The US extended an agreement to defer service payments on $132 million of Pakistan’s debt relief on Friday. According to the US embassy in Islamabad, after disastrous floods compounded the South Asian country’s economic difficulties.
Pakistan’s economy is in a balance-of-payments crisis, with a growing current account deficit, its currency falling to historic lows, and inflation approaching 27%. Severe floods overtook huge swaths of the country in late August, killing over 1,500 people and leaving $30 billion in damage. The damage fueled fears that Pakistan may be unable to satisfy its debt obligations.
US redirect essential resources in Pakistan – debt relief
The US ambassador to Pakistan, Donald Blome, signed the agreement to grant debt relief under the G20 debt service suspension plan, the embassy said in a statement, adding, “Our objective is to redirect essential resources in Pakistan.”
The rollover tied to the Paris Club Agreement in April 2020 to support 73 lower-income nations during Covid, under which the US offered relief on $128 million in debt to Pakistan.
The arrangement to postpone payments on that debt, as well as an additional $4 million, has now been renewed.Islamabad also requested that $2 billion in Chinese deposits be transferred to its reserves, according to a statement issued by Pakistan Finance
Ishaq Dar meeting with NongRong
Minister Ishaq Dar’s office following his meeting with Chinese envoy NongRong.
Dar reportedly requested the ambassador’s assistance in enabling the rollover of $US2 billion in SAFE China deposits due in March 2023. Earlier this year, Beijing refinanced Pakistan’s syndicate facility of $US 2.24 billion.
Miftah Ismail, Pakistan’s departing finance minister, stated last week that Islamabad was seeking debt relief from bilateral creditors in the aftermath of flooding. But stressed that the government was not seeking assistance from commercial banks or Eurobond creditors.
After the Financial Times reported that a United Nations development body was pressing the cash-strapped country to restructure its debt. The country’s bonds fell to less than half their face value. Ismail stated that the $1 billion bond would pay in full and on time later this year.
