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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,"
 Musharraf said.
 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
 external obligations.
 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
 concessional terms.
 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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