PRIME Minister Imran Khan’s call for debt relief made in
April has resonated and well heard across the globe and now the relief has started pouring in the shape of suspension of debt payments.
The Paris Club of creditor nations have now agreed to suspend debt service payments from Pakistan, Chad, Ethiopia and the Republic of Congo as part of a G-20 debt relief deal. The overall debt relief would mean suspension of $1.8 billion payable by Pakistan to 11 countries during May this year to June next year, both in the shape of the principal amount of the loan and its interest. These amounts would then be built into the remaining repayment schedule. An IMF report shows Pakistan has $12.731 billion of external debt repayment obligations in FY 2021 that could be subject to treatment under the debt relief plan. Although the plan targets official bilateral creditors, it is understood that commercial creditors will also be asked to follow the same template. There is no doubt that the suspension in debt payment will be a great help to a developing country like Pakistan whose economy has been shattered by the breakout of Covid-19 as the closure of businesses has contracted the growth rate to negative while foreign direct investment, exports and remittances have also been hit hard. However, the question is whether this relief will be enough. Given the steep rise of Corona cases witnessed in Pakistan over the last few days with almost six thousand cases reported on Thursday, we believe the resource rich countries will have to do more to help countries like Pakistan to help them meet the challenge and escape the total collapse of economy and healthcare system. They also need to give assistance in the shape of grants to help these countries further build the capacity of their healthcare systems to save the precious human lives. This is a global phenomenon and the developed world will have to contribute more generously to save the humanity. Since it will take years to the developing countries to come out of the economic strains of the pandemic, the Paris Club and other creditors should permanently waive off the loans that were due on the developing countries this year.
