Win-Win: Pakistan, G-20 Agree on Loan Deferment

Pakistan has successfully managed to get loan deferment by G-20 countries along with Paris Club creditors under Debt Service Suspension Initiative (DSSI), News360 learned.

Pakistan will get a major relief in repayment of the external debt worth a gigantic volume of $US 1.70 billion which it had borrowed from different countries in the bloc.

The officials of the ministry of economic affairs told News360 that Pakistan signed some 19 agreements with G-20 countries on loan deferment.

These agreements also include debts from member countries of the Paris Club.

The amount that was supposed to be used for paying installments can now be used by Pakistan for anti-coronavirus measures as the country is in dire need of funds for procuring coronavirus vaccine and other steps to offset the economic effects of the pandemic.

Read Also

FATF Nod: SBP Extends Prize Bonds Redemption Deadline

The officials told that Pakistan had successful negotiations with France, Switzerland, and China to defer repayment of loans and the parties reached agreements too.

How are they beneficial for the economy?

Sustainable Development Policy Institute (SDPI) Executive Director (ED) told News360 that relief in external debt payments would fortify the Pakistani Rupee against US Dollar (USD).

Hence, the rise in debt volume owing to the difference in the exchange rate would stall.

ED told that the depreciation of one rupee against USD increases Pakistan’s debt by Rs 130 billion.

The move will reduce pressure on external debt payments.

How it will benefit the masses?

SDPI ED said that the relief would balance the import bill as well.

Pakistan would not have to pay an additional amount, due to a strengthened rupee against the dollar, for the import of crude oil and other energy sources such as Liquefied Petroleum Gas (LPG).

Payment of $US 1 Billion to Saudi Arabia

The officials of the ministry of economic affairs told that Pakistan had recently returned $US1 billion to Saudi Arabia as per the schedule and did not seek additional time.

If Saudi Arabia had deferred the debt installment for Pakistan, it would have to do it for many poor African countries too.

The ministry officials asserted that Pakistan was confident that it would reach an agreement with G-20 countries on loan deferment.

Therefore, the installment was paid timely to Saudi Arabia.

Will loan deferment help procurement of Covid-19 vaccine?

The ministry officials told News360 that some Rs. 70 billion have been allocated for coronavirus related projects in the current fiscal year’s budget.

The relief in loan repayment would ensure the availability of funds.

Pakistan has also made an advance payment of $US150 million for procurement of the Covid-19 vaccine.

It will also help the country to expedite its healthcare programs amid the coronavirus situation.

A dedicated healthcare facility for coronavirus patients will be built in Islamabad with a worth of Rs 230 million.

The loans have been deferred until July 2021. After the deadline, the bloc will review the overall global pandemic situation and decide to extend or issue a new repayment schedule.