Spain debt

$10 billion debt rescheduling sought

ISLAMABAD:

Pakistan said on Friday it was seeking to reschedule $10 billion in debt owed to the Paris Club – a group of wealthy nations, as part of an initiative to create respite amid rehabilitation efforts by more than 33 million people affected by devastating floods.

Prime Minister Shehbaz Sharif has also asked the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, to provide the remaining loan of nearly $3 billion in advance in November this year, according to Finance Minister Miftah. Ismail.

The debt rescheduling announcement was made by the finance minister via a microblogging site to ease nerves in global financial markets where investors were jittery over news that Pakistan was seeking debt relief. debt covering all outstanding debt, including commercial loans.

“In view of the climate-induced disaster in Pakistan, we are seeking debt relief from bilateral Paris Club creditors,” the finance minister tweeted from New York.

The Minister added “we do not seek or need any help from commercial banks or Eurobond creditors”.

This is the third time that Pakistan’s debt will be rescheduled by the 17 members of the Paris Club in the last 20 years. Earlier, after Pakistan became a US ally in the war on terror, the Paris Club rescheduled loans for 15 years. For the second time, the debt was rolled over for three to four years following the Covid-19 epidemic.

“We plan to ask for Paris Club loans to be deferred for a few years and then ask member countries to swap debt with climate change finance initiatives,” Ismail said in an interview with The Express Tribune.

Pakistan’s public sector external debt stood at $97 billion in June this year, including $9.7 billion to the Paris Club, according to finance ministry documents.

This year, Pakistan is expected to repay $1.1 billion of Paris Club debt out of a total of $10 billion. Some $400 million of Japanese debt is due this year, followed by $300 million from France, $200 million from the United States and about $100 million from Germany, according to the Ministry of Foreign Affairs. Economic Affairs.

The $1.1 billion Paris Club debt rescheduling will immediately create a respite of around Rs 260 billion that the country can use to help flood victims.

Of the $10 billion, $8 billion is owed to five countries – Japan $4.6 billion, France $1.6 billion, Germany $1.3 billion, the States United States $1.1 billion and South Korea $415 million, according to the documents.

Austria gave $24 million, Belgium $17 million, Canada $50 million, Finland $3 million, Italy $161 million, Netherlands $78 million, Norway $10 million, Russia $72 million, Spain $63 million, Sweden $88 million, Switzerland $79 million and the United Kingdom. $5 million.

Ismail’s statement marks a break with his earlier stance when he ruled out the possibility of debt rescheduling.

The finance minister said it was possible that Paris Club member countries could refinance their bilateral debt without placing the condition of first obtaining the refinancing of commercial loans.

He said Pakistan would repay the $1 billion bond due in December, which was on schedule as the country had no plans to seek renewal of the commercial loan. “We have serviced all of our commercial debt and will continue to do so.”

The minister said Pakistan’s Eurobond maturing by 2051 was only $8 billion, which was not a heavy burden. “A significant part of our debt comes from friendly countries, which have declared that they will renew their deposits.”

Prime Minister Shehbaz Sharif met with the Managing Director of the IMF two days ago with a request to ease the conditions and release the remaining amount of the loan under the Extended Financing Facility.

The prime minister asked the IMF managing director to release the remaining $3 billion in advance, Ismail said, adding that Pakistan hoped the IMF would respond positively as the country was unable to meet the conditions. and then obtain the remaining loan in three installments.

“We expect the IMF to contribute at least two tranches and release the amount upfront,” the minister said.

Global lenders have remained reluctant to lend in the current fiscal year. In fiscal year 23 from July to August, international creditors disbursed just $424 million, or 1.9% of the annual estimate of $22.6 billion, according to statistics released Friday by the Ministry of Economic Affairs.

The largest loan of $200 million was provided by Saudi Arabia under the Oil Deferred Payment Facility during the two-month period. Of the rest, the World Bank gave $118 million and the Asian Development Bank $71 million.

The $1.1 billion tranche from the IMF was released in September, which would be part of the next monthly debt bulletin.

However, Paris Club debt rescheduling alone will not solve Pakistan’s problems. The country also owes 16 billion dollars to countries outside the Paris Club, mainly China, to which Islamabad owes 14.5 billion dollars.

Overall, Pakistan faces a daunting challenge to secure more than two-thirds, or $66 billion, of total public and publicly guaranteed external repayments in five years.

Repayments of $66 billion in foreign debt do not include interest payments on these loans, which are estimated at $9.4 billion over the same period.

Published in The Express Tribune, September 24e2022.

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