The Paris Club of creditor countries on Friday said it is giving Pakistan another extension to service its debt so that it can dedicate its resources to combating the Covid-19 pandemic.
The country has until December to make the payment, the club said in a statement, without releasing a figure.
Islamabad “is committed to devote the resources freed by this initiative to increase spending in order to mitigate the health, economic and social impact of the Covid-19 crisis,” the statement said.
The country’s debt amounts to some 90 per cent of its gross domestic product, according to the International Monetary Fund (IMF).
Read more: Pakistan, Japan sign $367m debt relief pacts
Its debt service for the 2021-2022 fiscal year totals $56.9 billion, says the IMF. Pakistan owes $11.5 billion to the Paris Club, according to the IMF.
The Group of 20 leading economies and the Paris Club, an informal group of state creditors coordinated by the French finance ministry, agreed in April to freeze debt payments of the 77 poorest countries last year to free up cash to fight the coronavirus pandemic.
The government of Pakistan, taking advantage of the initiative, entered into negotiations with 21 creditor countries for debt suspension amounting to $1.6 billion under the DSSI phase-1 (April-December 2020). The government will repay the suspended amount in four years starting January 2022.
Also read: Pakistan among latest countries to get Paris Club debt relief
In April, Pakistan and Japan had signed debt suspension agreements worth $367 million under phase-1 of the G-20 Debt Service Suspension Initiative (DSSI).
The global debt payment suspension initiative has provided temporary relief of around $3.5 billion to Pakistan under three phases and one-third of the relief has come from China, reducing the immediate borrowing requirement by the same amount. Under the third phase (July-December 2021) of the DSSI, Pakistan will get around $1 billion relief.