PAKISTAN WINS OFFICIAL DEBT DEAL. Pakistan yesterday secured an unprecedented debt restructuring deal from the Paris Club of official creditors in recognition of its economic reforms and its role in the war in Afghanistan, reports the Financial Times (p.4). The creditors agreed to restructure the entire stock of the country's $2.5 billion sovereign debt, extending its maturity and granting a generous grace period during which no principal has to be repaid.
Two-thirds of the $12.5 billion debt was rescheduled for 38 years from now with a grace period of 15 years. The maturity of the rest of the debt was extended to 23 years from now with a five-year grace period. "Pakistan has received special treatment from the Paris Club countries. This is one of the most generous deals the club has awarded," one banker noted.
Bankers from UBS Warburg, which advised Pakistan's government, said that while there was no reduction in the stock of the debt, the deal cut the net present value of the debt by at least 30 percent. Pakistani Finance Minister Shaukat Aziz said the deal would save Pakistan about $3 billion in the first three years alone.
Aziz, who negotiated the deal, said he saw the accord as a sign of confidence in his economic program, and not just a result of Islamabad's cooperation in the war on terrorism. Also reporting, Dow Jones quotes him as saying, "The current situation added more support. But if there had been no economic performance this treatment wouldn't have been possible."
Japan and the US are Pakistan's two largest creditors in the Paris Club, notes the FT. Pakistan's total external debt is estimated at about $38 billion, which includes loans from the IMF, the ADB and the World Bank.
Japan is committed to the agreement reached in Paris, Kyodo News reports Foreign Ministry Press Secretary Norio Hattori today. "Japan aims to conduct debt-rescheduling negotiations with Pakistan based on the Paris Club accord and conclude a bilateral agreement on the arrangement as soon as possible," he said in a statement.