In an update from Finance Ministry, G20 nations are expected to approve debt repayment relief of around $12 billion for Pakistan in upcoming meeting. The finance ministry of G20 is already working on the Debt Deferment Plan. Under the plan, each country from the selected 76 countries will be evaluated on basis of their outstanding debt and economic condition.
G20 nations have agreed to freeze bilateral loan repayments for poor economies up till end of this year and first quarter of 2021. The G20 nations have declared this step as extremely crucial to tackle the health and economic crisis facing struggling economies. Mohammad Al-Jadaan, the finance minister of Saudi Arabia said that the total relief by G20 nations can exceed initial commitment as private creditors are also encouraged to play their role.
The debt deferment will start commencing from May 1, 2020 while Pakistan will start getting the relief in 2021. Apart from loan repayment reliefs from IMF, World Bank and ADB, the Paris Club will defer both the principle and interest payments of loan for countries including Pakistan. Moreover, Pakistan is expected to get debt deferments of $5 billion from Saudi Arabia and $3 billion from China.
The amount of debt relief in total is a major news for Pakistan’s economy as the country was in urgent need of relief regarding debt liabilities.
Pakistan currently owes debt servicing of $28 billion during next three years to multilateral creditors. The current debt relief from G20 and IMF will address more than one-third of debt payments for Pakistan. The relief in debt payments along with incoming remittances can help finance ministry to deal with budget deficit. Currently, the estimates for economic shocks to Pakistan are severe according to statement released by State Bank of Pakistan.