Sunday, November 27, 2022

US extends $132 million debt relief to Pakistan after devastating floods

US extends $132 million debt relief to Pakistan after devastating floods

ISLAMABAD (Reuters) - Washington on Friday rolled over an agreement to suspend service payments on $132 million of Pakistan's debt, the US embassy in Islamabad said, as the South Asian nation faces an economic crisis exacerbated by devastating floods.

Pakistan's economy is facing a balance of payments crisis, a widening current account deficit, a slide in its currency to historic lows, and inflation crossing 27%.

Devastating floods meanwhile engulfed large swathes of the country in late August, killing more than 1,500 people and causing damage estimated at $30 billion, fanning fears that Pakistan would not meet its debt obligations.

The US ambassador to Pakistan Donald Blome signed the agreement to extend the loan relief under the G20 debt service suspension initiative, the embassy said in a statement, adding: "Our priority is to redirect critical resources in Pakistan."

The rollover is related to the Paris club agreement in April 2020 to support 73 lower income countries during COVID, under which the United States provided relief on $128 million in debt to Pakistan.

Pakistan's outgoing finance minister Miftah Ismail said last week that Islamabad was seeking debt relief from bilateral creditors in the wake of flooding, but emphasized the government was not seeking any relief from commercial banks or Eurobond creditors.