Pakistan has been included in the group of countries eligible for debt relief on all principal and interest payments to official bilateral creditors announced by the G20 countries in their Riyadh meeting on Wednesday. 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.

On Wednesday, 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.

In the meantime, the G20 countries will consult with the IMF and WB on whether the suspension period should be extended to June 2021 or not, depending on how the Covid related challenges are shaping up by then.

The full definition of what is included in the definition of “official bilateral” creditors is yet to be decided. The IMF will be responsible for drafting the rules of how this definition is to be applied. Authorities in Pakistan are confident, but not yet certain, that the definition will be broadly applicable on all categories of debt on which the country has servicing obligations this year, including bilateral reserve extension facilities extended by the Kingdom of Saudi Arabia, China and the United Arab Emirates.

Saudi Arabia chairs the group currently, and hosted the meeting from Riyadh. “All bilateral official creditors will participate in this initiative” a communique issued after the meeting said. Saudi Finance Minister Mohammed Al-Jadaan, who currently chairs the group, said this means “poor countries don’t need to worry about repaying over the course of the next 12 months.”

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.

After this, $6.744bn is owed to non-Paris Club bilateral creditors, of which $3.48bn is to China, $2.245 to Saudi Arabia and $1bn to the UAE. After this the country has $1.627bn payments to multilateral creditors, of which half is to the Asian Development Bank and the rest to the World Bank. Paris Club creditors, who are also to be included in the terms of the debt relief plan, are owed $787 million next year, with Japan and France accounting for the bulk of the amount.

Meanwhile, the Japanese government has decided to provide another $1 million to Pakistan through the United Nations High Commissioner for Refugees (UNHCR) to equip people and Afghan refugees to fight Covid-19, Dawn said 

Prior to this, the Japanese government had provided $2.41m to Pakistan to support its efforts to combat the infection, including $1.62m through the United Nations Children’s Fund (Unicef), $540,000 through the International Organisation for Migration (IOM) and $250,000 through the International Federation of Red Cross and Red Crescent Societies (IFRC), a press release of Japanese assistance said on Wednesday.

Through the fresh grant assistance, the UNHCR will provide necessary technical assistance and equipment and material to prevent the spread of Covid-19 by considering the situation on the ground at the request of the government. The support will boost Pakistan’s capacity to quickly track the coronavirus-affected persons and treat them accordingly.

Japanese Ambassador Matsuda Kuninori, while appreciating the tremendous efforts of the Pakistan government, said that the spread of Covid-19 had become a serious issue worldwide and it was now crucial for the international community to take necessary measures to address this disease.

https://www.dawn.com/news/1549626/japan-offers-1m-to-help-afghan-refugees-fight-covid-19-in-pakistan