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$1 billion US waiver to span 38 years

ISLAMABAD (December 10 2002) : The impact of the promised $1 billion loan waiver by US will span over 38 years, as it is part of Paris Club Rescheduling Agreement and, “it will not be a one go affair”, sources in Economic Affair Division (EAD) told Business Recorder here on Monday.

“The promised deal does not say that once the waiver is approved, the $1 billion from the total $2.9 billion liability owed by Pakistan to US will be immediately deleted,” sources said.

Secretary, EAD, Waqar Masood, confirmed the fact, and that the resultant provision is not going to come on cash term basis. “The US government has rescheduled the $2.9 billion loan owed by Pakistan as this waiver after approval from the Congress will make part of the total deal,” he added.

He said whenever the maturity of this part of loan will become due in bits and pieces, Pakistan would not be paying it, thus bagging home a huge benefit. “See the agreement in its totality. Pakistan will be relieved from a huge burden at the end of the day. Though the process will be slow, but flow of advantage will be steady,” he said.

Waqar said that so far, under Paris Club Agreement, Pakistan has successfully rescheduled and signed agreements of its loans worth $6 billion owed to different countries. “The negotiations with Japan, the largest donor, regarding its $5 billion, are underway and soon the fate will be decided,” he added.

Sources said that Pakistan is seeking debt swap from Japan. Officials at the Japanese Embassy said only that the deal was underway. They offered no comment on the swap or rescheduling. “But hopes in Pakistan camp are high that swap can be a possibility,” sources say.

The agreement of a non-ODA loan of Canadian $300 million with Canada has been reached and other agreement of Canadian $300 ODA loans are being negotiated and the process is in advanced stage.

Waqar Masood was of the view that impact of Paris Club Rescheduling on the overall debt servicing would be in the shape of 30 percent to 33 percent reduction. “It will have a very positive impact on the overall economic scenario,” he said.

According to him, Belgium, Sweden and Denmark are considering the possibility of debt swaps. “There is all likelihood that this would be achieved,” he added.

Whether Pakistan will be able to meet the extended deadline of December 31 for getting all agreements signed for its $12.5 billion Paris Club loans, he said: “It is a possibility, but if in a couple of cases spill-over occurs, it will not be any problem.”He said that in certain cases Pakistan is expected to get minor decrease in the interest rate but if seen in the prospect of total volume, it will also bring home quite some benefit. “The rescheduling will help to bring the debt servicing at a manageable stage and as Pakistan is also repaying its loans in 38 years, it will help to a great extent in shedding off the debt obligations,” Waqar said.

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