Japan to defer $200mln debt payment under DSSI

ISLAMABAD: In a much-needed relief to Pakistan, Japan on Friday agreed to defer the payment of a debt worth $200 million, under the second phase of G20 Debt Service Suspension Initiative (DSSI).

The first agreement between two countries to defer a debt of approximately $370 million was reached on April 27, 2021, under the same initiative. The total amount of deferred debt has reached approximately $570 million, which would widen the fiscal space for the government of Pakistan to restore its economy affected by the Covid-19 pandemic.

The concessional loans, subject to debt deferral, were utilised for infrastructure development such as roads, tunnels, power plants and grids, irrigation, water supply, and drainage facilities in Pakistan from early 1990s to the mid-2010s.

These concessional loans have favorable conditions in terms of low interest rate, as well as long grace and repayment period. Under the second agreement, repayments for the debt and interest due between January 1 and June 30, 2021 would be rescheduled after December 15, 2022.

In addition to the debt deferral, Japan has also extended a total of $23.5 million in grants to Pakistan for supplementing its counter-Covid-19 measures.

The steps include delivery of diagnostic kits in February 2020, disbursement of a total of $7.41 million to UNICEF, IOM, IFRC, UNHCR, and UNOPS for providing hygiene items and alternative learning opportunities, and training health workers, etc in April-May period of 2020.

In December 2020, Japan also extended a Grant Assistance of $9.5 million to NDMA (National Disaster Management Authority) for procuring medical equipment, and in March 2021, another $6.59 million were extended to UNICEF by Japan for improving the vaccine cold-chain.

Matsuda Kuninori, Japan’s Ambassador to Pakistan, said, “I am aware that Pakistan's Covid-19-affected economy is on a solid recovery path, including the prospect of higher GDP growth”. “Next year, Japan and Pakistan are going to celebrate the 70th anniversary of the establishment of diplomatic relations and I strongly hope that a new chapter will be carved in the history of our friendship on the basis of Japan's development cooperation in the past decades” Kuninori added.