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Pakistan secures Paris Club debt moratorium

June 11, 2020

By News Desk

PARIS/MANILA/KARACHI: In an effort to ease the sting the coronavirus crisis has had on Pakistan’s economy, the country has managed to secure a moratorium on debt repayments from the Paris Club, as well as a $500 million loan from the Asian Development Bank’s (ADB).

Pakistan joined Ethiopia, Chad and DR Congo to become the latest countries to secure the Paris Club’s moratorium on debt repayments, the group of creditor nations said. In mid-April, the G20 and the Paris Club agreed to waive most debt payments for the world’s poorest countries in 2020, as sweeping virus lockdowns upturned the global economy.

Since then, 30 eligible countries have officially asked for a moratorium, the group said. The new agreements announced on Tuesday mean a dozen nations have now agreed on such a measure. “For these 12 countries, the total amount... thus deferred to date is around USD 1.1 billion, plus the deferment of pre-existing arrears,” said the Paris Club.

The group was founded in 1956 and is made up of major industrialised nations that provide bilateral loans. In all, 77 countries with a combined debt of $36 billion are eligible for the moratorium this year.

Loan payments not made this year are to spread out over three years beginning in 2022. Virus lockdowns have put severe strains on government revenues, just as many nations need to step up health spending to combat the new disease.

Meanwhile, the Asian Development Bank (ADB) approved a loan worth $500 million to Pakistan to help the country’s coronavirus health and economic response and “protect poor” citizens, it said in a statement issued on Wednesday.

The development — part of the Covid-19 Active Response and Expenditure Support (CARES) Programme — comes following a meeting of the ADB’s Board of Directors in Philippines’ capital, Manila.

In its statement, the bank said the loan would help the Pakistani government “deliver social protection programs to the poor and vulnerable, expand health sector capabilities, and deliver a pro-poor fiscal stimulus to boost growth and create jobs as the country fights the novel coronavirus disease (Covid-19) pandemic”.

In this regard, ADB President Masatsugu Asakawa said: “The Covid-19 pandemic hit Pakistan at a critical point in its ongoing economic recovery program. We are fully committed to supporting Pakistan through this difficult period.

“This loan will help plug selected funding gaps as the government implements its countercyclical development plan, including strengthening the country’s social safety net and health sector capacity.” The ADB noted that the pandemic was forecast to hamper Pakistan’s economic growth, revenue collection, and employment. The country’s response to the outbreak of the respiratory illness was hindered owing to a low ration of healthcare workers to population and a lack of hospital beds.

The ABD’s CARES programme would aid “various government initiatives, including cash assistance payments to 3 million daily wage workers, of whom approximately 23 per cent are women, and cash grants to 7.5 million families under the Kifalat social protection program”, the statement added. “The program will also help fund the acquisition of additional ventilators and Covid-19 protective kits for medical staff, including appropriately sized personal protective equipment for women. To prevent job losses, the loan will support young entrepreneurs, including at least 25 per cent women, through the government’s youth entrepreneur scheme, Kamyab Jawan,” it noted further.

The $500-million loan, it explained, was funded via the Covid-19 pandemic response option (CPRO) — part of its $20 billion additional aid announced April 13 for developing nations’ response to coronavirus — under ADB’s Countercyclical Support Facility.