US extends Pakistan flood debt relief

US Embassy in Islamabad says its priority is to ‘redirect critical resources to Pakistan’

ISLAMABAD, Pakistan — Washington on Friday renewed an agreement to suspend service payments on Pakistan’s $132 million in debt, the U.S. Embassy in Islamabad said, after devastating floods exacerbated the crisis. economy of the South Asian nation.

Pakistan’s economy is facing a balance of payments crisis, a growing current account deficit, its currency falling to historic lows and inflation exceeding 27%.

Severe flooding engulfed large swaths of the country in late August, killing more than 1,500 people and causing damage estimated at $30 billion. The devastation has stoked fears that Pakistan is not meeting its debt obligations.

US Ambassador to Pakistan Donald Blome has signed the loan relief extension agreement under the G20 debt service suspension initiative, the embassy said in a statement, adding “Our priority is to redirect essential resources to Pakistan”.

The postponement is linked to the Paris Club agreement in April 2020 to support 73 low-income countries during COVID-19, under which the United States provided $128 million in debt relief to Pakistan.

The agreement to suspend payments on this debt, plus an additional $4 million, has now been renewed.

Islamabad has also requested the transfer of $2 billion in Chinese deposits to its reserves, a statement from Pakistani Finance Minister Ishaq Dar’s office said after meeting Chinese envoy Nong Rong.

He said Dar had sought the ambassador’s support to facilitate the rollover of the $2 billion SAFE China deposits due in March 2023.

Beijing has already refinanced the $2.24 billion syndication facility in Pakistan earlier this year.

Outgoing Pakistani Finance Minister Miftah Ismail said last week that Islamabad was seeking debt relief from bilateral creditors following the floods, but stressed that the government was not seeking relief from commercial banks or Eurobond creditors.

The country’s bonds had fallen to just half their face value, after the FinancialTimes said a United Nations development agency was urging the cash-strapped country to restructure its debt.

Ismail said the $1 billion bail would be paid on time and in full later this year. –

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