ISLAMABAD: The governments of Japan and Pakistan have agreed on a debt deferral amounting to $160 million as the third and last phase of the ‘G20 Debt Service Suspension Initiative (DSSI)’.

The total amount of deferred debt has now reached $730m, which will provide the fiscal space for the Pakistan government to restore its economy affected by the Covid-19 pandemic and the floods, the Japanese embassy announced on Wednesday.

Prior to this, both governments had agreed to the first debt deferral amounting to $370m in April 2021 and the second debt deferral amounting to $200m on October 2021, under the DSSI initiative.

Concessional loans, subject to debt deferral, have been used for infrastructure development such as roads, tunnels, power plants and grids, irrigation, water supply, and drainage facilities in Pakistan from the early 1990s to the mid-2010s.

These concessional loans have favourable conditions for Pakistan in terms of low interest rates, as well as long grace and repayment periods. Under the last agreement, repayments for the debt and interest due between July and December 2021 will be rescheduled after June 15, 2023.

In addition to the debt deferral, the Japanese government decided to extend an emergency grant of $7m to Pakistan in response to the damage caused by the flood disaster that has occurred in Pakistan since mid-June.

This emergency grant aid will allow for implementing humanitarian assistance activities for those seriously affected by the flood disaster in different parts of Pakistan through multiple international organisations in areas such as food, shelter and non-food items, health and medical care, as well as water and sanitation.

The Ambassador of Japan, Wada Mitsuhiro, reaffirmed his commitment to support Pakistan and assured that Japan stands ready to support the people of Pakistan.

“Given the rapidly rising scale of needs, we consider it critical to extend our best support and be available to the affected. As part of the ‘2022 Floods Response Plan’, we will extend our assistance, ensuring collective and coordinated actions to respond to the national emergency,” he said.

The Japanese government has already provided tents and plastic sheets as emergency relief goods through JICA, and these items are now being distributed to the people in need.

Published in Dawn, September 22nd, 2022

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