Pakistan to receive Paris Club debt relief over coronavirus

Pakistan has been included in the group of countries that will be entitled to debt relief as part of the G20 debt relief deal, the Paris Club of creditor nations announced on Wednesday.

Other countries whose debt service has been suspended include Chad, Ethiopia and the Republic of Congo.

The Group of 20 leading economies and the Paris Club, an informal group of state creditors coordinated by the French finance ministry, agreed in April to freeze debt payments of the 77 poorest countries this year to free up cash to enable them to fight the COVID-19 pandemic.

The latest agreements raise the number of countries to receive debt relief to 12 under the deal with a total of $1.1 billion in debt deferred as a result, the Paris Club said, adding 30 countries had requested for the facility.

The group was founded in 1956 and is made up of major industrialised nations that provide bilateral loans.

In all, 77 countries with a combined debt of $36 billion are eligible for the moratorium this year. Loan payments not made this year are to spread out over three years beginning in 2022.

Virus lockdowns have put severe strains on government revenues, just as many nations need to step up health spending to combat the new disease.

In April, major international creditors had said they would relieve the world’s poorest countries of debt payments this year to help them deal with the coronavirus pandemic that has sparked the steepest downturn in the global economy since the 1930s.

French Finance Minister Bruno Le Maire had told reporters some 76 countries, including 40 in sub-Saharan Africa, would be eligible to have debt payments worth a combined $20 billion suspended by official and private creditors, with a remaining $12 billion in payments due to multilateral institutions to be sorted out.

“We have obtained a debt moratorium at the level of bilateral creditors and private creditors for a total of $20 billion,” Le Maire had told journalists.

He spoke just before Group of Seven (G7) finance ministers and central bank governors who had thrown their support behind temporary debt relief to the poorest countries, as long as it was backed by the G20 and the Paris Club.

In a joint statement, they said they were ready to provide “a time-bound suspension on debt service payments due on official bilateral claims for all countries eligible for World Bank concessional financing” if joined by China and other countries in the Group of 20 major economies, and as agreed with the Paris Club group of creditors.