Rescheduling of accords under DSSI: EAD creates fiscal space of $4bn

ISLAMABAD: The Economic Affairs Division (EAD) has created a fiscal space of $4 billion through negotiations for rescheduling of agreements with the creditors under Debt Service Suspension Initiative (DSSI).

This was claimed by Minister for Economic Affairs, Omar Ayub Khan, at a recent meeting of the Federal Cabinet, after seeking approval for DSSI-1 and DSSI-II to sign rescheduling agreement of $ 821.2 million loans with Saudi Arabia.

The Economic Affairs Division briefed the Cabinet that the G-20 Finance Ministers, in their meeting held in April 2020, announced debt relief for IDA-eligible countries to mitigate the socioeconomic impact of Covid-19, known as DSSI-I.

The ECC in its meeting held on May 20, 2020, approved the proposal and authorized EAD to apply for the debt relief and proceed with signing of the MoUs with the creditor countries.

Pursuant to the ECC decision, EAD constituted a debt negotiation team comprising of EAD, Finance and Law & Justice Division officials, and entered into negotiations with bilateral creditors.

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According to EAD, to date under DSSI-1 31 debt rescheduling agreements with 19 creditor countries have been signed. Negotiations for finalization of debt rescheduling agreements with 13 creditor countries have been completed. Negotiations for finalization of debt rescheduling agreements with Italy, Japan, Russia, United Arab Emirates, United Kingdom and United States of America were in progress. DSSI-II debt yielded relief of $ 1.130 billion.

The G-20 Finance Ministers in another meeting held on April 7, 2021 extended the DSSI for a further and final period of six months (July-Dec 2021), known as DSSI-III (final extension).

The ECC, in its meeting of June 9 2021, authorized EAD to proceed with modalities for debt relief under the DSSI final extension. So far 19 debt rescheduling agreements with five creditor countries have been negotiated, finalized and are in the signing phase. Negotiations for finalization of debt rescheduling agreements under DSSI-III with the remaining bilateral creditors were currently underway. Debt relief under the G-20 DSSI (final extension), i.e., July-December, 2021 was around $ 952 million.

Two agreements with Saudi Arabia for rescheduling have also been finalized for DSSI-1 and DSSI-II; debt stock as on March 24, 2020 was $ 878 million whereas debt suspended (May 2020-June 2021) was as follows: principal, $ 870.37 million, interest $ 41.43 million - total $ 820.80 million.

Foregoing in view, approval of the Cabinet was solicited for signing of debt rescheduling agreements with Saudi-Arabia in terms of Rule 6(1) (h) of the Rules of Business, 1973. The Secretary EAD, being the authorized person, would sign these agreements on behalf of the Government of Pakistan.

The summary was not circulated to stakeholders since the debt rescheduling agreements were negotiated by the debt negotiation team, and individual agreements had been duly cleared by the Finance Division and vetted by the Law & Justice Division.

During the discussion, Minister for Economic Affairs, Omar Ayub Khan, highlighted that $725 million had been arranged from bilateral/ multilateral donors to procure Covid-19 vaccines and inoculate the citizens free of cost.

He maintained that as a result of successful negotiations for rescheduling of agreements under debt service suspension initiative, a fiscal space of $ 4 billion had already been created.

Copyright Business Recorder, 2022