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ISLAMABAD: Economic Affairs Division (EAD) has sought nod from the Economic Coordination Committee (ECC) to sign 15 debt rescheduling agreements with different creditors, finalized under Debt Service Suspension Initiative (DSSI), official sources told Business Recorder.

Sharing the details, the sources said G-20 Finance Ministers in their meeting held in April 2020 announced debt relief for IDA eligible countries to mitigate the socio-economic impact of Covid-19, known as DSSI-1. The ECC, in its meeting held on May 20, 2020, approved and authorized EAD to apply for debt relief, and proceed with signing of the MoUs with the creditor countries.

The sources said, pursuant to the ECC decision, Economic Affairs Division entered into negotiations with bilateral creditors. To date, under DSSI-1, 31 debt rescheduling agreements with 19 creditor countries have been signed. Negotiations for finalization of debt rescheduling agreements with the UAE are currently under way. DSSI-1 yielded debt relief of $1.608 billion.

The G-20 in their meeting held on October 14, 2020, extended the DSSI for a period of six months, i.e., January-June 2021, known as DSSI-II (extension). The ECC, in its meeting on November 20, 2020, authorized EAD to proceed with modalities for debt relief under the DSSI-II. So far, 29 debt rescheduling agreements with 13 creditor countries have been signed. Negotiations for finalization of debt rescheduling agreements with Russia, UAE and USA are ongoing. DSSI-II yielded debt relief of $1.130 billion.

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

The G-20 Finance Ministers in their meeting held on April 7, 2021 extended debt relief for a further and final period of six months (Jul - Dec 2021), known as DSSI-III (final extension). The ECC, in its meeting on June 9, 2021, authorized EAD to proceed with modalities for debt relief under the DSSI-III. So far, 19 debt rescheduling agreements with 5 creditor countries have been signed whereas negotiations for finalization of debt rescheduling agreements with Belgium, Italy, Japan, Russia, Spain, UK and USA are ongoing. Debt relief under the DSS-III is around $ 950 million.

According to sources, six agreements for DSSI-II with Italy, Japan and UK have been negotiated and finalized. Eight agreements for DSSI-III with Austria, France, Korea, Netherlands, Sweden and Switzerland have also been negotiated and finalized and one combined agreement for DSSI-1, DSSI-II and DSSI-III with Saudi Arabia has also been finalized.

According the sources, debt stock of Italy, Japan and UK was $5.990 billion as on December 31, 2022 of which debt suspended under DSSI-II (Jan-Jun 2021), was as follows: Italy $ 1.05 million, Japan, $ 197.98 million and UK $ 0.31 million (total $ 99.34 million).

The loans of seven other countries amounted to $3.370 billion as on June 30, 2021, of which loan of Austria was $ 26 million, France, $ 1.725 billion, Korea, $ 422 million, Netherlands $ 84 million, Saudi Arabia (DSSI-1, II & III) $ 961 million, Sweden $ 73 million and Switzerland $ 79 million.

The debt suspended (July-Dec-2021) was $ 195.61 million, of which Austria’s loan was $ 2.70 million, France $ 107.73 million, Korea $ 27.39 million, Netherlands $ 3.74 million, Saudi Arabia (DSSI-1, II & II), $ 38.56 million, Sweden $ 5.89 million and Switzerland $ 5.89 million.

Keeping in view agreed terms and conditions, approval of the ECC is solicited for signing of 15 debt rescheduling agreements with various creditor countries. Secretary EAD, being the authorized person, will sign these agreements on behalf of the Government of Pakistan.

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

Copyright Business Recorder, 2022

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