Pakistan will again postpone debt repayment
RAWALPINDI, SEPT.8 Pakistan is certain to get an extention of its unilateral six month moratorium on debt repayments a device which has helped keep the staggering economy afloat according to World Bank source reports. A. P.
Japan and the 10 Western countries which give aid to Pakistan under a World Bank consortium are scheduled to meet in Paris on October to examine a Pakistani request for the extension and “regularization means the Pakistanis want to work out a scheme of payments to ease a border scheduled in the new financial year to amount to more than 30 per cent of the country’s foreign currency earnings.
According to Government figures Pakistan will have saved $60 million announcing on May 1 that it was not repaying interest and principal on debts for six months to the consortium countries. The moratorium ends on November 1.
Pakistan has continued payments on loans from the World Bank and from consortium countries which provided funds outside the consortium agreement. By the end of October this sum will amount to $ 46 million. Including $ 24 million to the World Bank.
Economists of the consortium countries here say the group has lift choices but to agree to an extension if it ever wants to see its money. According to one economist, Pakistan’s failure to pay may initiate a series of acts such as the seizure by creditor countries of Pakistani ships and other property abroad. In turn that would provoke seizure of foreign property in Pakistan and an esoalation of trouble without getting any nearer to repayment.
According to the Pakistan Economic Survey the country has incurred debts of more than $5,000 million.
The military Government has budgeted about $258 million for debt servicing in the fiscal year starting on July 1. The figure for the last fiscal year was $216 million which did not include $27 million unpaid in May and June and which was 26 per cent of its foreign exchange earnings of $833,280,000.
Foreign earnings were expected to decline five to 10 per cent this year, indicating that the percentage which must be paid in debt service will rise to more than 30 per cent. A safe figure is supposed to be 20 per cent, according to economists rule of thumb.
Bangladesh but Pakistan so far has managed to avoid the collapse foreign economists were predicting for August.
The $ 63 million saved in debt repayments $ seven million the Pakistanis collected ahead of time from China which pure chased four trident airliners from Pakistan’s Government owned International Airlines. More efficient than usual Ministry paperwork which brought in unused but committed foreign aid funds before the end of the last fiscal year: deposits by Parisian Gulf Emirates friendly to Pakistan of foreign currency in the State Bank which has used the funds to bolster reserve figures, The funds cannot be spent but strengthen the appearances of the economy: high or the usual stockpiles of commodities which will keep industries dependent on imported raw material working longer than expected: The ability to divert West Pakistani exports mostly coton textiles ordinarily sold to a captive East Pakistani market to markets abroad. The Pakistanis claim that in the face to loss of foreign aid they had about $220 million in commodity assistance unspent but committed in the pipeline.
According to World Bank sources of that total $ 100 million has been committed already to specific projects and the rest includes $72 million in help over five years from the Chinese. The Pakistani Government has been trying to persuade the Chinese to commit the money over a threeyear period.
Without hard currency assistance to buy raw materials unavailable here. Pakistani industries with have to close down, throwing workers out of jobs. According to employers and labour leaders the process has already started.
Reference: Hindustan Standard 9.9.1971