(22 Nov 2020) Pakistan has so far secured $800 million worth of debt freeze deals from 14 members of the richest club of G-20 countries, as it still awaits ratification by remaining six countries including Saudi Arabia and Japan involving $1 billion transactions.
Pakistan along with 76 other poor African countries had qualified for the G-20 debt relief initiative, announced in April this year for May-December 2020 period, to combat the adverse impacts of the pandemic.
During the past seven months 14 countries ratified their agreements with Pakistan, which has provided fiscal space of $800 million to Islamabad for the time being, according to the government sources. In addition to these 14 nations, two other countries had also approached to extend debt relief to Pakistan.
The official documents showed that Pakistan has not yet finalised the debt rescheduling modalities with Japan, Russia, Saudi Arabia, United Arab Emirates and the United Kingdom.
Although these six countries have not yet ratified the debt relief related agreements, these G-20 members are expected to conclude the deal before end of next month, said a senior official of the Ministry of Economic Affairs while responding to a question. He said that Pakistan was not making repayments to these six countries too, on the understanding that these members would eventually sign-off the deals.
Pakistan was expecting a total $1.8 billion temporary debt relief from the members of G-20 nations for May-December 2020 period, according to the Ministry of Economic Affairs. This included $1.47 billion principal loans repayments and $323 million interest on the loans.
The economic affairs ministry’s estimates had shown that Pakistan can get $613 million worth of temporary relief from Saudi Arabia, $309 million from China, $23 million from Canada, $183 million from France, $99 million from Germany, $6 million from Italy, $373 million from Japan, $47 million from South Korea, $14 million from Russia, $1 million from UK and $128 million from the US.
So far, Pakistani authorities have entered into 27 debt rescheduling agreements with about 16 countries, according to the Ministry of Economic Affairs.
The maximum relief was expected from Saudi Arabia to the tune of $613 million for May-December period, said the sources. Japan was also expected to provide $373 million relief. However, agreements with these nations were still pending the final nod. The Russian Federation is also expected to ratify the revised terms by end of next month, which once ratified could provide temporary relief of $14 million.
Pakistan owes $25.4 billion to the Group of 20 rich nations as of August this year. On April 15, the G-20 nations announced a freeze on debt repayments from 76 countries, including Pakistan, during May to December 2020 period, subject to the condition that each country would make a formal request.
Saudi Arabia has also not extended the $3 billion financial assistance package and has already prematurely withdrawn $1 billion that Pakistan paid back by arranging another loan from China. Pakistan may also payback $1 billion next month to the Kingdom, a year ahead of Pakistan’s expectations.
The G-20 nations have also decided to extend the debt relief initiative by another six months (January-June) 2021 due to second wave of the Covid-19 disease that has again started affecting the nations.
The Economic Coordination Committee of the cabinet on Friday approved to make another formal request to the G-20 nations for extension in debt relief initiative for another six months. This time, the Ministry of Economic Affairs has estimated that Pakistan can potentially get relief of $915 million, including $273 million in interest payments during January-June 2021 period.
The maximum relief of $385 million is expected from China, followed by $211 million from Japan, $104 million from France, $53.6 million from Germany, $65 million from the US, $12 million from Saudi Arabia, $7 million from Russia and half a million dollar from the UAE. In case, Japan and Saudi Arabia also delay the relief under the second phase, the net benefits may come down to $685 million in the second phase, said the sources.
The UAE on Thursday had suspended issuance of new visit visas to Pakistan besides 11 other countries. There is no reason given by UAE regarding the decision. Pakistan foreign office confirmed the suspension and said, “We have learnt that the UAE has temporarily suspended the issuance of new visit visas until further announcement for 12 countries, including Pakistan. The suspension is not applicable on already issued visas.”
The UAE has also suspended Pakistan’s work visas and there is a need to take up this matter on priority with the UAE authorities, said Senator Anwer Baig, while speaking in The Express News show – The Review. Senator Baig said that Pakistan needed to strike a balance in its relations with the Gulf and other countries. The government should also take measures that help the country get rid of seeking assistance from friendly nations, he added.
However, the entire government is jubilant about the $1.1 billion current account surplus during July-October period of this fiscal year, conveniently ignoring over 10% dip in exports during this period.
Published in The Express Tribune, November 22nd, 2020.