The total US assistance for Pakistan has been
estimated at $6.5 billion after the events of September 11. Unlike the
previous governments which used to spend borrowed money lavishly for
their princely life, a large portion of that financial assistance has
been used for debt retirement by the present government.
The break down of this assistance consisted of $3
billion, $600 million, $300 million and $400 million budgetary
supports. Around $1 billion logistic support payments, around $500
million from OPIC and a one billion dollar write off.
The US government has recently announced $3 billion
five-year package for Pakistan, out of which the government was
intended to earmark $1 billion for debt retirement.
The US package includes $1.5 billion for defence
purchases and the remaining for economic assistance.
Of this $3 billion grant, two third would be used
for debt repayment. Pakistan was, however, given the choice either to
get it in cash or use it for debt retirement.
It may be mentioned that the total US debt towards
Pakistan is now about $1.8 billion, the favorable situation calls for
efforts to get rid of the entire US debt and hopefully the government
may succeed in achieving this target in near future.
As a result of successful rescheduling and debt
retired so far during last three years, the ratio of debt servicing to
foreign exchange earnings has been estimated to decline from 75 per
cent in the financial year 2000-01 to 25-30 per cent range in
financial year 2004-05.
The national economy was swamped in a formidable
size of foreign debt amounting to $36 billion till 2001. Out of the
total foreign debt of $36 billion around $15.5 billion came from the
IMF and the World Bank and other institutional lenders and $12.5
billion from the Paris Club.
Under the rescheduling Pakistan has been able to
sign the agreement at reduced rates of interest for an extended period
of repayment as compared to original rates of interest and repayment
period. Thus estimated relief of $12 to 15 billion annually will
accrue in payment of debt servicing on its external debt during the
year 2001-2002 to 2004-2005.
Under the tight financial discipline, the
government has been able to retire the entire expensive commercial
loans and the total foreign debt has been lowered from $38 billion to
$36 billion during last two and half years.
With the signing of agreement for rescheduling of
$4.5 billion in the last week of March this year, Pakistan almost
completed the rescheduling of $12.5 billion loans from the member
countries of the Paris Club.
With the signing of rescheduling agreement with
Japan, almost 92 per cent of the total loans under Paris Club have
been rescheduled. The Paris Club Agreement was signed in December
Pakistan and Japan have signed loan rescheduling
pact of $4.5 billion under the Paris Club Agreement. The loan
consisted of three categories, i.e. debts of Japan Bank for
International Co-operation (JBIC), commercial debts insured by the
Government of Japan and food aid debts. The food aid debts of $8
million are expected to be signed sometimes next month for which terms
and conditions have been settled.
The rescheduled debts will be repaid in 38 years,
including a grace period of 15 years and in 46 equal semi-annual
installments beginning from May 31, 2017 at 1.8 per cent rate of
interest. Another loan of Ex-JEXIM amounted to 16 billion yen will be
repaid in 38 years, including a grace period of 15 years and in 46
equal semi-annual installments beginning from May 31, 2017. The rate
of interest for this category will be applicable to six-month yen
LIBOR plus 0.5 per cent per annum.
The third category of the debt is from Ex-JEXIM
United Loans worth 45 billion yen will be repaid in 23 years including
a grace period of 5 years and in 36 installments beginning from May
31, 2007. The rate of interest will be applicable to six-month yen
LIBOR plus 0.5 percent per annum.
The fourth one is the debt guaranteed by Ex-JEXIM
of 6 billion yen will be repaid in 23 years, including a grace period
of 5 years and in 36 installments beginning from May 31, 2007. The
rate of interest will be applicable to six-month yen LIBOR plus 0.5
per cent per annum.
The rescheduled commercial debts worth 3 billion
yen will be repaid in 23 years, including a grace period of 5 years
and in 36 semi-annual installments. Japan's loan constitutes 36 per
cent of the total rescheduled debt of $ 12.5 billion is the largest
among 18 Paris Club creditor countries.
Credit for getting out of the debt trap entirely
goes to the present set up of the economic managers for loosening the
strings of the debt trap and providing a breathing space to the
national economy. This is certainly a great achievement by virtue of
this Pakistan's sinking economy has brought back on the track leading
towards a sound economic future.
There was a time when the bloated foreign debt
touching the level of $38 billion had become an incorrigible burden
over the economy of Pakistan. Hopefully, that situation would not be
allowed to repeat in future and the economy would move on the path
leading poverty ridden people of this country towards peace and