018 to June 2021, an unsustainable 20% increase on average each year.

Also read: Pakistan among latest countries to get Paris Club debt relief

The addition of Rs14.907 trillion to the public debt in just three years was equal to 82% of the gross public debt that the last two elected governments of Pakistan Peoples Party (2008-2013) and PML-N (2013-2018) had added in 10 years.

Another media report said this week that the country’s current account deficit surged to $2.3 billion in the first two months (July and August) of the current fiscal 2021-22 mainly because of a sharp increase in imports bills.

The overall external debt repayment and obligation is estimated to consume $14.7 billion during the current fiscal year.

The government will have to repay external debt and obligations to the tune of $830 million to Paris Club, $4.7 billion to Non-Paris Club, $2.6 billion to multilateral creditors, $4.448 billion to commercial creditors, $1 billion on bond repayment, and $1.068 billion to the IMF.

(AFP WITH INPUT FROM NEWS DESK)