Debt woes.

HERE'S something interesting. We all know that Pakistan is close to signing a deal for waiver of its external debt service obligations worth around $2 billion. The plan has been made possible by the G20 countries that announced an action plan to fight the Covid-19 pandemic in the early days of May, and followed that up with a more specific plan to permit rescheduling of debt service obligations for the poorest countries in the world.

'We support a time-bound suspension of debt-service payments for the poorest countries that request forbearance,' their statement announcing the deal on April 15, hosted by Saudi Arabia but conducted via digital channels. The 'time-bound suspension' of debt service payments would only apply to those tranches falling due between May and December 2020, although the statement also said there would be two reviews along the way and left open the possibility that the period covered by the plan could be extended further to June 2021.

The plan mostly covered bilateral debt, meaning money borrowed by governments from other governments. It did not specifically include money borrowed by governments from private markets or lenders, and certainly not money borrowed by private businesses from private markets or lenders abroad. The statement did, however, call on private creditors to consider extending similar treatment to their borrowers. 'We call on private creditors ... to participate in the initiative on comparable terms.'

Of course, Pakistan was first in line when this announcement came, and the word now is that the deal is about to clinched in the coming days. Reports in international media say Pakistan and Ethiopia are two countries that are about to get some of the debt repayment obligations rescheduled, while Congo, Mauritania and Cameroon are next in line. Word is Mali, Dominica, Nepal and Grenada will also be applying to avail this initiative.

Billing the future is common practice in most areas of debt management, and this time too the same reflexes are active and well.

Note the company Pakistan finds itself in. The announcement for the initiative clearly said it is for 'the poorest countries' in the world, which Pakistan clearly is not, yet there it was, first in line with hat in hand. Pakistan has a GDP in excess of $300bn, while Congo is $47bn, Mauritania $5bn and Cameroon $38bn. Ethiopia has a GDP of $84bn, and is classified along with Pakistan as one of the large countries participating in the initiative.

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