Pakistan seeks to reschedule $10bn of Paris Club debt: report

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Pakistan is asking for the rescheduling of $10 billion in debt owed to the Paris Club – a group of wealthy nations – in a bid to create respite for the cash-strapped government that is trying to rehabilitate over 33 million people affected by devastating floods, according to a media report on Saturday.

Prime Minister Shehbaz Sharif also asked the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, to provide the remaining loan of almost $3 billion in advance in November this year, the Express reported on Friday. Tribune, 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 requesting debt relief from bilateral Paris Club creditors,” the finance minister said in a tweet from New York.

The minister added, “we do not seek or need relief 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 past 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.

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 return $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 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 1 .1 billion and South Korea $415 million, according to the documents.

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 commercial loans. “We have serviced all of our commercial debt and will continue to do so.” The minister said Pakistan’s Eurobond that was due 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.” Meanwhile, Prime Minister Shehbaz Sharif met with Georgieva two days ago with a request to ease the conditions and release the remaining amount of the loan under the expanded financing facility.

The prime minister asked the IMF chief 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 to 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.

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 tranches from the IMF were released in September, which will 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.

The $66 billion foreign debt repayments do not include interest payments on those loans which are estimated at $9.4 billion over the same period, according to The Express Tribune.

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)

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