ISLAMABAD: Pakistan on Thursday welcomed the G-20 move to suspend debt servicing for 76 developing countries, saying it would have substantial impact on economies reeling from the Covid-19 pandemic.

“The prime minister appreciated debt relief measures by G-20 countries, IMF (International Monetary Fund) and World Bank for developing countries, including Pakistan,” the PM Office said in a statement.

Pakistan, which is itself under heavy external debt, has been on the forefront advocating debt relief and debt restructuring for struggling economies so that they could spend their resources on saving lives.

Prime Minister Imran Khan had on April 12 launched an international appeal for debt relief. He urged the world leaders to help developing countries in dealing with the impact of Covid-19 through debt relief and restructuring so that fiscal space could be created for them to carry out relief activities in their countries.

Pakistan’s total external debt is $107 billion and in the last fiscal year (2018-19), $11.6 billion was paid to service these loans.

Qureshi calls it Islamabad’s diplomatic achievement

The PM’s call for debt relief, called as ‘Appeal for Global Initiative on Debt Relief’ was preceded by an extensive diplomatic outreach by the foreign ministry.

Endorsing PM Khan’s appeal, a spokesperson for the UN secretary general, Stephane Dujarric, said Mr Khan’s initiative was in the same spirit as the secretary general’s own position.

A meeting of the finance ministers and officials of G-20 countries on Wednesday agreed to suspend repayments of principal and interest for poor and least development countries for almost a year. Countries with debt service payments to the World Bank and the IMF are eligible to benefit from the relief. The initiative, which is being backed by Paris Club of creditors, would be effective from May 1.

Pakistan will also be able to benefit from the relief for being on an IMF programme.

Fiscal space

Foreign Minister Shah Mehmood Qureshi, while speaking at a press conference at the Foreign Office, said Pakistan would get fiscal space because of the relief package and the government would use it for the welfare of people, especially the most vulnerable segments of society.

He said that the detailed study on the impact of the G-20 debt relief was being undertaken, but it is going to be substantial.

Pakistan has announced a relief package of $8 billion. This includes food distribution and cash disbursement for the poor.

Mr Qureshi said that the immediate objective of the PM’s appeal for debt relief was for creating fiscal space and that has been achieved.

He hailed it as Pakistan’s diplomatic achievement. He recalled that there was scepticism at the time of launching of the initiative and he too had cautioned the prime minister about the risks. However, he said, it worked.

Responding to a question about seeking similar relief from China, the foreign minister said that the G-20 package would not have been possible without Beijing’s support. Moreover, he maintained that the focus has to be on international financial institutions because China’s share in Pakistan’s external loans is very little.

“Lot of things can be done bilaterally and we will be doing that whenever needed,” he added.

Meanwhile, Resident Represen­tative of IMF in Pakistan Teresa Daban Sanchez called on Foreign Minister Qureshi to discuss the Covid-19 pandemic and its impact.

Mr Qureshi, during the meeting, underscored that any initiative for supporting developing countries to combat Covid-19 ramifications should be inclusive and without onerous conditions.

It should be recalled that besides debt relief, Pakistan is working with the IMF for a $1.4 billion concessionary financing arrangement to deal with economic impact of the coronavirus outbreak.

Published in Dawn, April 17th, 2020