The governments of Japan and Pakistan have agreed to a $200 million debt deferment as part of the “G20 Debt Service Suspension Initiative (DSSI),” which is the second phase of the “Global Debt Relief Initiative (GDRI).
Both governments had already agreed on the first debt deferment, amounting to about $370 million, to be implemented on April 27, 2021, as part of the same program, according to a statement posted here.
It is estimated that the overall amount of postponed debt has reached around $570 million, which will provide more budgetary room for the government of Pakistan to recover from the effects of the Covid-19 pandemic on the country’s economy.
From the early 1990s to the middle of 2010, concessional loans, which were subject to debt deferment, were used to fund infrastructure development in Pakistan, including highways, tunnels, power plants and grids, water supply, irrigation, and drainage facilities.
These concessional loans come with favorable terms for Pakistan, including a low interest rate and extensive grace and repayment periods, among other things.
The repayments for the debt and interest due between January 1 and June 30, 2021, will be rescheduled after December 15, 2022, according to the second agreement.
Beyond the debt reduction, Japan has also provided Pakistan with funds totaling $23.5 million in order to supplement the country’s counter-Covid-19 initiatives, which are as follows:
February 2020: Delivery of diagnostic kits; April-May 2020: Disbursement of a total of $7.41 million to Unicef, the International Organization for Migration, the International Fund for Agricultural Development, the United Nations High Commission for Refugees, and the United Nations Office for Project Services for the provision of hygiene items and alternative learning opportunities, as well as training health workers, among other things;
From December 2020 to March 2021, grant support of $9.5 million will be provided to the National Department of Medical Affairs for the procurement of medical equipment, and grant assistance of $6.59 million will be provided to Unicef for the improvement of the vaccination cold-chain.
During his nearly three-year tenure in Pakistan, Matsuda Kuninori, the Japanese Ambassador to Pakistan, said: “I am aware that Pakistan’s Covid-19-affected economy is on a solid recovery path, with the prospect of higher GDP growth.” Matsuda Kuninori is about to be transferred to the Japanese Embassy in Ukraine after almost three years in Pakistan.
“Japan and Pakistan will commemorate the 70th anniversary of the establishment of diplomatic relations next year, and I am hopeful that a new chapter will be written in the history of our friendship on the basis of Japan’s development cooperation over the past several decades.”