ISLAMABAD, June 23: The government has finalized a strategy to remove the country’s most expensive debt amounting to $4.5 billion over the next three years.

“Under our new debt reduction strategy, every year $1 billion debt will be retired to get rid of this $4.5 billion expensive debt,” said Director General of the Debt Coordination Office Dr Ashfaque Hasan Khan. This year the government will be repaying $1 billion or thereabouts, he added.

Talking to Dawn here on Monday, he said that a decision had been taken that foreign loans carrying 8 to 11 per cent interest rate will be returned on a priority.

He said there were a total of about 4,000 foreign loans, but only the expensive ones had initially been identified for their early repayment. These expensive loans were sought in the past from the World Bank, the IMF and the Asian Development Bank (ADB).

Dr Khan said that the debt burden of Pakistan could not be reduced without following a certain strategy. “That has now been worked out and will be announced shortly,” he added.

Finance Minister Shaukat Aziz is expected to approve the strategy after his return from the United States.

Responding to a question, Dr Khan, who is also the economic adviser to the ministry of finance, said that debt amounting to $1 billion will be paid off annually over and above the usual foreign debt servicing.

He said bilateral loans amounting to $12 billion had already been rescheduled for over 35 years due to which the debt burden had considerably been reduced.

The ratio of the debt burden had been reduced from 335 per cent to 188 per cent which will further come down to 135 per cent after repaying the most expensive debt.

Generally, any country which has a ratio of 250 per cent debt burden is eligible to seek the status of a Highly Indebted Poor Country (HIPC), he pointed out. “But we did not seek a HIPC solution despite facing a huge debt burden as it would have compromised the national security,” the director general of the debt office said.

Pakistan, he said, had been saved from becoming Rwanda, Ethiopia, Liberia, etc., by not opting for the HIPC solution, and, thanks to better debt management, Pakistan’s foreign liabilities will be removed.

He said that Pakistan’s annual foreign exchange earnings had been increased from $11 billion to $18.5 billion through more exports and significant capital inflows.

Dr Khan said that Pakistan’s annual export earnings had increased from $8.5 billion to over $10 billion. “It will further increase to help retire more foreign debt,” he said.