Pakistan Prime Minister Imran Khan witnessed the signing ceremony of $1.5 billion loan agreements with three international financial institutions for combating the COVID-19 crisis in the country, it was reported on Saturday.

According to the Prime Minister Office, the agreements were signed on Friday with the World Bank (WB), Asian Development Bank (ADB) and Asian Infrastructure Development Bank (AIIB), reports Dawn news.

The ADB is extending $500 million under the COVID-19 Active Response and Expenditure Support Programme aimed at supporting the Pakistan government's efforts to strengthen the health system and mitigate socioeconomic impacts of the pandemic.

The AIIB is extending co-financing of $500 million under the same programme to augment the government's efforts to mitigate direct and indirect impacts of the COVID-19 pandemic.

Another agreement relates to the Securing Human Investments to Foster Transformation worth $500 million.

It aims to strengthen the civil registration and vital statistics, health and education systems essential for human capital accumulation, recognise and support the contribution of women to economic productivity and improve efficiency of the national safety nets.

The $1,500 million loan amount will be disbursed to Pakistan in the next few days.

 Pakistan will also reschedule $2.41 billion worth of debt repayments in 2020 under the Debt Service Suspension Initiative (DSSI).

The initiative will help the country “enable an effective crisis response. Borrowers therefore commit to use freed-up resources to increase social, health, or economic spending in response to the [Covid-19] crisis,” the World Bank said in a statement accompanying the release of the country specific data on the rescheduling.

Pakistan is the second-largest beneficiary of the initiative following Angola.

According to the World Bank figures, the country’s total debt servicing due in 2020 is $8.974bn, of which official multilateral stands at $3.4bn, official bilateral $4.32bn, non-official $850 million and $362.5m is to bondholders.

The $2.41bn rescheduling will decrease the country’s debt service payments to $6.53bn during the year, translating into savings of 0.9 per cent of the GDP.

The DSSI, however, does not cancel these payments but only postpones them to a later date. The suspension period will begin from May 1 and will last until end-2020.

The suspension of payments will be NPV neutral, repayment period will be three years with a one-year grace period and be achieved either through rescheduling or refinancing.

Pakistan has welcomed the initiative, as it will free up much-needed fiscal space to allocate resources on livelihoods affected by the pandemic. However, the country was recently put on negative watch by the Moody’s Rating agency after the government formally requested debt suspension under the initiative. The citing was prompted by uncertainties surrounding the participation of private sector creditors in the DSSI.

The call for DSSI came from the World Bank and International Monetary Fund (IMF) asking global lenders to suspend debt service payments of the poorest countries to help them manage the impact of Covid-19.

In April, the World Bank’s Development Committee and the G20 finance ministers endorsed the call to free up resources of the poorest countries.

The IMF and World Bank will support implementation of the DSSI by “monitoring spending, enhancing public debt transparency, and ensuring prudent borrowing.”

https://dawn.com/news/3000734/pakistans-2-41-bn-debt-payments-to-be-rescheduled