Karachi, June 09, 2020: Pakistani government will save nearly $1.8 billion on the account of suspension of principal and interest payment of the loans from G20 States.
The relief is the part of the gesture of G20 states that have offered suspension of principal and interest for over 70 developing countries, including Pakistan.
The savings from the G20 debt relief will be utilized for the welfare of the people. The government is scaling up emergency cash support to the most vulnerable households to mitigate the impact of the COVID 19 crisis. We have scaled up social safety nets under the Prime Minister Ehsas program to 16 million households (44, of total population), from 5 million last year.
Pakistan was going through the worst balance of payment crisis in the history last year though the financial assistance of brotherly countries through soft loans provided a lease of life to the external account of the country.
Loans of nearly $7.7 billion were secured from bilateral arrangements including $3 billion from Saudi Arabia, $2 billion from UAE, $2.2 billion China and $0.5 billion from Qatar.
Keeping in view the challenges to the economy after Covid-19 outbreak and its related economic slowdown, Pakistan is looking for the deferred payments of loans.
According to a government official, “We are in talks with our development partners to move these deposits towards longer tenors.”
The Current Account deficit (CAD) has declined sharply as a result of the policy reforms undertaken over the last 2 year. It is projected to decline further to $ 4 billion or (1.7 percent of GDP) in the current fiscal year, compared to $20 billion when the government took office in 2018.
Looking ahead, recession in the global economy will lead to a decline in export earnings and remittances from workers abroad. However, with the decline in international oil prices, CAD is projected to remain manageable at 2 percent of GDP.
The reserves of State Bank of Pakistan have increased to $ 12.3 billion till May 2020 from $ 7.2 billion last year. However, the government is targeting to increase SBP reserves to $ 15 billion by end of next fiscal year.