Japan agrees to debt deferral of $160m for third consecutive year

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Zubair Qureshi

The governments of Japan and Pakistan have agreed on debt deferral amounting to around US$160 million, as the last phase of “the G20 Debt Service Suspension Initiative (DSSI).”

Prior to this, both the government agreed on the first debt deferral amounting to US$370 million on April 27, 2021 and the second debt deferral amounting to approx. US$200 million on October 22, 2021, under the same initiative. The total amount of deferred debt has reached approx. US$730 million, which will widen the fiscal space for the Government of Pakistan to restore its economy affected by the COVID-19 pandemic and the recent flood disaster.

The concessional loans subject to debt deferral have been utilized for infrastructure development such as roads, tunnels, power plants and grids, irrigation, water supply, and drainage facilities in Pakistan from the early 1990s to the mid-2010s.

These concessional loans have favorable conditions for Pakistan in terms of low interest rate as well as long grace and repayment period. Under the last agreement, repayments for the debt and interest due between July 1 and December 31, 2021 will be rescheduled after June 15, 2023.

In addition to the debt deferral, the Government of Japan decided to extend Emergency Grant Aid of US$7 million to Pakistan in response to the damages caused by the flood disaster that have occurred in Pakistan since mid-June. This Emergency Grand Aid will allow implementing humanitarian assistance activities for those seriously affected by the flood disaster in different parts of Pakistan through multiple international organizations in areas such as food, shelter and non-food items, health and medical care, as well as water and sanitation.

Ambassador of Japan Wada Mitsuhiro reaffirmed his country’s commitment to support Pakistan “I would like to assure that the Government of Japan stands ready to support the people of Pakistan. Given the rapidly rising scale of needs, we consider it critical to extend our best support and stand available to the affected. As part of the “2022 Floods Response Plan”, we will extend our assistance, ensuring collective and coordinated actions to respond to the national emergency”.

The Government of Japan has already provided tents and plastic sheets as emergency relief goods through JICA, and these items are now being distributed to the people in need.

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