Pakistan formally requests G-20 debt relief

ISLAMABAD: Pakistan, with cash shortages, has asked members of the G-20 nations for debt relief with a commitment not to take out new non-concessional loans, except for those allowed under IMF and World Bank guidelines, according to a media report.

Formal requests were sent to individual countries on Friday under the G-20 Debt Service Suspension Initiative, a senior official with The Express Tribune said Monday.

On April 15, the Group of Top 20 Economies announced a freeze on debt payments for 76 countries, including Pakistan, during the period May to December 2020, as they struggle to tackle the pandemic, subject to the condition of each country to make a formal request. .

However, one of the eligibility criteria was that the beneficiary country would not contract new non-concessionary debt during the suspension period, apart from the agreements under this initiative or in compliance with the limits agreed under the Debt Limit Policy (DLP). o IMF WBG non-concessional loan policy.

The Pakistani government has not mentioned debt relief in the request letters, although it has assessed the cumulative relief amount at $ 1.8 billion for the period May to December 2020.

Pakistan has also informed the IMF, the World Bank and the Paris Club of its decision to seek formal debt relief.

Last month, IMF Resident Representative in Pakistan Teresa Daban had said that Pakistan did not officially make any requests for debt relief to G-20 countries.

Pakistan owes $ 20.7 billion to 11 members of the Group of Top 20 Economies. Of this amount, an amount of $ 1.8 billion would expire in December 2020, including interest payments, according to the Ministry of Economic Affairs.

In these eight months, Pakistan will have to repay $ 1.8 billion to its 11 members. This includes repayments of $ 1.47 billion of principal loans and $ 323 million of interest on the loans, the newspaper said.

In addition, the Saudi debt of $ 613 million and the Chinese debt of $ 309 million will mature, according to the Ministry of Economic Affairs.

In this period, Pakistan must also return $ 23 million to Canada, $ 183 million to France, $ 99 million to Germany, $ 6 million to Italy, $ 373 million to Japan, $ 47 million to South Korea, $ 14 million to Russia, $ 1 million to the United Kingdom. and $ 128 million to the United States.

Under 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 returned during the IMF program period, according to the report.

These loans were guaranteed for only one year to avoid default on international debt obligations, but the IMF had put the condition that this money would be renewed every year until the program ends in 2022.

If the G-20 member countries accept the request, Pakistan will have a four-year period to repay the amount, including a one-year grace period.

Pakistan assured G-20 members that it would not incur new non-concessional debt during the suspension period other than agreements under the initiative or in compliance with the limits agreed under the IMF Debt Limit Policy or Group Policy of the World Bank on non-concessional loan.

An IMF report had estimated Pakistan's post-COVID-19 external financing requirements at $ 25.8 billion with a financial gap of $ 2 billion.

For the upcoming fiscal year, the IMF projected Pakistan's gross financing requirements at $ 29.3 billion and a financial gap of $ 1.5 billion.

The IMF had approved emergency loans worth $ 1.4 billion, which greatly reduced the expected financial gap, but the amount did not meet all the needs.

G20 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. International financial institutions were expected to establish a monitoring system.

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 IMF.