December 16, 2001	Sunday	Ramazan 30, 1422

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ISLAMABAD, Dec 15: The Paris Club’s $12.5 billion debt rescheduling will provide an exceptional cash flow savings of $2.7 billion for the next three years, enabling the government to increasingly divert resources to social sectors.

“For the current financial year, this cash flow saving amounts to $1.1 billion which will now help us in improving our social indicators effectively,” said Finance Minister Shaukat Aziz.

Speaking at a news conference here on Saturday after attending a three-day meeting of the Paris Club in Paris, he said the net present value of debt reduction was 30 per cent which he termed “highly favourable to Pakistan.”

He said now that the Paris Club has restructured Pakistan’s $12.5 billion debt for 38 years, he would be holding separate meetings with the bilateral creditors to negotiate new interest payment rates on these loans.

“Currently, a 2.2 per cent interest rate is being charged and hopefully we will get it further reduced,” the finance minister said. He said that about 70 per cent of the $12.5 billion was an Official Development Assistance (ODA) and had been offered on concessional terms.

The Paris Club, he said, had set the deadline of Sept 30 next year to conclude bilateral agreements for settling new interest rates on these $12.5 billion loans.

Pakistan owed $5 billion to Japan, $3.1 billion to USA, $1.1 billion to France, $1 billion to Germany and $650 million to South Korea, he said.

The present value of debt-to-export ratio was 334 per cent which has now been reduced to 240 per cent due to an unprecedented long-term debt relief offered to Pakistan. “This package is called ‘Islamabad terms’ which is unique unlike Houston, Naples or Cologne terms which do not provide so much debt relief”.

However, he said that Pakistan will have to implement a set of reforms to continue receiving uninterrupted debt relief from its bilateral creditors. “We have committed to adhere to certain economic discipline and to have transparency in our financial system,” he said, adding that in case Pakistan did not fulfil its commitments, the whole favour done by the Paris Club could be withdrawn.

Part of the debt has been converted into debt swap by some countries, including Canada and the United Kingdom, he said, adding that $100 million loan had been written off while $400 million debt had been converted into debt swap, now to be spent on improving social services. The strategy for overcoming debt burden has been extensively discussed with members of the Paris Club and that is why a major debt relief has been extended to Pakistan, he said.

“I think this needs to be appreciated that ours is a first government which successfully completed three-year IMF programme which in fact provided a basis to the Paris club to go for such an unprecedented favour of offering stock re-profiling of debt to Pakistan,” the finance minister said.

“We have been given a post-cut off date treatment on our loans and that is why people at the Paris Club meeting said that we had got non-standard terms which I believe is a great success on our part,” he claimed.