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Pakistan hopes for
bilateral loan write-offs worth $15 billion
ISLAMABAD, October 23
(Internews): President Pervez Musharraf has said
that Pakistan is seeking debt write-off for bilateral loans and there
are expectations that the country's help to the international alliance
against terrorism will bear fruit in the coming weeks.
"Debt write-off of bilateral loans is the best option we have and we are
trying for this best option," he said in an interview on Pakistan
Television aired Tuesday.
"Multilateral loans cannot be forgiven. It is only bilateral loans that
can be written off and that's what we are aiming for," Musharraf said.
Pakistan owes a total of $15 billion to various countries in bilateral
loans and $15.5 billion to multilateral lenders such as the
International Monetary Fund, the World Bank and the Asian Development
"Due to easing of restriction by European countries, Pakistan also hopes
to reap the benefit of $800 million in additional exports this year,"
He also said that Pakistan is seeking financial assistance from its
friends for improvement in education, health and law and order in the
The prospects of debt write-offs plus rescheduling comes as a major
relief to Pakistan, which was until September 11 faced with the grim
prospect of expensive short-term commercial borrowing to meet its
Pakistan needed to raise $2 billion in short and medium-term financing
from the commercial debt market by December, chiefly to come good on its
external debt obligations, but all that has changed with several
creditor countries signing debt-rescheduling agreements with Islamabad.
Pakistan's financing gap for the current fiscal still stands at $3.4
Sources at the International Monetary Fund say Pakistan would need to
raise non-concessional short-term loans worth $1 billion until the end
of the calendar year to fully cover its financing requirements for the
next six months.
This takes into account portfolio investment worth $500 million in the
privatisation of the state-run telephony giant Pak Telecom and
government-run United Bank by December 2001.
Pakistan raises short-term loans from the Jeddah-based Islamic
Development Bank (IDB), chiefly to finance oil imports. Commercial banks
led by the Citibank are also active players in this market.
Raising new short-term loans is in contradiction of Pakistan's debt
management strategy, which envisages only medium- and long-term loans on
However, the government has to resort to more short-term loans, as the
export receipts and remittances are not enough to cover the imports and
debt servicing requirements.
Although it will peak out this year, Pakistan's financing gap will
remain at $3 for the next two years.
Experts say continued efforts to contain fiscal and current account
deficits can help stabilise Pakistan's external debt from current 244
per cent of export of goods and services to 215 per cent by 2003-04.
However, they say sustained high growth in exports and market-based
exchange rate would key requirements for this scenario to emerge.
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