$846 million debt repayment suspended


Pakistan and Saudi Arabia on Thursday signed agreements to freeze $846 million in debt repayments for up to six years under a G20 debt suspension initiative.

Two agreements have been signed by the Ministry of Economic Affairs and the Saudi Fund for Development (SFD) under the Debt Service Suspension Initiative (DSSI) for the period of May 2020 to December 2021, according to a press release issued by the ministry.

Saudi Ambassador to Pakistan Nawaf bin Saeed Al-Malkiy attended the signing ceremony in Islamabad. SFD’s Managing Director for Asia, Dr Saud Ayid R Alshammari, represented the fund at the ceremony.

The $846 million, which was to be paid in the period from May 2020 to December 2021, will now be repaid over a six-year period starting in 2022 in semi-annual installments, he added.

Pakistan has already used the debt suspension facility because it failed to pay Saudi Arabia $846 million. However, the agreements were signed recently.

With support from the SFD – one of Pakistan’s major bilateral development partners – as well as other bilateral creditor countries, the G20 DSSI has provided fiscal space to address health and socio-economic needs. emergency from Pakistan, the ministry said.

The total amount of debt that has been suspended and rescheduled under the DSSI, covering the period from May 2020 to December 2021, is nearly $3.8 billion, he added.

This includes $3 billion in principal repayments and $814 million in interest payments on those loans.

Of this amount, $1.6 billion was renewed over four years and the remaining $2.2 billion over six years.

Pakistan has already concluded and signed 80 agreements with 21 bilateral creditors for the rescheduling of its debt amounting to $2.1 billion under the DSSI.

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The signing of agreements with the SFD brings the total rescheduled amount to $2.9 billion.

The Ministry of Economic Affairs said negotiations for the remaining $754 million were underway. Agreements for this amount are expected to be signed with the respective bilateral development partners during the current fiscal year.

Pakistan has secured about $1 billion in profits in the current fiscal year under the G20 initiative, which reduced its repayment requirement amid rising external debt and falling foreign exchange reserves. .

Gross official foreign reserves held by the SBP fell further to $16.4 billion last week despite massive injections from foreign creditors over the past three months.

In its latest report, the International Monetary Fund (IMF) said extending the DSSI until the end of December 2021 provided short-term relief to Pakistan.

He added that the forward-looking path of gross financing needs (GFN) had been revised upwards due to a higher than expected reliance on short-term domestic issuance since late March 2021.

The IMF has now projected Pakistan’s gross external financing needs at a record $35 billion for the next fiscal year, up from around $30 billion in the current fiscal year.

However, the $30 billion figure seems lower, as the IMF has projected a current account deficit of just $13 billion for the current fiscal year.

The deficit has already jumped to $11.6 billion in the July-January period, indicating that the government could even break through the record deficit of $19 billion, recorded in the last year of the previous PML-N government. .

Due to increased external loan repayments, Pakistan is now heavily dependent on rolling over maturing debt.

Even for the current fiscal year, the government is expected to secure $6.6 billion in loan refinancing from China, including refinancing of $4 billion in SAFE deposits and $2 billion from the United Arab Emirates.

Published in The Express Tribune, March 4and2022.

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Tana T. Thorsen