G20 includes Pakistan in debt relief plan

G20 includes Pakistan in debt relief plan

Riyadh (Web Desk): The G20 group of leading economies, in their Riyadh meeting on Wednesday, included Pakistan in the group of countries eligible for debt relief on all principal and interest payments to official bilateral creditors.

The G20 grouping had been urged by the World Bank and the International Monetary Fund (IMF) to extend debt relief to the poorest countries to free up their resources for the Covid-19 related challenge instead.

The G20 made the decision to include all countries grouped under the World Bank’s International Development Association (IDA) to be eligible for debt relief under the proposed plan. The IDA group contains 76 countries of which Pakistan is one. The G20 worked with a grouping of African countries as well as the multilateral lenders IMF and WB to decide on the terms of the debt relief.

The suspension period for debt relief will start from May 1 and continue till Dec 1, 2020. All debt service falling due in this period will be packaged into a new loan on which the payments will not start until June 2022. Then it will be paid over the subsequent three years. A standardized term sheet has been made for all the payments clubbed under the relief plan.

An IMF report shows Pakistan has $12.731 billion of external debt repayment obligations in FY2021 that could be subject to treatment under the debt relief plan.

Although the plan targets official bilateral creditors, it is understood by authorities around the world that commercial creditors will also be asked to follow the same template. Pakistan has $2.545bn of debt service payments owed to commercial creditors next fiscal year, of which $2.3bn is to China.