Federal cabinet green-lights G-20 moratorium on $2.7b loans

Federal cabinet approves loan suspension under G-20 debt relief initiative for COVID-19 hit countries

Mehtab Haider
This loan suspension is a provision given for five years with a grace period of one year. Photo: Geo.tv/ files

ISLAMABAD: The federal cabinet has granted approval to the Economic Affairs Division to sign agreements with 16 countries over the rescheduling of G-20 loans.

During Tuesday's federal cabinet meeting chaired by Prime Minister Imran Khan, the division submitted that G-20 countries had deferred payments on loans worth $1.7 to $2 billion given to Pakistan during the period of May-December this year.

The decision to defer loans and facility payments was taken in view of the coronavirus pandemic and will stay in effect till June 2021.

These 16 countries have signed loan agreements worth $800 million. Sources said the federal cabinet will review in the next couple of weeks loan agreements worth $1 billion with five countries including the Kingdom of Saudi Arabia, and Japan.

So far, loans worth $2.7 billion have been suspended in two phases. 

In the first phase, 21 countries suspended loan repayment of $1.8 billion for the time period of May 1 to December 31 this year. 

The second phase involves bilateral loan repayment including principal and mark-up worth $900 million suspended for five plus one year period from January 1, 2021, to June 30, 2021.

In totality, Pakistan received a loan suspension of $2.7 billion from G-20 countries' COVID-19 initiative.

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During Tuesday's meeting, signed memorandum of understanding (MoU) with these countries was presented before the federal cabinet for approval. According to sources, there are at least 57 loan agreements with 21 countries.

The Economic Affairs Division established a special desk to undertake the task in consultation with ministries of law and finance and other stakeholders.

“US provided 10 bilateral loans so the number of loans is around 57. We clubbed the loan agreements of special areas/sectors so that the standard loan agreement has been devised to sign with each bilateral donor,” said an official.

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The G-20 countries extended the loan suspension facility for low-income countries for the second phase. It would provide additional benefit to Islamabad to the tune of $900 million on account of loan repayment, according to the sources.

This facility has been provided for five years with a grace period of one year. The economic affairs division will be assigned to sign memoranda of understanding with all these countries for availing additional loan suspension facility of $900 million.

Prime Minister Imran Khan had pressed upon the international community to announce loan suspension for COVID-hit economies of the poor world and G-20 countries came up with the facility in April. Then the G-20 countries extended the facility for the second phase and several countries' loan repayments were suspended and it provided breathing space to poor countries.