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November 25, 2020

Cabinet approves G-20 moratorium on $2.7bln loans

Business

November 25, 2020

ISLAMABAD: Federal cabinet on Tuesday nodded to suspension of bilateral loan repayments worth $2.7 billion announced by G-20 countries in April to free up monetary resources for Pakistan.

The decision was taken after reviewing a summary, sources said. Out of total 21 countries, 16 countries provided 27 loan agreements having worth of $800 million. Now the remaining five countries including Saudi Arabia, Japan and others loan agreement having worth of $1 billion would be approved by the cabinet in coming few weeks period, said the sources.

Pakistan’s bilateral loan worth $2.7 billion has been suspended in two phases. In first phase, 21 countries suspended loan repayment of $1.8 billion for May 1 to December 31. In the second phase, bilateral loan repayment including principal and mark-up of worth $900 million were suspended for five plus one year period from January 1 to June 30 next year.

Overall, the country got loan suspension of $2.7 billion in totality from G-20 initiative of loan suspension of COVOD-19 hit countries. The country signed memorandum of understanding with each country separately and now these loan agreements were tabled before the cabinet for seeking final approval.

The sources said there are 57 loan agreements with 21 countries. The Economic Affairs Division established special desk to undertake the task in consultation with ministries of law and finance and other stakeholders.

“US provided 10 bilateral loans so the number of loans is around 57. We clubbed the loan agreements of special areas/sectors so that the standard loan agreement has been devised to sign with each bilateral donor,” said an official.

The G-20 countries extended the loan suspension facility for low income countries for second phase. It would provide additional benefit to Islamabad to the tune of $900 million on account of loan repayment, according to the sources. This facility has been provided for five years with grace period of one year. Economic affairs division will be assigned to sign memoranda of understanding with all these countries for availing additional loan suspension facility of $900 million.

Prime Minister Imran Khan had pressed upon the international community to announce loan suspension for COVID-hit economies of poor world and G-20 countries came up with the facility in April. Then the G-20 countries extended the facility for second phase and several countries loan repayments were suspended and it provided breathing space to poor countries.