Pakistan will reschedule its USD 2.41 billion worth of debt repayments in 2020 under the Debt Service Suspension Initiative, a move that the World Bank said will help the cash-strapped country mount an "effective response" to COVID-19.
According to the World Bank figures, Pakistan's total debt servicing due in 2020 is USD 8.9 billion, of which official multilateral stands at USD 3.4 billion, official bilateral USD 4.3 billion, non-official USD 850 million and USD 362.5 million is to bondholders, the Dawn newspaper reported on Sunday.
The USD 2.4 billion rescheduling will decrease the country's debt service payments to USD 6.5 billion during the year, translating into savings of 0.9 per cent of the GDP, it said.
The initiative will help the country "enable an effective crisis response. Borrowers therefore commit to use freed-up resources to increase social, health, or economic spending in response to the (COVID-19) crisis," the World Bank said in a statement.
The Debt Service Suspension Initiative (DSSI), however, does not cancel these payments but only postpones them to a later date. The suspension period will begin from May 1 and will last until end-2020.
Pakistan is the second largest beneficiary of the initiative following Angola. The initiative will free up much-needed fiscal space to allocate resources on livelihoods affected by the pandemic, the report said.
The suspension of payments will be NPV neutral, repayment period will be three years with a one-year grace period and be achieved either through rescheduling or refinancing.
However, the country was recently put on negative watch by the Moody's Rating agency after the government formally requested debt suspension under the initiative. The citing was prompted by uncertainties surrounding the participation of private sector creditors in the DSSI.
The call for DSSI came from the World Bank and International Monetary Fund (IMF) asking global lenders to suspend debt service payments of the poorest countries to help them manage the impact of COVID-19.
In April, the World Bank's Development Committee and the G20 finance ministers endorsed the call to free up resources of the poorest countries.
The IMF and the World Bank will support implementation of the DSSI by "monitoring spending, enhancing public debt transparency, and ensuring prudent borrowing," the report said.
