Japan agrees on $200m debt deferral

Japan and Pakistan agreed on Friday on deferring payment of debt amounting to around $200 million, which would widen the fiscal space for Pakistan to restore its economy from the effects of Covid-19 pandemic.

Earlier, the two sides had agreed on the first phase of debt deferral amounting to approximately $370 million on April 27 this year under the G20 Debt Service Suspension Initiative (DSSI).

With the second phase, the total amount of deferred debt has reached around $570 million, according to a press statement.

The concessionary loans, which were the subject of debt deferral, had been utilised for infrastructure development such as roads, tunnels, power plants and grids, irrigation, water supply and drainage facilities in Pakistan from the early 1990s to the mid-2010s.

These loans have favourable conditions for Pakistan in terms of low interest rate, long grace and repayment period.

Under the second phase agreement, the repayment of debt and interest due between January 1 and June 30, 2021 will be rescheduled after December 15, 2022.

In addition to the debt deferral, Japan has also extended $23.5 million in grants to Pakistan for supplementing its Covid-19 measures.

These include delivery of diagnostic kits in February 2020 and disbursement of $7.41 million to Unicef and other agencies for providing hygiene items, alternative learning opportunities and training health workers in April-May 2020.

Moreover, a grant assistance of $9.5 million was provided to the National Disaster Management Authority (NDMA) for procuring medical equipment in December 2020 and a grant assistance of $6.59 million was given to Unicef for improving the vaccine cold chain in March 2021.

Speaking on the occasion, Japanese Ambassador Kuninori Matsuda said, “I am aware that Pakistan’s Covid-19 affected economy is on a solid recovery path, including the prospect of higher gross domestic product (GDP) growth.”

“Next year, Japan and Pakistan are going to celebrate the 70th anniversary of the establishment of diplomatic relations. I strongly hope that a new chapter will be carved in the history of our friendship on the basis of Japan’s development cooperation in the past decades.”

Published in The Express Tribune, October 23^rd, 2021.

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