Pakistan formally requests G-20 debt relief
ISLAMABAD: Cash-strapped Pakistan has asked members of the G-20 countries for debt relief by pledging not to take on new non-concessional loans except those permitted by the guidelines of the IMF and World Bank, according to a media report.
The official requests were sent to individual countries on Friday as part of the G-20 COVID-19 debt service suspension initiative, a senior Economic Affairs Ministry official told the Express Tribune on Monday.
On April 15, the Group of 20 major economies announced a freeze on debt repayments for 76 countries, including Pakistan, for the period from May to December 2020 as they struggle to cope with the coronavirus pandemic, under subject to each country making a formal declaration. demand.
However, one of the eligibility criteria was that the recipient country would not “incur new non-concessional debt during the suspension period, other than agreements under this initiative or within agreed limits under IMF or WBG Debt Limitation Policy (DLP). non-concessional borrowing policy”.
The Pakistani government did not mention the debt relief in the request letters, although it assessed the cumulative amount of relief at $1.8 billion for the period May to December 2020.
Pakistan has also notified the IMF, World Bank and Paris Club of its decision to formally request debt relief.
Last month, the IMF’s resident representative in Pakistan, Teresa Daban, said that Pakistan had not formally made any request to G-20 countries for debt relief.
Pakistan owes 11 members of the Group of 20 major economies $20.7 billion.
Of this amount, $1.8 billion would fall due by December 2020, including interest payments, according to the Ministry of Economic Affairs.
During these eight months, Pakistan will have to reimburse 1.8 billion dollars to its 11 members.
That includes $1.47 billion in principal repayments and $323 million in loan interest, according to the daily.
In addition, $613 million of Saudi debt and $309 million of Chinese debt will come due, according to the Ministry of Economic Affairs.
During this period, Pakistan is also required to return $23 million to Canada, $183 million to France, $99 million to Germany, $6 million to Italy, $373 million in Japan, $47 million to South Korea, $14 million. to Russia, 1 million USD to the United Kingdom and 128 million USD to the United States.
According to an IMF condition, the $7.5 billion loans that the Imran Khan government had obtained from China, Saudi Arabia, the United Arab Emirates and Qatar cannot be repaid during the period of the program. IMF, according to the report.
These loans were only guaranteed for one year to avoid default on international debt obligations, but the IMF had made it a condition that this money would be renewed each year until the program ended in 2022.
If the G-20 member countries agree to the request, Pakistan will have four years to return the amount, including a one-year grace period.
Pakistan has assured G-20 members that it will not incur new non-concessional debt during the suspension period other than agreements entered into under the initiative or in accordance with limits agreed under the policy of IMF debt limitation or World Bank Group policy on non-concessional lending. ready.
An IMF report had estimated Pakistan’s post-COVID-19 external financing needs at $25.8 billion with a financing gap of $2 billion.
For the next fiscal year, the IMF has projected Pakistan’s gross financing needs at $29.3 billion and a financing gap of $1.5 billion.
The IMF had approved emergency loans of $1.4 billion, which more than filled the projected financing gap, but the amount fell short of overall needs.
G-20 countries have announced debt relief to help poorer countries use the fiscal space created to increase social, health or economic spending in response to the coronavirus crisis.
A monitoring system was to be put in place by the international financial institutions.
The debt relief will last until the end of 2020, but G-20 countries could consider a possible extension, taking into account a report on the liquidity needs of eligible countries by the World Bank and the IMF .