Pakistan seeks $1.87 bn debt relief from G20 countries

ISLAMABAD: Out of the total outstanding liabilities of US$20 billion, Pakistan has formally sought debt relief of US$1.87 billion from 11 bilateral creditors among the G20 countries, it was learnt.

Among the G20 countries, China is the largest bilateral donor as its outstanding liabilities against Pakistan piled up to US$9 billion, followed by Japan with US$5 billion and the remaining countries, including South Korea, France, Germany, Canada, USA, Saudi Arabia and others. “Yes we have sought debt relief from the G20 countries and hope to get breathing space of US$1.87 billion for the period of one year,” confirmed one of the top officials of Finance Division, while talking to ‘The News’ on Monday.

Meanwhile, the G20 countries are considering either to stagger the outstanding debt or to provide fresh financing facility to the Covid-19 pandemic hit countries. The official said the multilateral creditors were not ready to provide debt rescheduling to borrowing countries because they were considered preferred creditors and could not support any relief because it might have negative impact over credit rating of the country.

According to the World Bank, with effect from May 01, 2020, Monday is the beginning of an important debt relief initiative for the world’s poorest countries. The president World Bank stated that the bank has been proceeding at full pace with pandemic support strategy, using fast-track approach, to assist 93 countries with Covid-19 related health projects, and another 18 countries would shortly be getting support.

The WB president said it marked the start of a debt payment suspension by the IDA countries, if they requested forbearance. He said in March, IMF Managing Director Kristalina Georgieva and he called on official bilateral creditors to grant debt suspension to the countries eligible for International Development Association (IDA) financing – and considered the world’s poorest countries – may get help extra financial support to respond to Covid-19 pandemic.

During the spring meetings, the governors of the World Bank, IMF and the finance ministers of G7 and G20 countries supported May 1 start date. The G20 countries agreed on a coordinated approach, with a common term sheet providing key features for a debt service suspension initiative. Private creditors were also called on to participate in the initiative on comparable terms.

In addition to financial support, the initiative provides an important opportunity for the IDA countries to enhance transparency and fully disclose their public sector’s financial commitments. The World Bank and IMF are working together with IDA countries to evaluate their debt sustainability and transparency and monitor their use of the savings on debt service.

The president said another important component of their response to Covid-19, will be to scale up our social safety net operations, including cash transfer operations through banks, post offices, micro enterprises, and digitally, and community-based approaches, where available and scalable. He said, “We’re also actively engaging with the governments to eliminate or redirect costly and climate-harmful fuel subsidies and reduce barriers to the flow of food and medical supplies.”

Last week, the World Bank released an updated study on remittances, in which it was found that the global remittances are projected to decline sharply by 20 per cent in 2020, due to the economic crisis induced by the Covid-19 pandemic and economic shutdown.